Duplex for Retirement? 3 Reasons to Consider It

Duplexes: An Investment for Millennial and Baby Boomers Alike

We are not investment professionals. We are real estate agents that specialize in selling duplexes in the Twin Cities – Minneapolis region. We are not advising you to make purchasing decisions based on our advice. Rather, we hope to encourage you to consider doing more research about rental real estate investments.

Not every person is in the position where they can invest some of their retirement income or their savings into real estate, but we have found that there are plenty of compelling reasons for more people to look into it.

Do you like the idea of diversifying your investments away from being entirely concentrated in the stock market? Then rental real estate might be one of the most compelling investments you could possibly make.

We generally don’t recommend that people flip homes; we recommend that people try to purchase a deep value real estate investment and then rent it out. The reason why is that it can be difficult for a regular person to manage all the construction and costs associated with rehabilitating a property. Unless you’re a professional, it’s easy to get in over your head.

But when people purchase real estate and rent it out to tenants, it provides some amazing financial opportunities that people might not think of.

Did you know that duplexes are one of the easiest ways to start building your real estate portfolio?

The reason why a duplex can be such a compelling and common sense investment is because you can purchase it with FHA financing rather than the traditional home purchasing tools for investors. Because first time homebuyers can use FHA financing to purchase a duplex, duplexes are the easiest properties to start a real estate portfolio with.

We’ve been working with duplexes and investment properties for a long time, particularly in the Minneapolis and St. Paul neighborhoods – so we wanted to provide some information about why a duplex is such a compelling investment.

But before we dive into why rental real estate can be such a compelling investment, we wanted to talk to two specific groups: baby boomers and millennials.

When you read any book that talks about the millionaires in America, you quickly realize that millionaires live all around us, but they seem like regular people. What we’ve learned from reading and studying is that the key to becoming a millionaire is to stay out of debt, invest in property, and keep your living expenses as low as possible.

Keeping expenses low is important for both retirees and for people just starting their financial momentum. One of the best ways to keep your expenses low is to reduce your mortgage as much as possible. Think about it, your mortgage can take up to (or more than) a third of your income!

Buying a duplex and renting out one of the units allows you to offset a great portion of your living expenses.

That’s why so many millennials and baby boomers are starting to move back into the Minneapolis and St. Paul neighborhoods, and many of them are choosing to purchase a duplex.

Millennials and Duplexes

Buying a house has transaction costs and a level of permanence that most millennials shy away from when they are just starting out their careers and independent lives.

Those without the ability to purchase a home also don’t like the idea of wasting their money on paying other people’s mortgages through rent.

What do you do when you don’t want to be stuck in your forever home, but you don’t want to waste your money on rent? Purchase a duplex! We are meeting buyer after buyer in this type of situation.

If you are a millennial, and you have started to gain a little financial momentum in your life, but you’re not ready to commit to buying a home, then please connect with us to see if you would be able to find a duplex that you could purchase and owner occupy while renting out the other unit.

Baby Boomers Preparing for Retirement

Baby boomers are starting to realize that they might like the idea of living in the Minneapolis or St. Paul area because of the quality of life, the services, and the amazing parks and culture.

We are finding baby boomers that are using their retirement funds through a checkbook IRA to purchase duplexes that they can live in for the first part of their retirement. They then use it for cash flow as a full-fledged rental when they want to move into a senior living environment.

It’s not ideal to purchase rental real estate inside of a deductible or tax-deferred account because you cannot take advantage of some of the most attractive tax benefits that real estate enjoys compared to other forms of income. The rent from an investment property is considered passive income, which is not subject to self-employment taxes.

Investment properties can be a risky investment when the purchaser doesn’t perform their due diligence. But if a person has put together a strategic plan and has run the numbers, rental real estate can be a tremendous investment in retirement.

Low Interest Rate Advantage Goes to Real Estate

Traditionally, most retirees would use bonds as a way to diversify against the volatility of stock, but our decade of low interest rates has made bond investing difficult. We do not give financial advice, so we will leave it in a very simple way – bonds lose value as their interest-rate rises.