When it comes to property investment, multifamily homes are not usually a recommended choice, especially for beginners. But what about a duplex building? Is it a good starter investment property? Or is it a good property investment? Read on to find answers to these and many more questions.
Duplex building or investing in duplexes, in general, can be a daunting task. This is more so true if you happen to be a beginner in real estate or property investment. Luckily, you can make the process of duplex building or the process of investing in duplexes far less daunting with proper preparation and risk management. Do it right and you are sure to rip significant rewards from your duplex building investment.
In this post, we’ll be looking into investing in a duplex building. To be exact, we’ll take you through the process of investing in a duplex building. By doing so, we’ll be answering all the pressing questions about this type of real estate investment.
Why Should You Invest In Duplex Building?
The first question you need an answer to as an investor is why should I invest in a duplex building? To answer this question properly, you need to know what you’ll do with your duplex once it’s built. This is a very important step as it determines the feasibility of the project as well as your borrowing power.
For investors, choosing to invest in a duplex building offers the following investment options;
- Renting Out Both Units
- Selling Both Units
- Live In One Unit & Rent/Sell The Other
- Sell One & Rent The One Out
What’s arguably a big plus with duplexes is that you can take equity out of the property. Yes, as an investor, you can take out some equity of your duplex property once it’s completed. You can use this equity to buy up or invest in another property immediately.
If you are after cash flow, be it from renting or selling out, duplex building delivers a dual income for the cost of one single hand.
Is Investing In Duplex Building Financially Safe?
Once you’ve decided why you want to invest in duplex building, it’s time to focus on the finance side of things. In particular, you want to determine if investing in a duplex building is something you can afford. Not only that, but you should also determine if it’s financially safe for you.
A mistake many investors make when it comes to financing a duplex building investment is confusing it with or assuming its similar to investing in an already built unit. With the building or development of a duplex, there are many financial risks associated with it. Furthermore, there are extra costs and unforeseeable problems that’ll also demand financial attention. Many first-time investors fail to factor everything about costs and this why many have problems with their starter investment.
That said, the smart option is always seeking the help of an expert. When doing so, settle for a financial expert that specializes in matters of loan development. He or she will be able to provide you with valuable advice as well as provide worst-case scenarios to help minimize your risks.
Settle On An Ideal Location
When it comes to matters investing in a duplex building, location is very important. When searching for an ideal location, it is important you focus on two key things. What are these two? Well, growth areas and high areas of yield. So what are growth areas? Well, these are areas where there a growing community. This signifies that they’ll be a demand for housing in coming months or years. As an investor, you want to have renters or buyers ready once you’ve finished building your duplex. Investing in growth areas give you some sense of assurance or guarantee that you’ll get it right.
Areas of high yield are equally as important when settling on a location. With such areas, you are guaranteed high rental yields or sales. In other words, these are areas have a high monthly/annual rent. Additionally, home prices are at reasonably high levels.
In such locations, you’ll be able to fetch high profits from duplex building investment. Still, on location, go for areas/neighbourhoods located close to major amenities. These include shops, entertainment spots, shopping centres, hospitals and so on.
Carry Out A Feasibility Study
For many investors, a feasibility study is something they don’t like to do. In fact, some end up skipping it altogether. Why is this? Well, it is a tedious task. So is it right to skip it? Well, no. this is a very crucial step in just about any building duplex development. With a feasibility study, you either do it or find yourself in big trouble later on.
Just in case you are wondering, this type of study helps account for just about everything in your project. From land purchases costs, the cost of the building phase to selling and taxes fees, this study helps you cover it all. To gauge whether your duplex building investment is feasible, calculate the costs against selling price. When doing your feasibility study, these are the things you’ll be answering;
- What’s the expected capital growth or yield?
- Does the land meet development zoning regulations?
- Including contingency funds, is it within your borrowing limit?
Find A Reliable Builder
Once you’ve done all this, it is time to find and hire the right builder. There are several ways you can go about doing this. For starters, when embarking on your search, keep in mind that you don’t have to necessarily go with big companies. Always broaden your search to include small companies. Not only are they pocket-friendly but they also deliver in quality and work.
When conducting your search or doing a screening, make sure you ask about past and current projects. Get to see them for yourself and gauge if they’ll be able to deliver on their promise. Professional developers are always happy to share this information with you. If a developer or contractor doesn’t want to share this information, chances are that they aren’t as good as they say. While on current and previous projects, you can ask to speak to one of their clients.
If you want to conduct your search in a modern way, online searches are perfect for you. Consider using a property forum and discussions for reviews. This will help you settle on the right developer to handle your duplex building needs.