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Affording a home

Dynamic duplex duo: A plan for building wealth

By Julie Tramonte

November 2024

Jessica and Steven are a young couple who knew what they wanted at an early age – from spending their lives together to buying real estate so they could get a jumpstart on building wealth.  

The couple, now both 28 years old, met and fell in love in high school. They graduated and went on to college to earn degrees in their respective fields, with Jessica becoming a nurse and Steven an engineer.

In 2020, when they were 24 years old and renting a 1-bed, 1-bath apartment together, they decided they should buy their own property. Case in point on getting an early start: This is 14 years younger than the median age of a first-time homebuyer.1

“Interest rates were really low at the time, and we thought we’d find our own place because it felt like paying rent was throwing away our money,” explains Jessica.

The path less traveled

Instead of looking for a traditional single-family home like almost 80% of first-time homebuyers,1 they decided to buy a duplex. 

“We chose to buy a duplex for investment purposes,” Jessica says. “We knew that we could live in one unit and offset our mortgage payment with rent from the other unit. In fact, our plan was to possibly buy a second duplex before buying a single-family home, depending on our experience with the first duplex.” (Read more about the pros and cons of investing in a duplex here.) 

So, Jessica spent the next 6 months looking online for duplexes. During that time, the couple made offers on 10 different properties but kept getting beat by all-cash offers. Then, their real estate agent heard about a private listing from another agent in his group. The 2-bed, 2-bath duplex turned out to be “the one.”   

“Honestly, finding a duplex that hadn’t been listed yet was a game-changer because we didn’t have to compete with other offers,” confides Jessica. 

The couple gladly paid the asking price – especially since they didn’t have to deal with competitive offers. They used private mortgage insurance (MI) with their loan, which allowed them to make a down payment of less than 20%. They put down what they had in savings, a down payment of about 5%.  

(Note: Since they were an unmarried couple buying a house at the time, only Jessica’s name was on the title and mortgage back then.)  

They inherited a tenant

Jessica and Steven moved into the lower unit of their new duplex because the previous owner had just signed a 1-year lease with the tenant upstairs. The rent that was specified in the lease agreement covered more than half the amount of the couple’s monthly mortgage payment. 

“Having a tenant right away was a blessing and curse,” explains Jessica. “It was a blessing because we didn’t have to do the work of finding a tenant, but also a curse because we had no idea who our tenant was, we had to honor the rental amount in the lease, and we couldn’t pick our unit.” She continues, “But it was also nice to know that we would have monthly rent coming in for the next year, which took a load off.”   

Jessica and Steven moved into the lower unit and, fortunately, their tenant turned out to be dependable. The couple was able to grow their savings because of how they handled their tenant’s rent: Instead of using the rent to offset their mortgage payment, they paid the full amount themselves and socked away the rental payments in savings to prepare for their next duplex.  

(Note: The ability to afford the mortgage without rent from a tenant is something borrowers should consider carefully when deciding whether to purchase a duplex. The potential rental income may help borrowers qualify for – and afford – a larger mortgage, but there’s no guarantee a rental unit will be occupied by a paying tenant each and every month.)  

“I recommend people buy a duplex as their first home purchase – especially now (in 2024) when people are having a hard time affording single-family homes,” offers Jessica. “If you are willing to put in the work to be a landlord for one tenant, you’ll basically have someone paying half your mortgage. Buying this duplex really put Steven and me on our journey to wealth.” 

What's next for Jessica and Steven? Find out in part 2 of the dynamic duplex duo: What happens when things don’t go according to plan. 

 

1NAR 2024 Profile of Home Buyers and Sellers 

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Julie

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Julie Tramonte is a writer who joined MGIC in 2018. Prior to flying the coop, she wrote for a mattress company, a manufacturer and advertising agencies. She’s obsessed with reading, traveling, tennis and rearranging furniture. Mother of 2 beautiful, adult daughters. Empty nester who recently downsized. Her guilty pleasures are doughnuts and the Kardashians (don’t tell anyone).
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