Last week I was speaking with an attorney friend of mine over coffee and we got to talking about real estate and first home purchases.
The usual topics came up like inspections and the best places to buy. Which is the best school district? Of course. One question he asked did surprise me as not too many people ask it. I was very happy to answer it.
“What is the best type of property to buy as a young first time purchaser?”
As I am technically in sales my response was “whichever property makes you happy!” But all joking aside he was looking for honest input about appreciation and value. It’s a question no one really asks and I’m not sure why. Share if you have thoughts.
Here is what I explained to him.
If the decision was completely up to me and I was left to my own devices my first residential property would be a duplex property. Yes a duplex.
First: You start investing in property early in your life. It is commonly agreed by the experts that real estate is the safest and strongest way to accumulate wealth over the long term. Look at it this way. Over the past 60 years home values have risen 6.34% each year. At that rate a property purchased for $100,000 will be worth over $600k in 30 years.
Second: You could potentially live free or almost free. If you purchase a $100,000 duplex with 5% down your initial investment will be (with some closing costs) right around $7,000. Your monthly payment (interest and principal only) will be just over $500 with a 30 year fixed loan and 5% rate. Do you think you can get at least $500 for the side of the duplex you aren’t living in? In our area of Wisconsin you should get at least that if not more. There is a good chance the rent for the side you aren’t living in will cover all of your mortgage payment: principal, interest, taxes and insurance. You live FREE. Even if you just look at making your initial investment back you would have that accomplished in 14 months. Why not live free and see the first reason above.
Third: The property is a wealth generator. If you live in the property for 5-7 years you should have a good amount of equity to pull from. Add that to your savings (because you are a good saver) and you have a healthy down payment for your first single family home. That is unless you caught the bug and now want to be a real estate mogul. ..
I will keep you updated if my friend purchases a duplex as his first property.
Below are a few sources if you want to do some fact checking:
-Dylan A. B. Diersen
First Weber, Inc
Dylan has been quoted on by national new outlets and has multiple designations recognized by the National Association of Realtors. Also, he has consistently helped more and more people achieve their real estate goals by increasing service. You can see more blog posts at FoxCitiesProperties.com/blog or keep in touch on Facebook at https://www.facebook.com/WisconsinRealEstateExpert/