Property investment tip 55: The problem with buying both units in a duplex

The problem with buying both units in a duplex

A duplex is two residential buildings that are attached side-by-side. Or, a duplex is also a building consisting of two apartments, one above the other.

Many property investors buy both units in a duplex because there are more options to expand the properties, or to redevelop the land. This was always my plan when I purchased one unit within a duplex many years ago.

Lesson learnt: The mistake made

I had mistakenly assumed that because I was the landlord of one unit in the duplex, the process of getting a mortgage to buy the second unit would be very easy. I was wrong.

Many lenders are reluctant to issue mortgages to people seeking to buy both units in a duplex.

Lenders are concerned that landlords will convert a duplex into a single house. This building modification is against standard mortgage terms. And, it becomes a legal issue when both units are financed by different lenders.

Landlords who own the leasehold on both units, as well as the freehold on the land, are high risk to lenders. Another legal battle could occur if the lender repossess one or both units, but the freehold still belongs to the landlord.

On a side note, most lenders also had a problem with my current employment history. In 2017 / 2018 I took a one-year career gap. To date, I have returned to full-time employment for five months. The lenders stated that I had to be employment for 12 months before I could apply for a mortgage because I already owned one unit in the same duplex.

Advice for purchasing both units in a duplex

Get a mortgage lender to help you identify which lenders will accept your application for buying both units in a duplex. Please note, I am not a broker nor do I support any mortgage companies.

From experience, many lenders will tell that you are eligible for a mortgage. But the adviser you speak with is not necessary the person who processes your application. Your application could get declined.

Applying for too much credit at one time, or getting rejected for multiple credit applications is bad for your credit history. Let the mortgage broker do the research for you. Thereafter, you can submit your own application, if you prefer.

So, have you encountered any difficulties with purchasing both units in a duplex?

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Hi, my name is Jude Little, also known as ‘Big Sister Jude’. I am a comic artist and a property investor. I bought my first property at 26 and ended up owning four properties in Australia and the UK by 30. I created this blog to help millions of people, like my little brother and little sister, who want to climb the property ladder but lack the knowledge and confidence on how to get there.

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