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About ten years ago I was doing contract electronic design work in Austin, Texas. For those of you who have done contract work, you know that you only get a paycheck when you work. Between assignments you live on unemployment and savings. It's truly living from feast to famine.
At the time I was renting an apartment as I had for most of my life. Up to now this had been OK. But now I was married and the two of us were getting crowded in our one bedroom apartment. Also in Austin at that time, rents were getting out of control. Occupancy rates were 95% and higher. With this kind of demand, landlords were charging whatever rents they thought they could get away with. One bedroom apartments were going for $800 a month and two bedrooms commanded rents of over $1000.00 (remember, this was in 1996). Faced with these rents and a highly variable income I knew that I had to do something.
I was already quite frugal. My current car was only the second one I had ever owned. It was bought used for cash, so I didn't have to deal with a car payment. The biggest problem was the monthly rent. What I needed to do was to get off the increasing rent spiral. Usually the solution is to buy a house. But I couldn't see the advantage. Mortgage payments tend to be higher than rent. Also, I wasn't sure how long I was going to live in Austin. Unless I owned the house for at least five years, I would take a beating on closing costs and real estate commissions.
The solution was not obvious. Whether we like to admit it or not, we are conditioned to think in fairly predictable ways. And I have to admit that I was having trouble thinking of something other then the obvious solutions of buy or rent. But slowly a thought began to take shape. The problem as I saw it was that I was expected to trade money for a place to live. So what is the least money I could trade for the most house? Then I began to wonder how I could get on the other side of the money. I mean, if people are paying money for a place to live, how can I get them to give me some of that money? I think it was on a Sunday afternoon that I finally had a stroke of genius.
Of course! Buy a duplex.
Well getting from a good idea to the final result takes some time and effort. So I'll spare you the gory details. Suffice it to say that several months later it was moving day as my wife and I moved into one half of our new duplex. Our "half" was the two bedroom 1 bath 800 SF portion. The other "half" was a three bedroom 2 bath apartment. Now, here is the nice part. Our mortgage payment was $850.00 a month The Tenant on the other side was paying $725.00 a month for rent. If you do the math you will find that we only had to come up with $125.00 to cover the remainder of the mortgage. Very frugal housing indeed.
A few years later when my daughter was born, we bought a bigger place. Also another duplex. Of course we kept the first duplex. This time the numbers were even better, when all the rents were added up they completely covered the mortgage payments and we had some money left over.
Even though I no longer live in Austin I still own the duplexes. I have them under professional management and I am enjoying a small side income from them. If you want to read more of my advice on buying duplexes then visit the real estate section of this site.