Don’t have any experience in real estate investing? That’s not a problem. Buying a duplex as your first investment is a great strategy for many reasons. The benefits are plenty and are waiting for you to take advantage of them. So let’s get right into it.
Why Investing in a Duplex Is Smart
Investors definitely have many types of rental properties to choose from- from single family homes to the many variations of a multi family rental. Why not go for a triplex or a fourplex? Well you should, if that’s the right strategy for you. Every real estate investment has its unique perks and it’s up to you to find something that works with your portfolio.
Related: What’s the Best Investment Strategy in Real Estate?
Now because we’re talking about real estate investing for beginners, we’ll help you figure out the duplex investment strategy.
Here’s what you can expect from investing in a duplex:
- Rental Income
- Great Cash Flow
- Owning a Duplex Means Owning Two Rental Units
- Tenants Cover Mortgage Payments
- Relatively Easy Financing
Most of these points all root back to the main benefit of investing in a duplex– it’s a two family property. Here’s what you can do with these two units:
#1. Live in one unit, and rent out the other.
Living in one of the units means you’re not wasting money renting out another place, and you can get some landlord experience. However, the bigger advantage here is that the rental income coming from the tenant occupying the second unit can pay off the monthly mortgage. This leaves you almost living for free.
#2. Rent out both units and receive significant cash flow.
Investing in a duplex is a great cash flow investing method when both units are occupied by tenants. This dual income is part of the great deal that comes with a duplex investment property.
Flexible Financing
Financing a real estate investment is a big area of concern for many beginners. However, a duplex investment property can be financed quite easily. Because duplexes are under-written with most of the same guidelines for single family homes, you can take advantage of low down payments. You can probably purchase a duplex with a 3.5% down payment if you plan on living in one of the units. And we already talked about the convenience of your other tenant’s rental payment covering your mortgage obligations.
Investing in a Duplex: Step-by-Step Guide
We’re going to break down this process of actually investing in a duplex so you have some direction. Here’s how to buy a duplex:
#1. Know What You Want
Before you can start searching for duplex real estate for sale, you need to first define what you’re actually searching for. Here are some pointers to help you narrow it down:
- How much are you willing to spend? What is your budget for investing in a duplex?
- Are there any certain neighborhoods or markets you’re specifically interested in? Where do you want to invest?
- Is a duplex really what you want, or do you want to include other types of multi family homes for sale?
- Do you want a move-in ready property or a fixer-upper? What kind of condition are you looking for?
Setting your preferences and having your criteria will definitely make the process of investing in a duplex much smoother.
Related: 7 Best Rental Property Markets for Investing in Multi Family Real Estate
#2. Get Your Finances in Order
You need to decide how you’re going to finance this investment. The first method-cash- is obviously the simplest; that is if you have it. Most people don’t have that kind of money laying around so a loan is the way to go.
Conventional loans are the basic traditional loans you find in any bank. It’s a stable option because it usually comes with fixed rates. However, the down payment for it is 20%. If you can put down the 20%, this is a good method.
If you can’t do the 20%, an FHA (Federal Housing Administration) loan might be the one for you. It does come with a couple of extra costs and the obligation to live in one of the units for at least a year, but the best thing about this loan is the low down payment- only 3.5%.
Related: Real Estate Basics: How to Buy a Duplex with No Money Down
#3. Start Your Search
You can definitely go the traditional route and look at the MLS for duplex real estate for sale. However, the world has become a digital place. Why not take advantage of this? Searching for real estate property online has never been easier. And good news for you, the ultimate property search tool is only one click away! Mashvisor has been helping real estate investors make faster and smarter investments for years. I think it’s time you become one of those investors. With accurate and reliable data, our search engine is the best one for the job.
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#4. Analyze the Property
Is a duplex a good investment? Well, you won’t find out unless you conduct an investment property analysis. Numbers play a huge role in this industry, and calculating and understanding them is key.
To accurately analyze a potential duplex deal, you’re going to need some great math skills. Alright, not everyone has those, but that’s not a problem. Investors have given up manual calculations and have progressed to a better means of investment property analysis- a rental property calculator. It will calculate all the key metrics and measures involved in the investment and will conclude whether or not this is a good deal.
Related: Rental Property Calculator: Just for Beginners or a Tool for All Real Estate Investors?
#5. Buy It & Rent It Out
Once you’ve found the best deal, the buying stage of the process of investing in a duplex is almost over. If you have a real estate agent, they’ll work out the details with the seller when it comes to offers and deals. If you don’t, that’s not an issue! With some research and networking, you’ll be able to define a good deal for yourself and handle the negotiations.
After inspecting the property (we recommend hiring a professional inspector) and closing on it, it’s time to rent out the units! Mashvisor can help you determine the proper rental rate for your investment property in its neighborhood. Learn more about our product.
Summing It All Up
Investing in a duplex can definitely be a great first investment if done properly. Mashvisor’s tools can help you do just that every step of the way. From analyzing financing methods to choosing markets to finding the perfect property and analyzing it, beginner real estate investors have found their safe haven!
Do you have questions about Mashvisor? Read our FAQs and learn about our tools.