You’ve probably heard about homes being turned over fast the last few years, even with the Coronavirus Pandemic. That despite the rate of new housing construction, there’s still a need to catch up with the demand for housing.
This means that residential real estate remains to be a profitable investment stream. The next question comes — what kind of residential real estate is great to invest in?
This article talks about one of many types of dwellings — the duplex. It’s perfect for people who are looking to buy property where they could live in, at same time, property that could serve purely as a rental.
A duplex is basically a type of dwelling wherein two (2) units are in the same building. In a duplex, the two (2) units can either sit side-by-side or stacked. Either way, each has its own private entrance. If you’re going to buy a duplex, you can live in one unit and rent the other unit to others. It doesn’t become an expensive investment because your tenants will cover part of the mortgage. Basically, you own the entire property, but you’ll have help paying for it. In some cases, your tenant’s rent may even cover the entire mortgage!
As reported by the Pew Research Center, many Americans remain financially challenged to buy a home. This is because their income is still not enough to cover the increases in housing costs. To help with this, the government has instituted a variety of tax shelters for homeowners.
When you own real estate, you have to pay property tax. Moreover, if you’re operating a rental, the income you get from that rental is typically taxable. However, with the government’s tax benefits, you enjoy a couple of tax exemptions or deductibles. These include tax deductions based on your:
- Private Mortgage Insurance Premium – if your adjusted gross income for the year does not exceed $109,000 and you satisfy other qualifications by the IRS, you can deduct from your income tax an amount equivalent to the total price you paid for home insurance that same year.
- Home Mortgage Interest – if your mortgage is a secured loan and you bought the house after 2017, you qualify for the home mortgage interest tax deduction. This is an itemized deduction that is applicable only to the first $750,000 of your mortgage.
- Standard Homestead Exemption – in the State of Georgia, qualified homeowners can get $2,000 off from 40% of the property’s assessed value. The values are higher for senior citizens and disabled veterans.
- Familial Ties (line of duty exemption) – if your spouse is a policeman or firefighter who dies in the line of duty, you are exempted from paying 100% of your property tax until you remarry.
Prepare Yourself To Be a Landlord
Even if you let your property sit without activity you still hold the added responsibility of maintaining the place. But don’t be scared though! Being a landlord isn’t as bad as others would say. If anything, it’s fun because you only have to check in rarely yet you continue to earn from the rental.
Some tips to score a great tenant include:
- Invest time in properly screening applicants
- Require applicants to present a police clearance certificate
- Ask for references
- Interview them personally to get a sense of their behavior
Loans Are Available
Multifamily properties can be bought through a loan. Duplexes in particular can qualify for an FHA loan up to $702,000. The approved loan amount may be based on your projected rental income. However, this requires you to present a lease that has been signed by your incoming tenants already and you need to be occupying one of the two units. Learn more about financing a duplex home here.
Maintenance is Either Easy or Hard
In a duplex, both units share many structural components and utility lines. This means that how you maintain your unit may affect the condition of the other unit. If you get a good tenant, you won’t have to worry about keeping the property in order. On the other hand, if you get a messy tenant, you’ll have to be conscious about saving up for emergency maintenance expenses.
ROI is Easier to Predict
This applies when you implement a long-term rental policy. While it’s true that tenants can withdraw from their contract anytime, you can still include in your rules a couple of consequences should they withdraw before the contract expires. This includes not being able to get their deposit back. As such, you’ll have time to look for another tenant without skipping on a month’s worth of mortgage.
Lots of Options in Georgia
There are plenty of duplexes on the market around Georgia today. Contact us at HomeSold GA and we’ll help you find the right multifamily property for you! As real estate investors ourselves, we can guide you better when choosing a property so you can make more well-i informed decisions.
Call us now at 770-668-4888.