People who are thinking about buying a duplex often ask me what the advantages of occupying investment property are over living in a single family home.
I can think of dozens. But it’s Monday. We all should get some work done.
Here are 6 I can think of off the top of my head:
1. Neighborhood Affordability -Most buyers have their heart set on living in a certain neighborhood. In Minneapolis, that might be someplace close to the lakes or river, or other walkable amenities. However, many quickly realize the popularity of that neighborhood has resulted in home prices that are out of reach for their budget.
A duplex brings in someone else, namely the tenant who lives in the second unit, to help the owner pay the mortgage by paying rent. For example, if a duplex costs $300,000 to purchase, the tenant is essentially paying for one-third or more of the expenses. For the owner, it’s almost like buying a comparable single family home in the neighborhood for a deep discount.
2. Long-Term Investment – A duplex generates income. When rents increase, so does your income. If you keep the duplex over the long-haul, even after moving out, it will continue to generate supplemental income for you. Best of all, odds are it will never be entirely vacant. Even if a tenant moves out, you should have the other continuing to pay you rent.
3. Tax Savings– Unlike a single family home, improvements you make to the rental unit of your property can be written off as business expenses for your investment. If you paint that unit, retile the floor, update the kitchen…all can help offset your rental income.
4. Greater Mortgage Interest Deduction – While Congress is revisiting our ability to take a tax deduction for the amount of interest we pay on our mortgage, for now, it is still in tact. By purchasing a duplex, which was probably slightly more expensive as a whole than a single family home, you are able to save more.
5. Pet Sitting – OK, I’m checking to see if you’re paying attention. And yes, there are far more important benefits of duplex ownership. Nonetheless, whether you spend your winters elsewhere, or simply go out of town for a long weekend, you may find having another set of eyes watching for maintenance issues (like plumbing) or making sure your cat has enough water to be benefits you might not have convenient access to in a single family home.
6. Flexibility – In a time of increased employment insecurity,real estate market uncertainty and geographic mobility, you may find the ability to rent your duplex in a sought-after neighborhood in the event of your relocation to provides you with a wider range of choices when it comes to having to sell or incur a financial loss by ridding yourself of the property.
Again, there are many more reasons to consider a duplex as an alternative to a single family home.