Duplexes – One Of The Best Investments You Can Make
When it comes to property investing, most people will gravitate towards one family home. But were you aware that purchasing a duplex or a tri-plex is a much better investment? Let us look at the three most important things in real estate investing. Cash flow, Appreciating and Value.
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As anybody knows in real estate, the aim is for positive cash flow; otherwise you own an investment which costs you cash on monthly basis. Positive cash flow is only defined as cash left after paying for your mortgage, property taxes, insurance, and any monthly utilities and repairs.
A residence is a money pit which can cost you money in the method of their mortgage principal, interest, taxes and insurance. Add to this normal repairs and maintenance and after everything is said and done, the only investment value a house actually offers is appreciation and that’s speculative based on where you live. Not all markets have increasing values all the time and land values can be effected by plant closings, layoffs, etc.. For all practical purposes, a residential home, a “home” doesn’t fall in line with the genuine spirit of property investment, which will be property the will cause income-producing “positive” cash stream. Really, single family residential property used as a residence has the reverse effect and triggers outgoing money flow. . .thus, the “money pit”.
The smartest way to invest in residential property and still generate some kind of “positive cash flow” is to buy a duplex, live in one side and let the other. Many times the rent income coming in from another hand can practically pay the mortgage payment of the entire property supplying almost free home to the proprietor. The renters on the other side are not only paying your mortgage, but they are helping you build equity in your property. This equity will even grow over time with admiration, providing two sources of wealth building: one from cash flow pay-down of the mortgage and another, land value growth during natural appreciation.
The amount of money you would usually spend on a single family home mortgage payment (PITI) can be saved, in whole or in part, as a down payment to the next duplex throughout the time you live in your house.
The name of this game is to buy a duplex, live in half, rent the other half out and save to the next duplex. When you have sufficient money, move out of the duplex, then rent the unit and move to another duplex and then replicate the process by renting the other half out. In this way you would have 3 sources of earnings working for you: income from unit A and B at the first duplex and income from unit B in the second. Now you’ve got real estate working for you and you’re on your way to serious income generating cash flow.
The only real downside to the project is that will need to live next to your renter for a period of time. The upstroke is that it gives you a flavor of property management without burning more than you can reasonably weigh. Indeed, this notion is the way many real estate millionaires are birthed.
Not many people consider this angle when they are searching for a house and it’s worth careful thought and serious consideration. You’ve got two choices: The money pit or income producing property. It’s a choice you’ll need to make.
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