One of the best things about real estate investing is that it offers a variety of options for potential owners. The options can range from single apartments to full residential buildings, from single family homes to multi family properties, and each investment can bring success in its own right to the real estate investor. The trick to making any type of real estate investment work is to understand all the aspects of the property and the profits it can generate. One type of investment that has divided opinion amongst real estate investors is a duplex house purchase.
A duplex property is basically a residential building that hosts two households, each with their own separate entrance. That feature of buying a 2-in-1 investment property makes the prices of a duplex house higher than normal apartments due to their bigger size and unique features. However, it is cheaper than buying separate houses because of the common wall and others.
The ideal real estate investor in a duplex property is usually a person who wants to invest in a property that gives him/her a place to live while also making money from renting the other part of the duplex. On paper it is a very smart investment move, which begs the question “Why are duplex house purchases not a common trend?” Well, the thing about duplex house investments is that they are very hard to find. The availability of that type of property is usually limited, and in addition most duplex houses are not worth their price. To find one that will generate rental income and pay off your mortgages, it has to be a really great duplex house.
Related: Buying Your First Rental Property: What Property Is Right for You?
Owning a duplex house as an investment property has its advantages and disadvantages, which is why they usually divide opinions. Let’s look at the most important pros and cons:
Advantages of Investing in a Duplex House
1. Increased Rental Income
For investors who will be renting out both parts of the property, there is a possibility to generate more rental income compared to what would come from a regular rental property. Renting out the entire place could be an option as well if a tenant wants to rent both parts. A duplex house, a good one, would also have an outdoor space or a garden that could pump up the price, which means that the opportunities to make more profit are there.
2. Positive Reselling Value
Like most real estate investments, buying a duplex house and then turning it into a better quality one with added renovation costs can increase the value of the property. An owner can even renovate and sell only one part of the duplex and make a considerable profit on that sale. That both units of the duplex have their own entrance, bathrooms, kitchen, and utilities gives it a strong selling point.
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3. Good Intro to Real Estate Investing
Buying a duplex house can be a learning experience for beginners in the real estate market. While finding an investment property that will serve a double purpose is not easy, it is still easier than to find a rental property and a home, and this is exactly why a duplex house investment would be ideal. An investor can purchase the property and use one part of the duplex as a home for him/herself and his/her family, while the other part can be rented out to a tenant. Being close to your own rental property and to the tenant can prove to be a very helpful experience without requiring too much effort due to the proximity to the rental property.
4. Perfect for Airbnb
A duplex house might be the perfect fit to become an Airbnb rental property while providing convenience to the owner. Renting homes on Airbnb has proved to be tiresome for most owners because of the preparations needed like cleaning and the high turnover of guests. However, living next to your own Airbnb rental while still enjoying the comforts of privacy will lead to bigger profits without losing much time, effort, or money.
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Related: 6 Reasons For The Growth Of The Airbnb Investment Property
Disadvantages of Investing in a Duplex House
1. Dealing with Bad Tenants
Owning a duplex house and then sharing the other part with a tenant could prove troublesome. Owners always have a fear of renting their properties to bad tenants because of the financial losses they might face as a result of damages. Living next to your tenant brings a new dimension to the problem of bad tenants – that you have to suffer living in close proximity to them. Loud or noisy tenants could disrupt the living environment of the owners.
2. Limited Location Options
Finding a duplex house is not easy, that is a fact. They are not available in all areas or neighborhoods in cities. If you are looking to buy a duplex house in a central zone of most cities, chances of finding one will be very slim. This forces investors interested in such an investment to suffer forced locations that will be mostly suburban areas.
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Investing in a duplex house can be a very profitable investment for owners if they are able to avoid certain mistakes associated with investing in such properties. Overpaying for a duplex property might result in a horrible investment, relatively low rental income, and even negative cash flow. Moreover, not paying enough attention to the location could lead to investing and living in a bad neighborhood. However, if these mistakes can be avoided and the investor is sure of the demand and calculates well the profit, then investing in a duplex house would prove a masterstroke. Hitting two birds with one stone is a saying that fits perfectly when purchasing a duplex house.