Real Estate Investing for Beginners: How to Get a for a Duplex

The Duplex Route: Maximizing Investment Potential And Passive Income Generation

What Is a Passive Income Generator?

A Passive Income Generator, or PIG, is a means of getting money without active measures. Many different PIGs are out there, but real estate has some of the most lucrative options in this area. Essentially, you acquire a property, get it rentable, then find tenants. From there, you collect money with no more active effort than depositing the check.

There is another acronym commonly used to describe property acquisition and management tips in this regard, and it has some specific application to a duplex. That is the BRRRR method; which refers to:

  • Buying
  • Rehabilitation
  • Renting
  • Refinancing
  • Repeating the process

Funding Your BRRRR

You purchase the property–this doesn’t mean you own it outright; it’s often just a down payment. With a duplex, you can put money down and live on one side while renting out the other. You rehabilitate the secondary side to be rent-worthy, acquire some renters, then refinance with the bank–the bank is more likely to refinance after you’ve rented out the premises. From there, simply repeat for subsequent properties. As you go about this process, you’ll find some specific duplex loan options exist, including:

VA Loans

Veterans Affairs loans often have lower rates of interest, and can be applied to more than just duplexes. One of the best parts of a VA loan is that you can pay back the loan faster. With some loan agencies, there are fees incurred when you’re paying off your property. These fees kick in for a variety of reasons, one being overpaying the monthly amount you’ve agreed on with your financial agent.

With VA loans, there are no penalties for paying the loan back quicker, and you get a better rate on the property overall–it’s a win -win; especially when you consider that interest rates in 2020 are at historical lows.

FHA Loans

If you’re not a veteran, and don’t have any family members who can provide you VA interest rates on a loan, then you might want to check in with the Federal Housing Authority to finance the acquisition of that duplex you’ve been thinking about.

Through the FHA, you don’t need to have credit as high as in other situations to get low interest rates; and interest rates are lower in general–it’s another win-win. To learn more about details defining FHA loans, and how you might apply their benefit to a duplex purchase, check out this site.

Conventional Loans

Conventional loans are neither insured nor guaranteed by the government, meaning the propensity for higher interest rates increases. However, since historic lows define the market presently, you can still get good deals on a loan for a duplex. Also, once you get moved into one side of the property and rent out the other side, you can refinance with your financial institution for a lower overall interest rate.

Working With Financial Partners

Do you have friends or family with assets? Instead of financing through the bank, you might finance through an investor at little or no interest. This option isn’t available to all people, and even when it is, it’s not always advisable. Even so, if you can feasibly swing this kind of thing, you’re likely to save money and increase your own financial stability.

Do the job right, and you can sell the duplex once you totally own it and have paid off your investor. Then you can buy the next one on your own at a better interest rate, owing to the possibility for a higher down payment after the sale of your first property, and a more reliable financial profile.

Higher down payments can reduce interest rates. If you can pay off more than half of a duplex from the outset, you can get low rates, and you even have negotiation room. Just work with a local financial institution rather than a national or international one, as they have more negotiation room. Certainly this will depend on your personal situation and municipality; consultation with a financial advisor is wise for best results. 

Finding Your Best Duplex Investment Option

Should you work with financial partners, get a VA loan, get a conventional loan, or get an FHA loan? Well, that depends on what sort of financial aptitude you have, your present rate of income, and the long-term plan you’ve got for the duplex you’re considering.

Whatever you do, keep in mind BRRRR principles, and think outside the box. You can make real estate a financially profitable endeavor in just a few years’ time if you do your homework and make the right decisions early.