Duplexes - One Of The Greatest Investments You Are Able To Make
When it comes to property investing, the majority of individuals will gravitate towards a single family home. But did you know that buying a duplex or a tri-plex is a better investment? Let's look at the three most important things in real estate investing. Cash flow, Appreciating and Value.
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As anybody knows in real estate, the goal is for positive cash flow; otherwise you have an investment which costs you cash on monthly basis. Positive cash flow is only defined as money left over after paying for your mortgage, property taxes, insurance, and any monthly utilities and repairs.
A home is a money pit which will cost you money in the way of their mortgage principal, interest, insurance and taxes. Add to this regular repairs and maintenance and after everything is said and done, the only real investment worth a home really offers is appreciation and that's speculative depending on where you live. Not all markets have increasing values all the time and property values could be effected by plant closings, layoffs, etc.. For all practical purposes, a residential property, a "home" does not fall in accordance with the true spirit of real estate investment, which is real estate the will cause income-producing "positive" cash stream. Really, single family residential property used as a residence has the reverse effect and causes outgoing money flow. . .thus, the "money pit".
The most economical way to invest in residential property and generate some form of "positive cash flow" would be to buy a duplex, live in 1 side and rent the other. Many times the rent income coming in from the other side can practically cover the mortgage payment of the entire property providing nearly free home to the owner. The tenants on the other side aren't only paying your mortgage, but they're helping you build equity in your own property. This equity will even increase over time with admiration, supplying two sources of wealth building: one from cash flow pay-down of this mortgage and another, property value increase during natural appreciation.
The money you would normally spend on a single family residential mortgage payment (PITI) can be saved, in whole or in part, as a down payment to another duplex throughout the time you live in your house.
The title of the game is to purchase a duplex, reside in half, let the other half out and save to another duplex. When you have sufficient money, move from the duplex, then rent the unit and continue to the next duplex and repeat the process by leasing the other half out. This way you would have 3 sources of earnings working for you: income from unit A and B in the first duplex and earnings from unit B in the second. Now you have property working for you and you are on your way to acute income producing cash flow.
The only real downside to the project is you will have to live next to your renter for a time period. The upstroke is it gives you a taste of property management without biting off more than you can reasonably weigh. Indeed, this notion is how many real estate concessions are birthed.
Not lots of people think about this angle when they are searching for a home and it's worth careful thought and serious consideration. You've got two options: The money pit or income producing property. It's a choice you'll have to make.
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