In August 2016, I made the largest purchase in my life, I bought a duplex. It was very scary but at the same time necessary. I had just turned 25 and had been living at home for about 3 years after graduating from college. It was time to go.
Many of my family members and friends had asked if I was planning to get an apartment but the answer was always “no.” I have never like the idea of paying into something that would never be mine. Renting a house was just never going to happen, it isn’t for me.
Ever since I was a child, I knew I wanted to buy a duplex or a multi family home for my first house. I was never interested in a single family house for my first home. In my mind, a single family home isn’t an asset (if you decide to live in it). Let me explain because I know this concept sounds funny.
Most people buy homes and expect the price to appreciate over time. In the long run they almost always do, but there is a huge difference between owning a single family home and multi family home.
In a single family home when the mortgage is due, the entire mortgage comes directly from the owner. In a multi family home, at least a portion, if not all, of the mortgage comes from the tenants paying rent.
Just for argument's sake, both types of houses have the same mortgage amount, $360,000. Keeping this example simple, over 30 years it would cost $1,000 per month. In the single family situation, I would have paid every penny from my pocket directly. In the multi family home situation, I would only be paying a portion of that directly, or if I get lucky, none of it directly. Fast forward 30 years, if I decided to sell the multi family house, I would have collected on all of the monthly rents and the profit from selling the house. On the other side, if i decide to sell the single family house, I would only receive the profits from the sale. Mathematically it makes sense to buy a duplex or multi family house. A multi family house is constantly making money while a single family house isn't. This is why I don't think a single family home is an asset.
Just like renting for me, buying a duplex or a multi family house isn’t for everyone. There is a lot of risk by owning a multi family and it is a lot of responsibility. But if managed properly, and getting lucky with tenants, it can be a life changer. It has been for me.
TLDR:
Buying a multi family house constantly makes you money, single family house doesn’t (assuming you’re living in it).
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