Published in Anchorage Daily News on 11.29.2023 I have often wondered why first-time home buyers don’t consider purchasing a duplex as their first home. You can live in one unit and 75% of the gross rental income from...
Published in Anchorage Daily News on 11.29.2023
I have often wondered why first-time home buyers don’t consider purchasing a duplex as their first home. You can live in one unit and 75% of the gross rental income from the other unit can be used for qualifying income. Not only is that a good opportunity for help with your mortgage but once you have lived in the duplex for a year which is the required time of occupancy for an owner-occupied loan, you can rent the second unit and then ‘move up’ to a single-family home. That’s the exact opposite what most first-time home buyers consider. They purchase a home first and then, over time, begin to consider a multi-family investment. Now, Fannie Mae, the mortgage investor, is making that opportunity a much easier option for a first time buyer. In November 2023 they announced a new program with only 5% down for owner-occupied duplexes creating, in my opinion, an added incentive to consider this ’reversal’ of a real estate investment strategy.
According to Madona Rhine-Stack, Senior Mortgage Loan Originator at Global Credit Union Home Loans NMLS #204026, buyers will need a credit score of 620 for a Fannie Mae, AHFC, FHA or duplex loan. VA also offers a ZERO DOWN program. However, a VA buyer also needs to have prior proof of being a landlord or some type of history with rentals and if not, they will need to hire a property manager prior to closing. However, whether VA or conventional, these programs may also be attractive to downsizing seniors. I downsized from a single-family home to a duplex several years ago. Rather than a condo or smaller home, it’s a wise investment with several tax benefits. But that decision should only be made after consulting with a CPA. The VA has no specific loan limits, but the mortgage is based on the veteran’s or active-duty entitlement benefits which has many variables so active duty and veterans need to connect with the VA prior to duplex hunting.
You may be surprised by the loan limits for duplexes which can be as high as $1,394,775. This week’s search of the duplex market in MLS shows the highest sold price at over $1 million. There are currently 115 closed duplex sales year to date with 28 pending and only 21 active listings as reported in MLS. Today’s asking prices range from $835,000 to $165,000. Regardless of your qualifying price point, an owner-occupied duplex is nevertheless, it’s an often overlooked opportunity, particularly in a tight housing market like what we are currently experiencing.
Adding to the desirability of an owner-occupied duplex is the 14.2% increase in average rants and only a 2-4 percent vacancy factor. Anchorage’s housing crisis isn’t just for purchase but also for rent. Whether its single family or a duplex, owners and renters can expect increases in gas and electric as well as real estate taxes and insurance. Duplexes are a valuable and desirable commodity in today’s market. Unfortunately, most of the residentially zoned low-density land was swept up by duplex condos over the past twenty years or so. Duplexes are expensive to build—more bathrooms, more kitchens, which are the two most expensive rooms to build. But the idea of owning a duplex as a first investment and then moving forward after a year or so to a single-family home makes more sense than vice versa when a nonowner occupied duplex, triplex or even a four plex requires a much larger down payment. In a tight housing market like what we have for the foreseeable future in Anchorage, some buyers should think outside of the single-family box—think DUPLEX.
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