The Benefits of Investing in a Multi-Family Duplex – Increased Cash Flow and Reduced Risk | Morris Invest (2024)

The Benefits of Investing in a Multi-Family Duplex – Increased Cash Flow and Reduced Risk | Morris Invest (1)

In today’s unstable economic environment, savvy investors continuously seek out opportunities that offer both high returns and long-term stability. One such opportunity is taking advantage of the benefits of investing in a multi-family duplex. Why is this the case? Because this type of investment offers a variety of benefits ranging from steady cash flow to portfolio diversification, just to name a few. Below, we’ll explore the key advantages of investing in this property type, shedding light on why it could be a game-changer for your investment strategy.

Benefits of Investing in a Multi-Family Duplex

Duplex rentals stand out as a lucrative option for investors aiming to enhance their portfolio and build great wealth. These unique properties, which consist of two separate living units within a single building, are popular among the investors we work with. With that said, let’s dive in to learn more about this.

1. Dual Revenue Streams Equals Increased Cash Flow

For real estate investors with a goal of maximizing their returns, a duplex presents a unique opportunity to double their income potential. Instead of relying on a single rental stream, you unlock the power of two, effectively doubling your cash flow from day one. This translates to a faster return on investment, putting more money in your pocket from the start. Also, you’ll want to check out our article on Maximizing Cash Flow by Investing in Rental Properties that Deliver the Best Returns for some essential tips.

2. A Duplex Reels in Steady Income and Protects Against Loss of Revenue

Renting out a duplex with multiple tenants offers a more stable source of income, which is important in today’s unreliable economy. How is it more stable? Well, with a duplex, if one tenant moves out, the remaining tenant can offset the loss of income by continuing to contribute towards the property’s revenue, and keep your mortgage payments flowing in. This type of setup diminishes the financial pressures often associated with tenant turnover and vacancy periods, enabling investors to keep the rent checks flowing in.

The Benefits of Investing in a Multi-Family Duplex – Increased Cash Flow and Reduced Risk | Morris Invest (2)

3. One Loan Covers Two Doors Making it More Affordable

Investing in a duplex offers the unique advantage of acquiring two units under a single mortgage. So, unlike purchasing two separate single-family homes simultaneously, which would require individual loans for each, buying a duplex means one loan covers both properties. This arrangement not only simplifies the financial aspect by requiring just one down payment and one monthly mortgage payment, but also presents an incredible investment opportunity due to its affordability and convenience.

4. Investors Can Take Advantage of Economies of Scale with a Multi-Family Duplex

For investors, acquiring a duplex allows them to take advantage of economies of scale because it means doubling the rental income while not entirely doubling the investment cost. For instance, certain fixed costs may be spread across two units, which lowers the cost per unit. Here are a few examples of this:

  • Property Management Fees: While the total fee might cost more than a single property, it’s still more cost-effective than paying for two totally separate rentals to be managed. See our article on the Financial Advantages of Using a Property Management Company to learn how invaluable their services are.
  • Insurance: The cost of insuring a duplex might be slightly higher than a single unit, but again, it will be less than insuring two separate properties.
  • Utilities: Depending on the setup, things like water and trash collection could potentially be shared between units.

On top of all this, although maintenance costs may not be completely halved, owning one property with two tenants can offer reduced maintenance overhead.

For example, if both units require plumbing repairs, the plumber might be able to complete the job for both units at a lower cost compared to separate service calls. Also, if a roof needs to be replaced or repaired, the cost is similar regardless of whether the building is a single-family home or a duplex. In addition to this, property-wide landscaping will require the same amount of work and materials as a single house, providing a cost-effective advantage to those owning duplexes.

The bottom line is that with shared systems and infrastructure, upkeep and improvements can be more affordable when you own a duplex.

Power Resources for Real Estate Investors

Before you move on, be sure to read our financial resources that can help you become a successful real estate investor and place you on the path to financial independence:

Grow Your Portfolio and Your ROI with a Multi-Family Duplex!

The benefits of investing in a multi-family duplex are substantial, offering investors the opportunity for steady cash flow, reduced financial risk, and a significant return on investment. Most importantly, by strategically investing in duplex properties, investors are setting themselves up for financial freedom. So, whether you’re a seasoned real estate investor or just starting out, considering investing in a duplex could be the strategic move that propels your investment journey.

Morris Invest offers residential new construction duplexes, as well as single-family rentals in lucrative markets, and we assign a property manager, as well as place a tenant for you. We take care of all the details, big and small, to effectively place a cash flowing rental in your portfolio. Feel free to give us a call so we can develop a custom plan based on your goals – we look forward to speaking with you.

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The Benefits of Investing in a Multi-Family Duplex – Increased Cash Flow and Reduced Risk | Morris Invest (2024)

FAQs

Why is multifamily a good investment? ›

Multifamily property can provide tax benefits.

