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If you are a new investor or are looking into entering the real estate market for the first time you are likely curious about which types of properties would be the smartest to invest into. While single-family homes have a longstanding reputation as a reliable place to begin building your portfolio, there is another strategy that stands out as a great place for beginners to start – duplexes.
Duplex homes are a great investment because they are incredibly versatile type of property. These units are held in high regard for their ability to quickly build equity while generating a steady cash flow through from its rental income. As well, they serve as a step into the world of multi-family real estate investing.
So, here are a few reasons why duplexes can be a strong investment strategy for new and returning investors.
But first, if you are interested in investing in duplexes and other multifamily homes, click the link below to book a free strategy call to discuss mortgage financing options.
What is the meaning of Duplex house?
Before explaining the advantages of a duplex, it is important to understand exactly what a duplex is. A duplex is a single property with two dwelling units. These units are typically divided by a shared wall or stacked on top of each other. Despite being a single building, when a buyer purchases a duplex, they are essentially buying two homes for the price of one.
Have High Cash Flow Potential
Cash flow is the name of the game for the majority of long-term real estate investors. So, when you are looking to invest, it is important you look for one that can generate a strong cash flow consistently. This is where the true advantage of duplexes shines through.
Due to the fact they contain two separate residences, buying a duplex creates the opportunity to generate multiple revenue streams from a single property. This means you can have an easier time generating enough income to cover the property’s monthly expenses such as mortgage payments, insurance, and maintenance costs, while also generating a positive cash flow. In some cases, it is even possible to set the rental price for a single unit high enough to cover most or all your expenses. This means the majority or even all of your rental income from the second unit can be considered profit. Additionally, this provides you with protection during brief periods where a single unit may become vacant.
Since the property has two units, duplexes are also a strong contender to be considered if you are planning to do an owner-occupied rental property. While your tenants pay for one unit on the property, you can live in the second one for free or very little money, allowing you to save up for your next investment property even quicker than you would paying for a separate principal residence.
However, since you are going to be living there, it is important you set clear boundaries with your tenant regarding when they should come speak with you. Otherwise, you run the risk of having your tenant knocking on your door at 3AM with their concerns while you are trying to sleep. As well, you will have the shared wall or floor/ceiling with your tenants which means you will have to live with any sounds coming from their unit, but this can sometimes become a non-issue if your tenant screening process includes considerations for noise.
Discover How To Analyze a Properties Cash Flow With This Step By Step Guide
Easier to Rent Than Apartments
If you are looking for a multi-family investment property that will make it easy for you to find tenants, look no further than a duplex. Unlike apartment buildings which occasionally make your tenants feel like they are living inside of a box, duplexes provide more of a “home” feeling which attracts more potential renters to your property. Duplexes also make it easier for renters to tune out sounds from their neighbours because they typically only have to worry about a single wall or floor that is shared with another tenant while their other neighbours are father away. As opposed to apartment complexes where tenants often have neighbours on all sides generating noise.
If you are planning on living in your duplex, this will also help you find great tenants because most people prefer to their landlords be nearby in case of an emergency.
Affordable Multi-Family Option
While a duplex is typically more expensive than a single-family house, you do get two residences in a single purchase. This makes them a more affordable way to add multiple doors to your real estate portfolio at one time. Additionally, duplexes are often built in more affordable neighbourhoods making them much easier to purchase.
Legal Non Conforming
When shopping for a property, you may come across a legal non conforming duplex. These are properties that were lawfully in existing before the zoning laws were changed. These properties can still be used as a two unit property, even if they city no longer considers it a “conforming” dwelling.
Relatively Easy to Finance
One of the reasons people hesitate to invest in multi-family real estate are concerns over the financing these types of properties. However, fortunately for them duplexes are among one of the easiest multi-family properties to securing financing for. With most lenders and financial institutions, duplexes are typically as easy to finance as single-family homes. Securing financing for these properties can be made even simpler if you are planning to make the property into an owner-occupied rental because you will be able to take advantage of various programs meant to help people buy new principal residences.
If you would like more information on duplexes or other residential real estate investments, contact us at LendCity. We will gladly connect you with our network of team members and investors who can help you learn everything you need to invest successfully. As well, if you are ready to buy or are planning to buy soon, make sure you fill out our online application so that we can help you find the best lending options from the lenders who are best suited to your strategy and situation. We can be reached at 519-960-0370 or you can visit us online at LendCity.ca.
Alternatively, you can click the link below for a free strategy call today.