Investing in Duplexes
You can turn a nice profit by making investments in either duplexes or single-family houses. Many real estate investors have made a nice income using both methods of wealth creation. But real estate investing is all about cash flow, and if you are buying real estate for investment purposes, a single-family house will limit your income to one renter, while a duplex allows you the opportunity to collect on two.
There is money to be made investing in single-family houses located in solid, appreciating neighborhoods where there is high demand for housing. But investing in duplexes offers more advantages.
What Is a Duplex?
A duplex is a multi-family property with two units. Typically, a duplex is laid out in a side-by-side arrangement. Other options include an older large home converted into two units. Some are the “up and down” type of two-family homes. The term is generally applied to a property that was originally intended to be a single property with two units. Often, the two units are identical, but not always. For simplicity, let’s assume for this story that a duplex is a stand-alone property, not part of a condominium community.
Subsidized Living Expenses
With a duplex, you can potentially live in one unit and rent the other one to generate income for your living expenses. If you can come up with a large enough down payment and get a low enough interest rate, the rent you collect from the tenant could cover all or at least a good chunk of your living expenses.
If you invest in a single-family home, you will need to collect enough rent to cover the mortgage payments and cover the expenses related to that house. Ideally, you will have a profit each month from the house, but it probably will not be enough to subsidize your living expenses to the extent a duplex would.
“Duplexes are great starter Real Estate Investments: since you can potentially live in one unit and rent the other one to generate income to cover your own living expenses.”
Reduced Risk of Investment
Cash flow is king in real estate investing. If your tenant moves out of a single-family home, you’ll lose 100 percent of your cash flow and will be stuck with the full cost for the upkeep of that home until you find a new renter.
Assuming that you are renting both units of a duplex, if one tenant moves out, you still have cash flow from the other unit to help cover the bills until another renter moves in. A duplex offers more sources of income and therefore can reduce the risk of the investment.
Impact of Home Values
Single-family home values are based on the sales prices of similar single-family homes in the same neighborhood. This is great when prices are rising and not so great during economic downturns.
Duplexes are valued on the cash flow the property generates. It doesn’t matter how much rent you charge for a single-family home; buyers will determine its value based on what nearby single-family homes are selling for. Duplex values are not as affected by falling home prices in a neighborhood if rents stay the same. You can increase the value of a duplex by raising the rents because another investor will be willing to pay more for the higher cash flow.
Qualifying for a Mortgage
It could take less income to qualify for a mortgage to invest in a duplex than you would need for a single-family house. Assuming you have saved enough of a down payment, have good credit and a job, you would have little problem getting loan approval. Banks are not so flexible with single-family home investments.
Making your investment stand out
If you drive through some of the new subdivisions in La Crosse, WI you’ll notice the same duplex home built throughout the entire block. Not just the same style of house but the entire exteriors are the SAME!
When Real Estate Investment Results starts building out our duplex lots, we will be doing quality and beautiful work. We have searched different types of duplex designs that are unique and different than what investors are putting up everywhere. We as a company enjoy being different and take pride in our quality finishes.
A Modern Duplex Example
Modern Farmhouse Duplex with Extra-deep Garage
This super-efficient duplex house plan has a modern farmhouse exterior with board and batten siding mixed with wood accents.
Inside, you are greeted by the family room which opens to the kitchen featuring a breakfast bar, pantry, and practical counter space. A coat closet and a powder bath complete the main floor.
Upstairs, the master bedroom features a walk-in closet. A wall separates its bath area from the centrally located laundry. Just off the second-floor landing, the bedrooms share a hall bath.
Each unit gives you 932 square feet of heated living space - 424 square feet on the main floor and 508 square feet on the second floor - and an extra-deep garage.
ArchitecturalDesigns.com
Floor Plan #62771DJ
https://www.architecturaldesigns.com/house-plans/modern-farmhouse-duplex-with-extra-deep-garage-62771dj
