When investing in real estate, it’s crucial to understand the differences between common types of properties and how these properties can help investors achieve their financial goals in varied ways. Today, we’re going to examine how a duplex compares to a single-family home as a real estate investment, and there are many things to consider.
Expectations
Duplexes are typically more expensive than single-family homes, and there is higher demand for single-family residences than for duplexes, so selling a duplex may take longer than expected. However, duplexes produce more cash flow over time, and this is very appealing to real estate investors.
Vacancy and Monthly Rental Income
A vacant single-family home will significantly affect your monthly return on investment (ROI) more than a duplex. With a duplex, the chances of both units being vacant simultaneously are low, which means you’ll have a better chance of consistent monthly rental income. With a single-family home, you are responsible for 100 percent of the mortgage if it is vacant.
Property Insurance
Property insurance for a duplex is typically 15 to 25 percent higher than policies for a single-family home.
Return on Investment (ROI)
This is the most important deciding factor when purchasing an investment property, and it’s important to weigh which type of property will generate a better long-term investment return. Several factors contribute to ROI, including property condition, how well tenants care for your property, location, and appreciation potential, just to name a few.
Crucial Questions to Ask When Considering a Duplex
Ask yourself:
- How much do I want to spend?
- What condition am I willing to accept? (fixer-upper or move-in ready?)
- What areas or neighborhoods should I consider for my duplex investment?
- Do I want to live on one side of my duplex or rent out both units?
These questions will help guide your duplex purchase. Be sure to do your homework.
At the end of the day, duplexes often offer a wide range of advantages. The critical takeaway is to buy a quality property. Crunch the numbers, do your homework, and select a real estate investment gives you the best chance for a higher return.
Have questions about real estate investing? Reach out to TALK Property Management anytime. We’re always available to help.
