For rental properties(single family homes, duplexes, 4-plexes) this is especially important and often overlooked.  If you have just taken over, raised the rents and had tenants move out and new ones come in, you don’t want any surprises.  I can only imagine the headache that it would cause if your new tenant found out their house had been robbed by someone that had a key to the place!

So get your doors rekeyed after tenants move out.  It is generally not overly expensive and is a lot easier to deal with than having a property robbed and possibly getting sued by the new tenants.

Until the drop in the market, finding a cash flowing property in the Seattle area market was a pretty difficult thing to do.  Unless of course you wanted to put 30% down which seems a bit over the top to me.  Now with the market down and banks cutting deals on REO and short sales, I am definitely seeing more properties coming through that make sense to buy.

Part of buying a residential real estate investment property right, is getting all of your costs worked out ahead of time.  That way you will know if it is going to have positive cash flow.  One larger item that many people forget or think they can do themselves is property management.  I strongly encourage everyone to hand that job off to professionals. 

Yes, property managers do take a cut of the revenue, but consider that the reduction in headaches and time spent dealing with your rental property is well worth the price.  Additionally a good property manager will save you money by screening for good tenants, and not letting bad tenants slide on the rent.  I have seen a good number of owners get stiffed because they bought a tenants sob story on why they couldn’t pay the rent.  Of course they always say they are good for it, but hardly ever make good on the promise!

If you have pulled your money out of the stock market and are wondering what to do with your 401k or IRA, consider buying a rental property or two.  Whether a single family home, duplex or fourplex, the numbers are looking better than they have in a while, and as bad as it has been in the last few years, the real estate market looks a whole lot more stable than the stock market these days!

Should Your First “House” be a Duplex?
By Ki Gray

There is a lot of talk about getting your first house. Its part of the American Dream to get a house and maybe get a dog named Rover. But maybe someone’s first house should instead be a duplex. Why would I propose such a thing. Is it possible I am a secret Russian spy that hates American pie. No their are simply to many advantages to buying a duplex first.

Buying a duplex has a number of financial advantages over buying a house. A lot of people assume that in a particular neighborhood duplexes would sell for about twice of what a house sells for. This is rarely the case. Duplexes are more frequently about 1.5 times the price of a house in a given subdivision. So to pick an easy number if a house is selling for 100k then a duplex should be selling for 150k.

So lets compare the two. To keep things the same lets assume we have 20k to put down and we are looking in the Austin real estate market so that the taxes are .025 percent of the purchase price and insurance is .004 percent of the purchase price.

- Lower Monthly Payment

To start off with lets look at the house. For the house we are going to have a 6.5 percent interest rate.

100k house price
20k down payment
Monthly Payment = $747.32

Moving on to the duplex. Since duplexes usually have higher interest rates we are going to assume a 7 percent interest rate. We are also going to assume that the other side of the duplex is being rented for $650.

150k duplex price
20k down payment
Monthly Payment = $1184.18

Rent Payment minus 5 percent vacancy = $617.50

Monthly Payment minus rent = $566.68

The monthly payment on the duplex comes out to be 31.8% less than on a house. You might get different numbers based on your area. In most areas a duplex leads to a lower monthly payment but there are a few real estate markets where the opposite is true.

- Increasing Your Future Real Estate Purchasing Power
Besides the advantages due to a lower mortgage payment there is another advantage over buying a duplex first. Buying a duplex first allows you to make additional purchases while buying a house first can negate your ability to buy additional properties.

To understand why this is the case we need to understand a few rules about how banks determine whether or not to provide loans. When you are purchasing your first investment property banks will usually not count the rent as income unless you have owned investment properties for over 2 years.

So if a buyer first buys a house and then wants to buy a fully rented duplex they will need to be able to qualify for the full price of the house and the duplex combined. This can be difficult for someone in the beginning stages of their career. If a buyer first purchases a duplex first in 2 years when they are looking for a house they can count the rent from the duplex as income which can help them qualify for the house purchase.

- Faster Payoff
Another interesting way to look at it is that if instead of simply spending the saving you incurred by owning a duplex if you were to pay off your mortgage faster. So if you applied 747.32 to your house it would take 30 years to payoff. But if you paid your duplex of $566.68 and then took the additional 180.64 and applied it to your mortgage you could pay off your duplex in 18.5 years. So in 18.5 years you would have a $150k duplex paid off instead of a $100k house partially paid off.

- Greater Benefits of Mortgage Payoff
Not only will you pay off your duplex faster but once you paid if off you will be in a better position. Once you pay off your house you are living mortgage free but not payment free. Based on the original assumptions (Austin Texas 2.5 percent tax rate and .4 insurance rate) you are still making a payment of 241.66 a month for taxes and insurance. In contrast once the duplex is paid off you are not only living in your duplex for free you are actually getting a profit of $255 a month.

Buying a duplex is not for everyone. Some people do not want the hassle of managing a property. And our article is not proposing that everyone should buy a duplex. We are simply showing the financial benefits of buying a duplex.

If you are looking to purchase a home or duplex in the Austin Real Estate market Ki can help you in your search. Ki is an Austin Realtor with a long history of helping clients purchase personal and investment properties. His website has a search of the Austin Homes.

Article Source: http://EzineArticles.com/?expert=Ki_Gray
http://EzineArticles.com/?Should-Your-First-House-be-a-Duplex?&id=787836

If you have been thinking of buying  a home or a duplex in the Lynnwood or Everett, Washington areas give me a call and we can discuss if buying a duplex as your first home is right for you.

Jacquie Cliff – The Amazon Negotiator
Let me lead you through the Real Estate Jungle!

Real Estate Agent, Loan Officer and Real Estate Investor serving:
Lynnwood, Bothell, Mill Creek, Seattle, Bellevue, Marysville, Mountlake Terrace, Edmonds, Everett, Snohomish, Kirkland and the surrounding areas!

Call me with any of your real estate questions at 425-773-3149 or email me at Jacquie@jacquiecliff.com anytime!

“Why your first home should be a duplex.”
Copyright © 2008 By Jacqueline A. Cliff, All Rights Reserved.