The point of real estate investment should be to essentially gain capital by investing in real estate. One of the safest ways to go about this is to invest in a duplex rental property, manage it over time, and have a modest return monthly, (rents-expenses to own and manage) and a net gain over time, (property value increases and tenants eventually pay down the principal + interest). I will explore this topic in a series of posts. Consider this post an introduction in the series. One of the biggest decisions you will make in the process of owning that rent/hold property is finding the one that makes the most sense to invest in.
When searching for a suitable property to invest in, keep the number one factor in mind, the tenant. What will the tenant reasonably pay for the unit, what property will attract quality tenants, and what unique amenities will make the property more desirable to renters? If you choose the property that best satisfies the above questions, you will see a far greater rate of return on investment and have an overall easier time of owning and managing the property. A duplex typically satisfies more of what a tenant desires in a multi-rental unit then any other type of multi-unit property.
Why you may ask is a duplex much more desirable than say a modern apartment complex or a three-decker, (apartment on each of three floors)? A sense of personal space (most often the units provide personal yard space and minimal noise and traffic impact from neighbors) would be my number one reason. Beyond that more space and good design flow are a close second. Since you will own a more desirable rental property, here is how you will benefit:
More Rental Applicants: When one of my units hit the rental listing I brace myself for the amount of rental inquiries I will receive. I have a pad of paper and pen on hand and often barely keep up with the amount of potential rental candidates I screen in the process.
Rental Rates that Outperform Other Rental Units: I find that I can charge at least a few hundred dollars more than my competition. I don’t know how many times I have heard the argument that this or that unit is renting for x dollars but yours is listed for way more. When I ask what the comparable offers compared to my unit, the reason for the higher rental price becomes clear to the potential renter. The problem is this is their ‘perfect match’ but there budget will not cover the cost of renting the unit.
Longer Tenant Occupancy: I find the more a tenant feels at home renting a property the longer they will stay in the unit. I average 4-5 years per occupancy. This low turnover should not be taken lightly. The expense of renovation, listing, and vacancy revenue loss, can add up over the years; never mind the time and effort to find that new ‘perfect tenant’.
Better Care and Upkeep: Since a duplex provides more personal space for renters, they are much more likely to take the steps necessary to maintain that personal space. I have even had situations where one tenant will remind the other tenant that their side of the yard could use some attention. I offered to intervene but the tenants worked it out. The point is the more a tenant takes ownership of their space the less you will need to manage the property.
Greater Ability to Pick and Choose Quality Renters: If you own a very desirable duplex property, you now have a deeper pool of potential tenants to chose from. This fact allows you to be a little more picky in finding the best fit tenant for the rental unit.
Hopefully I have convinced you in this introduction to Buying and Holding a Duplex, that this type of investment is obtainable and might be the least tricky form of real estate investment to get into. In my next post on this topic I will further explore the buying process and how you can choose the property that will meet or exceed your investment goals.