A duplex is a housing structure that has two units. The units share a vertical wall so some people call these houses 'two-in-one" houses. This article discusses why it may be better for you to invest in a duplex instead of a single-family rental home:
Ease of Getting Financing
Many financial institutions easily extend financing for duplexes because they consider the income generation capacity of the units as some kind of assurance that they will get their money back. It will therefore be easier for you to afford building a duplex in a more up-market area due to the ease of funding the project. This is unlike a single family home where financial institutions only look at your current income to assess the chances of getting back their money so the funding you get may be limited.
Lower Risk
Duplexes offer a lower relative risk than single-family units do. This is because the cash flow from a duplex is generated from more than one tenant so a vacancy in one unit cannot put a standstill upon the cash you have available to meet monthly expenses like paying the mortgage. When a tenant in a single-family rental home leaves then you will be compelled to use your savings to meet all the costs of the home until you can find another tenant so this makes these rental homes more risky to you as an investor.
Economies of Scale
You are likely to enjoy lower operating costs when you own a duplex. This is because property managers may offer you a discount on each unit if you give them business. Services like lawn maintenance are also lower since they are taken out of two incomes (rent from two tenants) so their impact on your cash flow will be less.
This is different from what happens if you own a single family home. You may not get any discount from a property manager and home maintenance costs take a bigger percentage out of your monthly income since they are being offset from the rent got from one tenant.
Duplexes also have some shortcomings like imposing a greater demand on your time if you decide to manage them yourself. This is because you will spend more time showing potential renters the homes since you need twice the number of tenants that a single-family home requires. Discuss these issues with a duplex builder and other professionals such as real estate agents so that you make an informed decision about your wish to build a duplex.
Contact a company such as Innovation Building and Design Pty Ltd to learn more.
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