How to Live Mortgage Free
Are you feeling like rent prices are through the roof? Wish purchasing a home was more affordable? As a Realtor® in Virginia, I have worked with many investors and families who have gotten their foot into the housing market by purchasing a duplex as their primary residence and renting out the other unit. With little to no money down and saving money every month, here’s how you can live mortgage free or very close to it!
Duplexes = $$$
If you purchase a duplex, you can live in one unit and rent the other unit out and use the income to pay your monthly mortgage payment. A great Realtor® can assist you with finding a duplex that will bring in enough to cover your mortgage and help you find a tenant who meets credit and income requirements! First, let’s jump into how to finance the property with only 0%-3.5% down, then we will analyze a deal!
Every day I come across investment opportunities and email them out to my investors weekly. Want to get added to my list?
Subscribe Here:
FHA Financing
The FHA loan is a government backed loan that requires a minimum downpayment of 3.5%. If you are financing a 2-4 unit property, as long as you live in one of the units, FHA guidelines will allow you to use 75% of the projected rental income of the other unit towards your monthly debt to income ratio, meaning you may be able to qualify to borrow more money. One drawback with FHA loans is that they require an upfront mortgage insurance that gets financed into the loan amount as well as a monthly mortgage Insurance factored into the payment. This insurance is charged by the lender to the borrower to mitigate financial loss in the event the home is foreclosed on. This is an added expense either built into the loan amount or monthly payment that protects the lender and not the borrower. Even if the borrower puts 20% down, they will still be subject to mortgage insurance.
VA Financing
The VA loan is a great mortgage type for military service members and veterans. With the VA loan a borrower can put 0% down and finance a home they plan to live in with no monthly mortgage fee. The VA loan allows a borrower to purchase a property with up to four units, meaning you can rent out the other three units and live in one. The VA loan is similar to FHA in the fact that they will consider 75% of the projected rental income for the additional units.
The deal:
Here is a current duplex in my market that hit the MLS (multiple listing service) today! This duplex is listed at $155,000. Assuming the home is in safe condition and will pass appraisal the mortgage payment on this home would be around $1,300 based on today’s mortgage interest rates for FHA loans. For VA loans it would be about $1,250 a month. Looking at the data in the area, rent could range from $1,000-$1,300 a month. This particular duplex does need some work. Keep in mind, the more updated your rental property is, the more competition you will have for tenants, which can earn you more money.
Financial Freedom
By living in one of the units for a few years and renting out the other, you will have the ability to save money and build equity. When you are ready to move, you can either sell the duplex and use the equity to purchase your next home OR keep it as a cash flowing asset! This is one of the simplest and most affordable ways to start investing in real estate and get you on your way to financial freedom.
Have questions or want more information? I’m always happy to help. Let’s chat today!
