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Is Buying a Duplex a Good Investment in 2022

The rental real estate industry is booming this year, and because of this, investors have been reaching out for advice on how to take advantage of the hot market we’re seeing. There’s one question in particular that we hear the most – “Is buying a duplex a good investment in 2022?”.

The short answer is, yes, it’s actually a great investment decision.

With that said, below, I’ll be addressing this question in more detail and explain why I think duplexes are a wise investment choice in 2022, so you’ll be armed with the knowledge needed to make an informed decision for yourself.

What Makes Purchasing a Duplex a Good Real Estate Investment in 2022?

One reason so many individuals are currently considering investing in a duplex is because this property type has increased in popularity over the past few years.

The increased interest occurred, in part, as a result of the ripple effects of the affordable housing crisis that created a shortage of rental real estate and, in turn, a rise in rent prices, which led investors to realize that they could greatly benefit if they had two rentals within one property.

Fast forward to today, and we’re starting to see some changes in the housing market; we see it slowing down a bit. But the demand for rentals has not slowed down, and rent prices are still increasing. For example, within the state of Texas, the number of prospective home buyers that have, instead, turned to renting, came to 24 percent, which marks the highest percentage in the nation.

Also, when it comes to rent price increases, one Texas property manager stated that rentals that were going for $1,500 last year, have increased to $1,800-$1,900 per month – that’s a significant rise in price.

So, as for the question, “Is buying a duplex a good investment in 2022?” I’d say, definitely, if you want to take full advantage of this lucrative rental climate we’re currently in.

There are also many other reasons to invest in a dual-unit property – let’s explore a few.

Additional Advantages that Make Buying a Duplex this Year a Wise Investment Choice

In many ways, investing in a duplex can outshine single-family home rentals, as well as provide several specific benefits that make it a wise addition to any portfolio. With that in mind, below, you’ll find some of the most notable reasons for buying a duplex in 2022, or any year.

1. When you Invest in a Duplex You Conveniently Get Two Doors With One Loan

Buying a duplex allows you to take out one loan that covers both units, so one mortgage covers both doors. You wouldn’t be able to do this with two single-family homes that you’re buying at the same time, even if they’re sitting right next to each other on the same lot.

Getting two doors with one loan, one downpayment, and one monthly mortgage payment is more affordable, convenient, and an incredible opportunity.

2. Allows for One Property to Provide Two Income Streams by Means of Two Separate Rental Agreements

One of the most attractive elements of investing in a duplex is the fact that it can double your cash flow, because in reality, you would own two rentals in one. In addition to this, it goes without saying that receiving two rent checks per month can allow you to build wealth at an accelerated pace. When considering the passive income possibilities, a dual-income rental is a great option for those who are striving for financial independence and portfolio growth.

3. Multi-Family Properties Provide Protection Against Vacancy Which Ensures a Steady Cash Flow

Vacancies can be costly and often force investors to pay the mortgage out of pocket when the original plan was to have the tenant pay. However, duplexes can help reduce the risk of financial losses caused by vacancies.

For instance, when you own a single-family dwelling and a tenant leaves, it can be a real financial burden because there’s no getting around having to pay the mortgage yourself. However, when you own a duplex, it’s very unlikely that both tenants will leave at the same time. Because of this, there’s a high probability that you’ll always have at least one renter in the property while looking to fill the second door. This setup makes buying a duplex a secure and reliable investment.

Duplexes Provide a Real Home Which Lowers the Vacancy Rate

It’s also worth mentioning that the turnover rate is considerably lower than a multi-family property that includes more than two doors. For example, in properties that have 4 doors, 16 doors, and more, the tenant loses space because more people are crammed into one building. In rentals such as these, it’s common for tenants to not stay as long.

In contrast, with a duplex, the tenant is provided with a larger space to call home, typically with multiple bedrooms, as well as a yard, and this can make them feel as if they’re residing in a single-family home.

When a tenant has the opportunity to make a rental their home, they typically end up staying for many years – this can reduce the vacancy rate significantly, keeping your investment financially sound.

4. You Can Use a Self Directed IRA to Fund a Residential Two-Unit Dwelling

For those investors who happen to have a 401(k) or traditional IRA, you’ll be happy to know that the funds within your retirement account can be used to invest in a duplex.

What is a Self Directed IRA?

A self directed IRA is an alternative option to a regular IRA or 401(k). These traditional retirement accounts are restricted to the common investment types such as stocks, bonds, and the like, which can limit your options, as well as put your funds at risk if the stock market were to take a dive, like it did during the pandemic.

On the other hand, an SDIRA permits an individual to invest their money in a broad range of assets, such as rental real estate, which includes a duplex, as well as a variety of other assets. As you can imagine, an SDIRA gives the investor much more control over their investment decisions.

Using a self directed IRA provides a perfect solution to funding a real estate investment, as well as a smart strategy for accelerating your retirement fund growth. For those of you who are interested in using your retirement account to grow your real estate portfolio, I suggest diving into our article titled – How To Use a Self Directed IRA To Invest in Real Estate in 2022.

6. The Right Duplex in the Right Housing Market Can Increase Your ROI

Buying a duel-family property is a good investment, but only when you buy the right duplex, in the right market. This is actually essential to ensuring a high ROI, investment security, as well as equity that continues on an upward path.

