When you have a real estate portfolio of over 10,000 apartment units, people tend to ask you questions. One of which, especially from new investors, is on whether buying a duplex is worth it or not.
Figuring out if buying a duplex is right for you isn’t a matter of a quick “yes” or “no” response.
And, to be frank, it would be a disservice to you to give you an incomplete explanation.
Let me break everything down for you.
Do duplexes follow the 1% Rule?
First of all, when I am looking at any type of real estate deal, I am trying to find two things. I want to find reasons to buy it and reasons to negotiate. Never reasons not to get into it at all.
That is not me telling you to buy every deal that comes along. Instead, you have to see if this duplex will help you achieve what’s called the 1% rule.
The 1% rule is a general measure of profitability. Simply put, if you can charge in rent 1% of what you paid for the property, you will make money on the deal.
Buying a duplex may have the opportunity to get you there and may be worth it in that case.
But let’s look at the other side of the coin.
It takes more than two to make a deal go right
Next, I’m going to tell you something about buying duplexes that sounds harsh. Yes, it is easy to get a loan on duplexes, which is why they are so tempting to buy.
However, the most important number in real estate always has and always will be the number of units. You lose one tenant and you’re automatically down to 50% occupancy. Then, you are stuck with the mortgage payment.
In the end, do I think buying a duplex is worth it or not? Nine times out of ten, my answer is no.
Sure, you can make a little bit of money in these deals. But I want you to create wealth. And for that to happen, I suggest you consider going after bigger real estate deals.
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