Buying a Duplex

I’ve been thinking about buying real estate. I don’t have that much money but perhaps just enough for a 10% down payment on a small duplex. I was thinking why not rent one unit and live in the other and have one unit cover the mortgage. Doesn’t it sound too good to be true? If that is possible, why wouldn’t more people do it? Well let’s try to break down this thesis. Your tenant turns out to be a nightmare. This is a risk in any multifamily real estate investment but it is even more so when you’re living next door to your tenant. They can be loud, inconsiderate, bug you for little things, take your kindness for granted, etc. etc. Here is what you can do to protect yourself as a landlord:
- Vet your tenants. well duh? no i mean really vet them. From their social media, to references, to past rental history. Be thorough. It will pay off. If you find red flags, think about the risks. Living next to someone raises your level of risk if they turn out to be a problem.
- Build a solid lease. Add to your lease various scenarios that could pose a problem in the future. From excessive noise to smoking to subleasing. Build a solid lease and let your tenants know that you will not hesitate to exercise your rights. These rights can be keeping part of their deposit, increasing their rents, etc. Also, ensure that the lease complies with local laws and regulations.
- Train your tenants. This really means setting expectations and boundaries with your tenants. There is a balance between being nice to them and ensuring they are happy and not letting them take you for granted. Draw boundaries between how they can reach you for maintenance issues, what happens if they pay their rent late, garbage collection, etc. It is generally good to have them pay their utilities directly in their own names. Also good to not get overly friendly with them and blur that landlord-tenant relationship.
- Use Technology. Nowadays many renters are paying their rents online through various property management tools. Landlords are learning how to use these tools to track maintenance issues, track complaints and requests from tenants, and to keep the tenants in the loop on what’s happening in their buildings. In a duplex all this may not be necessary but it is still good to think about using a separate email or phone number to connect with tenants.
- Get ahead of any issues. Keep your eyes and ears open and if you foresee any issues building up, get ahead of them and address them.
In the end, buying a duplex will require some compromises but also allows you to start building equity and live almost rent-free. As with anything in life, there are challenges and opportunities with any steps you take, the best you can do is think through the challenges and get ahead of them by planning and managing expectations.
