Buying a 2 family house

amother

Ivory

Mon, Dec 04 2017, 11:04 am

I am debating between buying a one of two family house. The one family is nice because its complete and total privacy and you never have to deal with a tenant.

The two family is talking to me though because once you have a tenant your mortgage is considerably lower and I'd have more breathing space financially. Also, if the value of your single family house goes up you really have no benefit until you sell it. On a two family as the value of your house increases your mortgage stays the same but you can charge more rent.

Do you have a two family house? If you can do it over would you buy a one or two family and why and any other words of wisdom for me

amother

Papaya

Mon, Dec 04 2017, 11:10 am

I personally wouldn’t want to live in a two family house because I didn’t grow up in a place where it was common and not used to it and can’t handle noise from other people. I would buy a two family as an investment. If money was no object I would say don’t do it but if it will help you financially and you are the type that can handle it go for it.

amother

Lime

Mon, Dec 04 2017, 11:12 am

This question is very location specific. I live in a large city where duplexes/triplexes are worth way more than single family homes. We bought ours less than a decade ago and it has since doubled in value. The rents from our 2 tenants has also doubled in the same time period. We are sitting on more than half a million in home equity while our tenants pay for the mortgage, taxes and insurance. This is not necessarily the case in other locales.

amother

Ecru

Mon, Dec 04 2017, 11:13 am

I have a 2 family side-by-side house and B"H overall the experience is good and I would do it again if I can do over, mostly because financially it's probably the only way we can own something at this time. There were some months that it was empty, but B"H eventually got rented out.

Some things to consider-
1) what mortgage is, what expected rent would be & then multiply that by percentage of time you expect it to be rented & also take a percent off the rent for repairs/maintenance, repainting etc. Need some sort of buffer. There are a lot of expenses with a rental. Also, there are some tax benefits to rental - like can deduct mortgage expense for that portion, also stuff like lawn mowing, can deduct portion of it, etc, etc.
2) If it's an up-down, if your family makes a lot of noise or if tenant makes a lot of noise if you would hear each other & how much it would effect quality of life
3) Is it as convenient as a 1-family would be? B"H, we have our separate driveway & backyard area, so it's kind of private, but I can imagine not liking it if didn't have that.

My experience has been good, but it's really anecdotal, because it could have played out differently. Hatzlacha rabba - I hope it will work out well for you whatever you decide to do.

amother

Wheat

Mon, Dec 04 2017, 11:19 am

We bought a 2-family which we are in the process of converting to a 1-family. We needed the space and here it is significantly cheaper to buy a 2-fam than a 1-fam with similar square footage. We collected rent for the past year and a half till our tenants moved out.

If we had not bought a 2-fam we'd have had to pay more for a smaller house. On the other hand we need to make a lot of adjustments to the house which we might not have had to do if we bought a 1-fam.

Very individual decision depending on the market you live in, your budget and the pros and cons of each house you're considering.

amother

Ivory

Mon, Dec 04 2017, 11:27 am

amother wrote:

that's a fallacy.

If my mortgage is 3000 on a one family house my mortgage is always 3000. If the two family house my mortgage is 4000 and the tenant pays me 2000 making my mortgage 2000. In five years as the market rises I will be able to charge 2500 rent essentially making my mortgage 1500. As the rent goes up my portion of the mortgage decreases. This is obviously an oversimplified equation but where am I wrong?

amother

Ecru

Mon, Dec 04 2017, 11:33 am

amother wrote:

Side point - Just be aware that property taxes also sometimes goes up, but that is true both for single & 2-family houses.

amother

Khaki

Mon, Dec 04 2017, 12:03 pm

amother wrote:

1. depending on where you live, you can't just raise the rent on an existing tenant at whatever rate you want to.

2. your ability to find a (new) tenant to pay the increased rent you want to charge will depend also on the availability of rental units in your neighborhood, and the price of those units. the housing market for renters and owners don't necessarily run in tandem.

amother

Ivory

Mon, Dec 04 2017, 12:56 pm

amother wrote:

over the course of the 30 year mortgage the market will increase making the rental price go up...

amother

Khaki

Mon, Dec 04 2017, 2:45 pm

amother wrote:

over the course of the 30 year mortgage the market will increase making the rental price go up...

over the course of 30 years lots of things can happen. Market can go up, it can also crash. You can hope to get x rent, and get far less.

I'm not saying this is a bad plan - but you built in something as a given - which it isn't. Its not automatic that you will get more rent because your property value has increased.

simba

Mon, Dec 04 2017, 2:57 pm

I own (more like the banks owns) a 2 family home. It was the only way we could afford to buy. The monthly rental income goes up annually and our mortgage is fixed.

You have to be able to deal with being a landlord, it is not easy. If you think you can handle it then I would say it is a good idea.