Investments are a way to get your money to work for you. They can lead you to your financial goals and build your wealth. There are several ways to invest your money, with real estate being one of them. This article will highlight tangible real estate investment strategies and how they can contribute to your financial success.

Duplexes and beyond

Duplexes can be a great kick-off to a first-time investor’s portfolio. You can live on one side and rent out the other with a rental rate that covers your mortgage and creates some cash flow. And when you’re ready to move out, you can rent out both sides and expand your monthly income. We’ve written about duplexes for pioneering investors before, but what’s the advantage of adding a duplex to your already-started portfolio?

What’s the scoop on duplexes?

Have you seen a townhome style community that looks like a bunch of duplexes next to each other? New developments are popping up in growing communities like Waukee, Bondurant, and Ankeny. There’s a stark difference between a townhouse and a duplex. It’s all in the lay of the land. When you buy a townhome, you own the lot it sits on and your neighbor owns the lot right next to you. A duplex sits on one plot of land. So if you’re living on one side, you share the land with your neighbor. 

Duplexes can accumulate a larger sum of cash flow if you’re actively renting both sides. Almost double of what you would make with a single-family home. But make sure you’re taking into account maintenance costs and time spent managing the property, because this affects your monthly cash flow.

Read on to find our tips and tricks to finding the right duplex to invest in.

Tips and tricks to finding the perfect match

Real Estate Investment Advisor at RPM Iowa, Seth Evans, talked us through some of the things to keep an eye out for when purchasing a duplex. Let’s take a look:

  • Filter out conversion duplexes. “A conversion duplex is a house that has been reworked to fit multiple units,” Said Evans. “These can be duplexes, triplexes, and sometimes even fourplexes.” A conversion duplex can sometimes come with too many issues to count.
  • Budget to fix miniscule issues before they turn into bigger problems. “This is usually where the monthly cash flow goes,” Explained Evans. “You see a big monthly cash flow number, but not the maintenance costs or the time it takes to manage. Taking care of issues before they become bigger and more costly will save you money in the long run.” The kind of duplexes available in today’s market are generally older. Replace older appliances, put in new carpet or flooring, update electrical work, etc. Have the budget ready to make these changes so they don’t consume your monthly cash flow later on.
  • Find deals offline. Especially with the market as competitive as it is right now, it’ll be difficult to find a non-conversion duplex on any MLS or Zillow. That’s not to say that you won’t find anything, but if you’re ready to buy soon, make sure to cover your bases. Speak with your REIA and see if they have a pocket of investors looking to sell any of their duplexes, triplexes, or fourplexes in their portfolios.

Should you go for a triplex or fourplex?

A triplex or fourplex have separate living units, but the homes are joined by a common wall or roofing structure. Deciding whether or not you want to push for more doors to manage is solely up to you. Multiple factors play into making that sort of decision, like:

  • Are you managing the properties yourself, or do you have a hired management team to help you?
  • Do you have enough reserves just in case something were to happen, or to cover the mortgage if a tenant doesn’t pay that month?
  • Are there quality buildings for sale in your area? Would you be interested in investing elsewhere, like out of state?

Investing in a duplex

It’s a numbers game, no more than going the route of a single-family home or townhome. Talk to your REIA or real estate agent, a trusted financial advisor, or property management team. They will be able to help guide you through your decision making process.

Have you read our first article of this series that highlights different real estate investment strategies? You can find it here.