Real estate investing can be a profitable alternative to traditional investment options, such as the stock market or retirement accounts. It can offer steady income and the opportunity to take an active role in growing your assets and capital. While getting started in real estate investing can be daunting, duplexes and multifamily properties can be a good place to start, and here are some reasons why.
Duplexes are an easy and relatively low-risk way to get started in real estate investing, especially if you’re willing to live in one unit while renting out the other. This strategy, known as house hacking, can offer several advantages.
Firstly, financing a duplex can be more accessible than financing other types of investment properties. Federal Housing Association (FHA) loans can be an option for those who don’t have the required 20% down payment for a conventional mortgage. FHA loans may allow you to pay as little as 3.5% down, but they can only be applied to homes that you plan to live in for at least a year. This loan option is perfect if you plan to live in one side of a duplex and rent out the other.
Secondly, house hacking can help you live for free while building equity in the property. If you can cover the mortgage and other expenses with the rent from the other unit, you could live rent-free and benefit from the tax advantages that rental properties can offer. Additionally, if you’re handy, you can save on the initial purchase by finding a duplex that needs some work. This can help increase the value and selling price of your property later or bring in higher rents and quality tenants if you keep it as a rental property.
Multifamily properties are another option for those looking to diversify their real estate investment portfolio. While some benefits of duplexes also apply to multifamily properties, such as the ability to capture rents from multiple tenants while owning just one property, multifamily complexes offer some unique advantages.
For instance, multifamily homes can benefit from economies of scale. Shared structures and amenities among tenants, such as roofs, exterior walls, and landscaping, can be divided among the units, resulting in lower costs for each individual unit owner. Additionally, because multiple units generate revenue, even if one unit is vacant, you can still bring in rent from the others, reducing the risk of not being able to pay the mortgage.
Furthermore, investing in a multifamily complex can result in faster growth compared to acquiring multiple single-family properties. Since you’re only purchasing one property, you’re only dealing with one transaction, which can save time and money. Additionally, having multiple rents as income can help you gain equity quickly and move on to your next purchase.
In conclusion, real estate investing can offer a profitable alternative to traditional investment options, and duplexes and multifamily properties can be a good place to start. While each option has its own advantages, both offer the opportunity to capture rents from multiple tenants while owning just one property, diversify your risk, and gain equity quickly.