Regular readers of my blog post know that my favorite investment strategy for the young investor is Buy a Duplex! Live in it, earn income from it, and exchange your profits for portfolio growth over time.
I recently read that in buy-and-hold (rental) real estate, about 80% of your profit comes from appreciation. In other words, the rents you bring in are just a nice month-over-month. bonus, but what really counts is the equity earned through appreciation.
Through appreciation over time, you will be able to borrow against the equity in the property and turn that money into downpayment or rehab money for your next acquisition. Or you could sell the property and apply the cash to your next purchase.
The point is that there are lots of fun ways to gain financial freedom and personal independence through real estate investment strategies such as buy-and-hold rental real estate.
The trouble I’m noting right now in Colorado Springs is a severe shortage of good multi-unit opportunities. Why? Well, because the current owner is probably making so much money off his or her investment that he or she has no incentive to sell. Especially since borrowing against the property is an option as I said before if the owner needs more cash.
This leaves the Colorado Springs active listing market for duplexes, fourplexes, and the like dominated by old properties that are worn out and in severe need of updating. They are the properties that the owners got tired of upkeeping. They are the properties in declining neighborhoods where the tenant quality is less than ideal. They are the properties where rents are still at 2003 levels because the landlord stopped actively managing the income.
What I’m getting at is take your time to find a good deal and be prepared to put some sweat equity into the property. You may be doing physical property repairs and improvements. You’ll almost certainly be raising rents. And you’ll more than likely be changing and updating leases and perhaps putting in new tenants.
Duplexes are a great opportunity to have someone else pay your mortgage for you! When you’re ready to start your investment portfolio, give me a call! I can help!