Why Invest in Duplexes?
Much of our success in our real estate business at Tranquility has come from buying duplexes or (suited houses referred to in Alberta). It is known as residential real estate with two separate units.
There are several really good reasons to add these properties to your portfolio. Here are a few:
1. Cashflow Protection. If you are buying property as an investor, cashflow is an important factor to allow for success in your real estate purchase. Two rental incomes contribute to one set of expenses and one mortgage. If one unit goes vacant for a short period (which you should always plan for), the income from the second unit will always be there to support mortgage payments and other expenses. Contrast this to a single-family home, when that goes vacate, all of the mortgage costs and expenses come from the investor’s pocket.
2. Increased Cashflow and Affordability. Having two incomes to subsidize costs for a rental property puts more income in your pocket than having one rental income. The percentage of rental income over the purchase cost of the property is almost always higher than single-family properties. This income per property makes these properties much more affordable, especially for first-time buyers.
3. Easier Financing. Banks are always looking for security and your ability to convince them that you can cover their mortgage payment. Two rental incomes make banks happy and thus become more willing to lend you money. This allows for a higher debt servicing ratio (which in simple terms is a ratio to measure how much money is available to service debt). Banks prefer duplexes over single-family homes for financing for this reason.
4. A Great option for a Starter Home. I love recommending this idea to my kids and young millennials. Buy a duplex, finance it with the bank for very low money down, live in one side and have renter in the other, have the rental income cover most of the costs of the mortgage, insurance, utilities, and repairs, and then enjoy living there for next to no money of your own on a monthly basis …. WHO WOULDN’T WANT THAT AS A FIRST TIME HOME BUYER ?
5. Many Options for Sale. Duplexes are easy to sell because they have several exit strategies when it comes time to sell. Investors love them for cash flow, first time home buyers love them as their initial real estate purchase, large families love the option of having more than one suite under one roof for their parents or adult children and the list goes on. As a result of many selling options, your property will fetch top dollar when it comes time to sell.
6. Progression to Property #2 comes Faster. Because of the advantages of owning a duplex, getting to property #2 comes much quicker. Mortgages get paid down faster. Money can be saved for a down payment on a nicer single-family home while still being able to retain ownership of the duplex, now with two renters in place. It’s a great progression to a larger family home when a family starts to grow.
7. Duplexes Sell to Joint Venture Partners. This is the main reason we invest in many suited houses (duplexes). The money partners we deal with are concerned about the security of the capital they invest, not having to invest more than their original cash contribution (no cash calls) and the exit strategy employed to return their capital to them when the time comes. Suited houses provide this for our investors. They love the cash flow, the security of two incomes, the affordability of the duplex, the ease of looking after the property and the confidence that they will not lose their capital.
Now, go make your next real estate purchase a duplex and start enjoying all these benefits!
If you are interested in investing with us in a suited house (duplex), please reach out to us and we will be more than happy to share with you why we feel this is one of the best investments in real estate you can make.
Kind Regards,
John C. Heeney, CEO Glenroe Lending
Glenroe Farms Limited ( Private Lending )
We build LEGACY to create TRANQUILITY
john@glenroelending.ca
519 808 7370
