Cash flow is important to any investor be it a stock investor, a widget investor or a real estate investor. The principle of diversification is touted no matter what the investment, and for good reason as it helps cash flow. If one area is clogged then there are only areas for income to flow from.
In real estate, a unit is a unit. Some living spaces are luxurious, and some living spaces are more modest, but at the end of the day it is simply a livable unit. With more units, there is more diversification and more cash flow.
We have a bias to multifamily properties, but the reason a duplex is the ideal solution for many investors are:
- A duplex is still considered residential real estate. Any property under 4 units resists the label of “commercial real estate”. In later posts we will explore why this is important.
- It provides diversification without concentration. What we mean by this is that you can have unit and property diversification. For example if you own a 10 unit property and there is an unforeseen event that hurts the viability of your property then all 10 of your units are affected. With duplexes, you double your cash flow potential without concentrating all your eggs in one property basket.
- Duplexes are multifamily properties that look and feel more appropriate in a residential setting. A duplex can “blend” in unlike a larger unit building.
Cash flow is important in any investment. Simply put, duplexes help double that potential.