Regular People Can Be Rental Real Estate Investors with Duplexes
What if we told you that despite adding thousands of units, the vacancy rate in Minneapolis is staying tremendously low? Rental properties are thriving, but it might seem like the only people who will profit are all of those rich investor-types.
Did you know that you can purchase a duplex with FHA financing as long as you are going to be an owner occupier?
We find people all of the time that had no idea that rather than purchasing a traditional home, they could’ve used their mortgage payment to purchase their first investment property.
Most of the time, when you want to invest in rental real estate, you have to come up with a large down payment. But when you decide to purchase a duplex, you’ll see that you can use the same type of financing as a regular home, but you get some very interesting opportunities.
Borrow in Consideration of Rental Income
If you’re a first-time homebuyer and you like the idea of buying a duplex and having a tenant pay a large portion of your mortgage, then you will be excited to know that you will be able to use your own income as well as a portion of your rental income for your mortgage approval.
You’ll hear real estate investors talking about leverage or the fact that they use the bank’s money to purchase investments for themselves. Robert Kiyosaki has created a term called OPM which stands for “other people’s money.” Using the bank’s money to purchase an investment for yourself means that you are gaining leverage. Using rental payments from a tenant to pay the mortgage amplifies your leverage.
This means that you have buying power far beyond what you might have when making other investments.
Buying a duplex with FHA financing can be an awesome way to get started in rental real estate.
When you use FHA financing for purchasing a duplex, you will have to live in the property for at least one year, but after that you can find a tenant to replace the side you have been occupying and then use a portion of the rental income from those two tenants to borrow again.
Some people like the idea of moving a couple times, especially when they are in the early stages of their career. In these cases, utilizing FHA financing to purchase a duplex is even more advantageous.
Investing in duplexes by utilizing FHA financing is pretty easy to identify as a great opportunity when you don’t have children, your career is a little more mobile, and you don’t have the responsibilities that come along later in life.
That’s why so many people decide to purchase a duplex and then rent out the second unit, rather than simply renting an apartment.