The Right Duplex

When it comes to the right duplex, as I mentioned, space is important because you want your tenants to feel they’re residing in a real home. Along with this, the overall condition of the property is crucial to not only keeping your tenants happy, but also to your bottom line.

Buying an old duplex with a failing electrical system, roofing that needs to be replaced, and the like, will dwindle down your profits, which defeats the purpose of investing in a piece of real estate in the first place. It’s best to buy a new construction property where everything is in perfect condition right out of the gate, and you won’t have to replace anything for years to come.

Also, a new construction property, when eligible, can lower your tax burden by thousands by utilizing a cost segregation analysis. You can read more about this by heading over to our article on cost segregation studies; it’s an interesting post that you’ll  certainly want to dive into.

The Right Market

Even more important than the right duplex is investing in the right market. Buying in a location that’s a hot or up-and-coming market can make all the difference when it comes to maintaining and increasing your return on investment. If your property sits in an area that doesn’t have certain characteristics, you could be setting yourself up for a financial loss.

Morris Invest is heavily invested in an area that has all the characteristics of “the right market”, and this location is Lubbock, TX. After you dive into the following information, you’ll see exactly why we specifically chose this area.

1. Why Texas is a Great Place to Invest in a Duplex

Texas offers many exceptional advantages, such as its large and steadily growing population, which keeps the need for rental properties in high demand. It’s also a landlord-friendly state which can save an investor thousands of dollars if there’s ever a tenant-landlord dispute – the state favors and protects the landlord’s rights. In addition to this, there’s no state income tax which allows you to keep more money in your pocket, and this increases your profit margin.

Also, because there’s so much land available in TX, the competition for it is pretty low, and so, in turn, this keeps the price of land and housing low. As an example, in an overcrowded state such as CA, available land is rare, and when you do find it, there will be high competition for it, as well as a hefty price tag. Along with this, the cost of living is low in TX, which brings the cost of labor, housing materials, and building costs down – this all makes purchasing a property such as a duplex in Texas very affordable.

 

2. Why Lubbock is the Best City Within Texas to Own a Rental

With Lubbock being perfectly situated within the Lone Star State, and with this city having its own unique set of favorable characteristics, you have a recipe for a successful investment. So, what are these investment-friendly characteristics?

Texas Tech Adds Over a Billion Dollars to the Lubbock Community

Lubbock offers a booming economy with a hot job market. This is due to several factors, such as the fact that Texas Tech University is located in this city. With around 40,000 students and a vast amount of teachers and staff, you could imagine that the unemployment rate is low. Also, with this many students, the demand for rentals is through the roof. This university brings a lot to the table, and is responsible for adding over a billion dollars to the Lubbock economy.

Lubbock is a Thriving Health Care Hub that Employs Thousands

The economy is also strong in Lubbock because it’s home to a large health care system that’s responsible for bringing millions of dollars into the area. Because of this, Lubbock, TX, is known as a health care hub and employs thousands of health industry professionals. With so many people employed within the health industry in Lubbock, it brings about a need for many rentals that employees can call home.

Many Fortune 500 Companies Fuel the Lubbock Community

This city, located in west Texas, is the home of many Fortune 500 companies, which includes Amazon, Cisco, and IBM, just to name a few. With companies such as these, and other businesses in the area, it provides a stable economy that’s always in need of good workers who require long-term rentals.

Lubbock was Voted One of the Most Recession-Proof Cities

Lubbock is well-known for being a recession-proof city and proved just how recession-resistant it was during the covid pandemic that destroyed the economy of many other cities. In fact, in a statement made by Lubbock’s mayor this year, he explained that his city’s unemployment rate didn’t change too much as compared to pre-pandemic numbers, and he went on to say that there are actually more jobs in the city of Lubbock than two years ago.

These statistics can’t be claimed by many cities that, because of the pandemic, had a large number of business closures and skyrocketing unemployment rates. If Lubbock did this well during the most difficult economic time in recent history, then it’s clear that investing in real estate within this thriving location is a smart financial move.

You can read more about how economically stable this city is by reading our latest article – Lubbock Recognized as Recession-Proof City and Maintained a Strong Rental Market Throughout the Pandemic.

The bottom line is that it’s important to invest in an area that has a strong economy because it will ensure the stability of your rental and your return on investment.

What’s the Best Way to Invest in a Duplex?

The wisest way to invest in a duplex is to work with a full-service real estate investment company such as Morris Invest. Why do I say this? Because working with a professional team of real estate investors that have years of experience can ensure that you get set up with a secure, cash flowing, new construction rental property in the right market.

Trying to do this on your own just wouldn’t yield the same results, and it would be extremely time intensive, and there’s really no reason you should have to do it yourself.

Morris Invest specializes in providing lucrative duplex rental properties to our clients where we make the process super simple by taking care of every detail for you – from converting your current retirement account to a self directed IRA in minutes, to placing tenants in your new duplex and assigning an experienced property manager, it’s all done for you; we hand you the keys and you eventually start receiving two rent checks every month like clockwork.

I hope this article has given you some insights as to just how good of an investment a duplex really is. Feel free to reach out to one of our team members with any questions you may have about investing in a duplex, or if you just want some direction on your investing goals.

Also, you’ll want to take the opportunity to go on a personal tour of one of our new construction duplexes located in Lubbock, TX:

 

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