While the article focused on single family homes, it also quoted Zillow’schief economist Stan Humphries, who stated, “There is no iron law that real estate must appreciate.”
Well, that’s exactly why duplexes and small multi-family properties are good investments. If you and your Realtor are doing your math correctly, the cash flow can give you a good return; without appreciation.
Anyone who encourages you to buy an investment property that doesn’t cash flow because “it will go up in value” doesn’t know what they’re doing. How much something will appreciate is entirely speculative.
Successful real estate investors buy properties because they know, going in, what the rate of return on their money will be.
Sure, we all got used to rapid appreciation during the years of the boom market. But savvy investment property buyers were sitting on the sidelines, because the numbers didn’t work.
If a duplex house, triplex or fourplex either pays for itself, or makes your portion of the mortgage affordable, something like appreciation should be seen as a bonus.
After all, if the property never went up in value, at the end of the mortgage term you would have equity equivalent to the amount you paid for it, as well as monthly cash flow.
Small multi-family properties in the Twin Cities are averaging better rates of return than they have in years.
They can be a pretty nice way to supplement your income, even if your last name isn’t Trump.