Eighteen years ago, I downsized from a single family home to an owner-occupied duplex.  Back then, it was an unusual housing choice for a realtor to make and even today, friends and colleagues still ask me why I made that move. But, personal reasons aside, an owner-occupied duplex is not only a good investment, but an increasingly acceptable lifestyle choice.  Year to date, 142 duplex sides have been permitted which is more than double from the 62 in 2013. Whether it’s sharing a common wall with a friend, family member or total stranger, the duplex home is the latest housing opportunity for affordability and a partial answer to Anchorage’s housing crunch.

An owner-occupied duplex has many advantages, not the least of which is financial.  Seventy-five percent of the rental income can be used to qualify for the mortgage as long as the buyer/owner has some previous property management experience as evidenced on a prior tax return. Loan limits have increased over time and you may be surprised to know that VA has a duplex loan limit of $625,000.   Fannie Mae and AHFC will loan up to $800,775.  These loan limits allow for an owner’s unit much like a luxury single family home with three and four bedrooms, triple car garage and a smaller tenant’s unit for that returning adult child, mother-in-law or corporate relocator. The two sides of a duplex do not need to be equally designed.   In fact, many may look like a single family home with a primary front entrance and a tenant entrance on the side or rear.  I live in south addition where duplexes are hard to distinguish from single family homes.  Across C Street to the east, is another emerging neighborhood where duplexes are gaining in popularity.

One caveat to high loan limits, however, is that if the buyer is qualifying based upon a contribution of the rental income to his overall debt ratio, he must have six months of reserves on hand, including principal, interest, taxes and insurance.  So, even for VA financing which can be up to 100% of appraised value, a buyer would need to have approximately $15,000 cash on hand to purchase a $550,000 duplex. Still, that amount is modest when considering you have assistance with your monthly mortgage payment.

Duplexes are expensive to build because they have more bathrooms and kitchens, the two most expensive rooms to construct, and so their value should never be analyzed on price per square foot alone, but rather rental income and your lifestyle choice.  And even though a brand new duplex should not have repairs for several years, an owner must be prepared to replace aging appliances, carpeting, and paint, and make other upgrades to remain competitive in the rental market.