People with money have always looked at the real estate market as a relatively safe playing ground where they can make their first investment steps or an easy way to establish another income flow. This relative safety is granted by two simple facts – people are in constant pursuit of housing and, unlike other investment options, properties produce passive income and represent a renewable source of capital.
Still, in spite of all these general traits, different property types offer different sets of pros and cons. Here, we will take a look where duplexes stand in the grand scheme of things and some strategies you can use to invest in this type of premise.
What is a duplex?
If you are unfamiliar with the term, the word duplex describes a house that consists of two separate living units with two separate entrances. Sometimes, these units are located on top of each other. More often, they are both accessed from the ground level. Either way, investing in a twin-home represents a strategy that allows you to rent the property to two different families at once.
Pros and cons of investing in a duplex
This fact alone creates a very unique value proposition that makes duplexes one of the most interesting investment options in the real estate market. Let us break down some of the pros and cons produced by such a setup.
What makes a duplex a good investment
Rental income – Since a duplex, essentially, represents a two-family property, you are in a position to rent both units and double the rental income.
Affordability – This type of investment grants you two housing units at the price that’s far lower than the price of two separate properties.
Ease of financing – Taking into consideration this level of versatility, it comes as a very pleasant surprise that duplex financing is performed through all regular channels (conventional loans, FHA loans, cash, etc.)
Of course, we have to point out that a duplex investment represents such a popular beginner option because you can simply move into one unit, rent the other, live for free and have a great deal of the mortgage covered.
Things to look out for
Maintenance – Since the property will be occupied by two families at once, you can expect the maintenance costs to rise above the average.
Vacancies – Finding tenants is hard. Filling two vacancies is even harder. However, as we already mentioned, these problems can be offset by moving into one of the compartments.
As we can see, duplexes are by no means a perfect investment, but both the drawbacks we've covered aren't severe enough to prevent you from enjoying a couple of more than lucrative benefits.
The investment strategy for beginners
And now that we’ve covered the basics and established what the duplexes are actually all about, let us take a look at a couple of ways you can tilt the odds even more to your advantage.
Leverage the tax benefits – Although local legislation varies from country to country, duplex properties often come with attached tax advantages. For instance, you are often allowed to claim the tax deductions the very same year you have bought the property.
Lower the rents – Since you have acquired a two-family property at a price that's just slightly higher than a single-family house, you can do a lot to attract the prospective tenants by slightly lowering the rent.
Leverage the location – Unlike regular properties, duplexes are far less spread out. That is why you should use this fact to your advantage and invest in duplex projects rather than buying existing properties. Hot locations in combination with lowered rents will help your investment earn a lot of heat.
We hope these few considerations helped you realize just how valuable duplexes can prove to be if selected and managed properly. No matter whether you are just making your first investing steps or you are simply looking for yet another source of income, this is the feather you most definitely want in your cap.