Blog Stories Saving for Early Retirement: Moving from a Single Family to a Duplex

Saving for Early Retirement: Moving from a Single Family to a Duplex

By Melissa Dorman, January 26, 2021

When I met Kenton almost 2 years ago I remember telling him about how real estate has changed my life. It has me on the path of early retirement by age 36. At the time, Kenton was living in beautiful single family home in North Portland worth over $600,000. He is an economist at Nike and his wife is a surgeon. They are smart people!  It wasn’t long until Kenton started reading books and listening to podcast about investing. It clicked. He wanted to invest in real estate too!

After some discussion, he decided to sell his single family home with his wife and downsize into a duplex. Many people would think “That’s crazy! Why would you do that?”.

You see most people don’t consider that your living expense (rent or mortgage) tends to be your highest expense each month. Saving up for early retirement is difficult when 25-50% of your income goes to a mortgage on a single family home. While Kenton had a lot of equity in his single family home, his mortgage payment was still the single largest expense in his budget.

Running the Numbers

As we began looking for his first owner occupied investment property, we considered downsizing to a condo or even a house with an ADU, where he could live in the ADU and rent out the house. But eventually we landed on a duplex because the numbers; $1,500 of rental income from the tenant occupying the other unit would cover most of the $2,600 monthly mortgage, principal/interest, taxes and insurance. Instead of spending $3,000-$4,000 on a single family home mortgage, now Kenton pays around $1,000 a month to live there and can save the rest for his next investment. That’s $24,000-$36,000 a year in savings!

Saving on your expenses is only part of the reason why this is such a smart move. Also, $1,000 a month is going directly to paying the principal on the mortgage, creating equity like a forced savings account. And even at a conservative rate of 5% appreciation each year, he will also gain $26,000 more of equity each year. Between his saving on living expenses, principal pay down, and appreciation…. that’s more than $62,000 a year!

Even with as little as 5% down with an FHA loan, Kenton can move into his next investment property and this duplex would cash flow and pay for itself after only a year of living there (the required time for this type of loan).

I’m so happy for my good friend Kenton. Not only is he living in a great two bedroom recently remodeled unit near Nike for $1,000 a month… and he is also well on his way to early retirement!

You may be wondering, does he miss his sing family home? Kenton told me ” My only regret is not starting sooner! I wish I would have started buying investment properties when I was 26 years old. I’d be retired already!”

Melissa Dorman

Broker | OR & WA

She/They

Ten years ago, Melissa was living in a slum in Kolkata, India, helping over 200 women escape sex trafficking by providing alternative work at a social business. It was there she discovered her passion for financial education as a means of empowering people to move out of poverty. After graduating from UCLA with a Masters, Melissa spent 5 years working as a Social Worker; assisting clients facing homelessness, in jail, or at a psychiatric facility. As much as she loved the work, imagining saving for retirement on the meager salary of a social worker was becoming grim. That's when Melissa discovered "passive income." In no time, she fell in LOVE with real estate as a vehicle for wealth. Soon after, Melissa began locating off-market multi-family properties to purchase through creative financing strategies and win-win opportunities. Two years into investing, Melissa quit her day job as a Social Worker to become a full-time broker and investor. Initially, she was drawn to people in difficult circumstances, so she developed extensive experience assisting families facing foreclosure, short sales, and probate. Melissa is well versed in helping her clients overcome complex real estate challenges. Currently, Melissa is teamed up with Super Broker, Yascha Noonberg at Living Room Realty. Together they assist clients to achieve their real estate dreams, including how to strategically buy and sell a personal residence to maximize profits. Far from the slums of Kolkata, her greatest passion now is empowering other working professionals to develop passive forms of income through buying multi-family properties in Portland.
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  • T: 503-567-4697
  • melissa@livingroomre.com

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