Duplex House Hack with Partner (Recent College Grads)

[Owen Madigan]

Hello,

I am new to bigger pockets but have been set on owning a duplex for some time now. My best friend from growing up and I are back home (Boston area) from college and want to save up to buy a duplex together and rent out the other side. The plan would be to live in it for a year together then move out and have both sides rented.

We would ideally look to be buying in about a year to 18 months from now, hopefully when rates come down. It's looking like prices are going to be around $1m. Any help/advice on what kind of financing to go for (FHA/conventional/first time home buyer benefits) and any insight on how best to do this with a partner would be greatly appreciated.


Thank you!

-Owen

[John Steffen]

Hey Owen, yes, it's possible for both of you to be on title, split closing costs, etc. Your lender will likely base the loan off just one income/credit though (at least that's how my lenders have done it)

I would personally advise against it - life is a windy road and you never know when one of you may want out of the deal even if both have full intent to stay in from the onset. Instead, I would work together on a side hustle and see how fast you can stack cash so you both can go out and buy multi families. It's only 3.5% down + closing costs and reserves.

Work your day job, mow lawns, leaf cleanup, shovel snow, flip furniture, pick up night shifts waiting tables/bartending, stock shelves at home depot overnight if you hate talking to people or anything else. THIS part would be a blast to do with your buddy. See how fast you can each race to ~50k. Good luck! 

[Rick Albert]

It is all dependent on the numbers.

If you are planning on putting low money down, the odds of it cash flowing (or even breaking even) in the first year would be difficult. 

It would only work if you add a lot of value.

I also wouldn't wait for rates to drop. The problem is everyone else is in the same mentality, therefore if rates drop more, then competition rises, and so do prices (think 2021 but not as intense). 

Versus buying now, and when rates drop, you refinance. That way you also would have a lower loan balance (because each month you have been paying down the loan) and there may be some appreciation. This COULD result in removing your private mortgage insurance.

[Michael K Gallagher]

Quote from @Owen Madigan:

Hello,

I am new to bigger pockets but have been set on owning a duplex for some time now. My best friend from growing up and I are back home (Boston area) from college and want to save up to buy a duplex together and rent out the other side. The plan would be to live in it for a year together then move out and have both sides rented.

We would ideally look to be buying in about a year to 18 months from now, hopefully when rates come down. It's looking like prices are going to be around $1m. Any help/advice on what kind of financing to go for (FHA/conventional/first time home buyer benefits) and any insight on how best to do this with a partner would be greatly appreciated.


Thank you!

-Owen

 brilliant idea, it will be challenging to finance but a great idea and I hope you are successful.  if you aren't stuck on boston which is a great market, there might be better price to rent ratios north into the 603, nashua, manchester all great growth markets, and no sales tax or income tax.

[Austin Cade]

Quote from @Rick Albert:

It is all dependent on the numbers.

If you are planning on putting low money down, the odds of it cash flowing (or even breaking even) in the first year would be difficult. 

It would only work if you add a lot of value.

I also wouldn't wait for rates to drop. The problem is everyone else is in the same mentality, therefore if rates drop more, then competition rises, and so do prices (think 2021 but not as intense). 

Versus buying now, and when rates drop, you refinance. That way you also would have a lower loan balance (because each month you have been paying down the loan) and there may be some appreciation. This COULD result in removing your private mortgage insurance.

 Absolutely agree with this. As one of my mentors says, “there is always a reason NOT to do something and if you focus on that you’ll never do it.” Go get that duplex. Any property at a good price based on comps is a good property. Who cares about the interest rate. If done right that property will make you way more money then you’ll spend in interest. I’ve owned properties with a 2.75% interest rate and properties with a 6% interest rate. You can always make money. 

[Lien Vuong]

To prepare I would get a good understanding of what each partner can contribute to the purchase (cash/sweat equity) as well as the division of labor. It's good to have that honest conversation from the start and I'll be revealing to understand what your partner has to offer and vice versa. Apart from that, talk to a lender to see what you would qualify for so you can be prepared for the purchase when the time is right. 

[Mose Gebremeskel]

Similar to some of the other comments....don't wait too long and just do it. $1m does seem high but if you two can do it then go for it. House Hacking is one of the best ways to get started in real estate. I can attest to that myself. Best of luck on that journey! 

[Wale Lawal]

@Owen Madigan

When planning a $1M duplex investment, consider financing options like FHA loans, MassHousing loans, and local grants. Partner with a friend to protect both interests, create an Operating Agreement, and focus on saving and preparing for the down payment and reserves. Research rental rates and tenant screening to ensure the property generates income. Consider the long-term strategy for building equity, saving on living expenses, and setting up for future investments.

Good Luck!

[Nick Harrington]

Hey Owen - very exciting! 

Two of my best buddies did this right out of college as well (in Milwaukee, not in Boston), while I waited a couple years before doing it, and I can tell you, I wish I did it sooner. 

Main thing for you is: 
- Have both you and your buddy talk to the same lender and get pre-approved to understand down payment options and what your combined budget would be
- Decide how you want title held (joint tenancy or tenants in common) - do a google search on this to see which option is best for you guys
- START SHOPPING! I would recommend start going to see properties about 6 months before you are ready to pull the trigger, maybe starting with open houses

and finally.... TAKE THE PLUNGE! A househack is a financial no-brainer 99% of the time. I have done two of them and the only regret is I didn't do it sooner / I wasn't more aggressive at buying the good ones I saw when I first got started out. If I could go back to my younger self, I would have told him to "get your head out of the spreadsheet, everything is going to be okay, and buy a nice place in a nice area". 

Hope this helps and here for any questions you have

[Marcus Auerbach]

Quote from @Owen Madigan:

Hello,

I am new to bigger pockets but have been set on owning a duplex for some time now. My best friend from growing up and I are back home (Boston area) from college and want to save up to buy a duplex together and rent out the other side. The plan would be to live in it for a year together then move out and have both sides rented.

We would ideally look to be buying in about a year to 18 months from now, hopefully when rates come down. It's looking like prices are going to be around $1m. Any help/advice on what kind of financing to go for (FHA/conventional/first time home buyer benefits) and any insight on how best to do this with a partner would be greatly appreciated.


Thank you!

-Owen

Don't partner. At least not on the ownership (title). I have seen too many partnerships end badly. One of you should be the owner, hold title to the property, the other can be a limited partner. Make sure you spell out the exit in all details  in your agreement, it is not a matter if, only when, you have different ideas and want to part ways.

[LeeAnn Owens]

Hi @Owen Madigan,

Good idea, but from experience I would tell you this is not the way you want to go. You'd be banking on 1) your business partnership to work out, and 2) living together to work out. Friends don't usually make the best roommates or business partners. 

I would look for a less expensive area with lower barriers of entry to start out in. For your first property you can put down as little as 3.5% and a lot of areas also have grants for first time homebuyers that you could look into. You probably don't need a partner on your first buy if you play your cards right. 

You should both consider buying your own properties and lean on one another for support in the wonderful world of landlording. Maybe consider a partnership down the road when you both have some experience under your belt. 

Good luck!

-LeeAnn