The multifamily real estate sector offers an array of tax benefits. Investors can capitalize on deductions related to mortgage interest, property taxes and depreciation, among others. These tax advantages contribute to optimizing an investor's overall financial picture.

How much cash flow is good for rental property? ›

The average cash flow on a rental property for most investors is an 8% return on investment, or ROI. Others will strive for an ROI of 15%. There really is no magic number or right amount to ear.

What are the disadvantages of buying a multifamily home? ›

More Expensive To Own: Unlike single-family houses, buying multi-family properties usually requires larger sums of money. Besides this, you must first pay for legal documents like deeds, mortgages, leases, and other relevant documents required for purchasing real estate.

Why is investing in real estate good? ›

On its own, real estate offers cash flow, tax breaks, equity building, competitive risk-adjusted returns, and a hedge against inflation. Real estate can also enhance a portfolio by lowering volatility through diversification, whether you invest in physical properties or REITs.

Is multifamily still a good investment? ›

Multifamily property is considered a relatively “safe” investment compared to other real estate asset classes. That's because even during an economic downturn, people need somewhere to live. In fact, during a recession, many people find themselves forced to sell their homes and move into rental housing, instead.

Is multifamily risky? ›

Historically, multifamily has been one of the safer asset classes to invest in compared to other commercial property types. Unlike office buildings and retail space, which have been hit hard by remote work and e-commerce, rental apartments tend to have low vacancy rates, and steadily rising rents.

When investing in rental property Why is the need for a positive cash flow so important? ›

The Role of Cash Flow in Real Estate Investment Success

Steady Income Stream: Cash flow from rental income provides you with a consistent and predictable source of revenue. Unlike some investments that rely on market fluctuations, real estate generates income through rent payments from tenants.

How important is cash flow for investment property? ›

You could invest for appreciation, but positive cash flow is the most upfront and beneficial gain you could make. Having positive cash flow means paying all costs associated with your property using rent and still having profit. In other words, it's having a net positive after paying expenses using your collected rent.

How to increase cash flow from rental property? ›

  1. Optimize rental income. ...
  2. Add revenue streams. ...
  3. Upgrade the property and add amenities. ...
  4. Replace inefficient appliances and fixtures. ...
  5. Furnish the space. ...
  6. Ratio Utility Billing Systems (RUBS) ...
  7. Use a different rental strategy. ...
  8. Environmentally friendly properties save money.
Nov 14, 2022

How does multifamily housing affect the economy? ›

In 2016, it generated over $3.4 trillion of national economic output and supported 17.5 million US jobs. This represents almost 19% of total GDP (in nominal dollars) and 12% of the employment growth for that year, up from 17% and 11% shares, respectively, in 2013. billion and 1.43 million jobs.

How does owning multi-family units make money? ›

Multifamily investing can help you earn passive rental income, scale your portfolio, and in some cases qualify you for unique tax deductions. Simply put: if you are looking for your next asset class to diversify a 60/40 portfolio, multifamily investing could be a great fit.

How do you know if multifamily is a good deal? ›

How to Value Multifamily Property : 6-Step Guide
  • Step One: Dig Down the Purchase Price. ...
  • Step Two: Explore the Financial Data. ...
  • Step Three: Compute Overall Operating Income. ...
  • Step Four: Estimate the Cash-Flow. ...
  • Step Five: Examine How Much ROI you Will Earn. ...
  • Step Six: Calculate the Net ROI.
Mar 24, 2023

When not to invest in real estate? ›

Unstable Market Conditions:

Market conditions play a vital role in the success of real estate investments. If the local real estate market is experiencing instability, such as declining property values, high foreclosure rates, or oversupply, it may not be an ideal time to invest.

How many real estate investors fail? ›

95% Failure Rate for Real Estate Rental Investors

That's because it takes a lot of work for a successful investor. Especially for rental investments. A real business requires investment capital. Don't get tricked into those “no money down” scams.

What is one major problem with investing in real estate? ›

Risk of bad tenants: One of the significant challenges in real estate investing is finding and retaining reliable tenants. Bad tenants can lead to property damage, missed rent payments and eviction expenses.

What is the 1% rule in multifamily? ›

Multiply the purchase price of the property plus any necessary repairs by 1% to determine a base level of monthly rent. Ideally, an investor should seek a mortgage loan with monthly payments of less than the 1% figure.

What is a good return on multifamily investment? ›

What is a good ROI for multifamily? A good return on investment (ROI) for multifamily investment could be between 14% and 18%.

What is a good return on multifamily? ›

IRR expectations are not equal; the IRR and other return metrics are closely tied to the property's risk profile. An excellent acceptable IRR for a multifamily deal ranges from 12% to 15%.

Why is multifamily a good hedge against inflation? ›

Multifamily leases typically last no more than 12 months. This allows landlords to increase rents to coordinate with the annual rate of inflation. These increases can help real estate investors stabilize or potentially increase cash flow. Additionally, their multifamily investment appreciates in value.

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