While I don’t discuss it often, one of the best things about investing in a Minneapolis duplex vs a larger multi-family property is the fact that duplexes tend to have a more rapid rate of appreciation.
Before I continue, let me offer the following disclaimer. You should never, ever buy an investment property based on how much you or your Realtor thinks it’s going to go up in value.
Nobody can predict how much something will appreciate with any accuracy whatsoever, and if they tell you they can, they’re lying.
Having said that, sooner or later, all real estate does appreciate. And the properties that do so at the fastest clip are the ones there are the most buyers for.
The largest pool of prospective buyers is out looking for single family homes. As a result, they tend to go up in value the most quickly, because of the amount of competition driving price.
Because duplexes can qualify for low money down FHA insured financing, they also appeal to owner occupants. Most new duplex investors start out living in their first property, and moving out when their family expands or lifestyle changes.
While triplexes and four unit buildings also qualify for FHA financing, there seem to be fewer prospective owner occupants for them. Perhaps these properties seem more like they require someone to truly be a landlord, vs the perception of being a home owner who just happens to have a single tenant to tend to.
Larger apartment buildings, consisting of five or more units, cannot qualify for residential financing. Instead, investors must secure commercial financing, which typically requires a minimum down payment of 25 percent or more. Since few people tend to have large chunks of cash available for investment, there are fewer buyers for these apartment buildings.
Of course, in each and every one of the afore-mentioned property types, rents, location and condition play a key role in determining value.
However, if your goal is to accrue a large chunk of cash to put on larger properties down the line, a duplex might well be your best investment.