2 Things You Should Know About Buying A Duplex For Income

Commercial real estate can be a great investment. The term is applied to any kind of real estate that is acquired to make money, such as a hotel, duplex, apartment, or even a retail building. Buying a duplex is a great way to enter the world of real estate where you can make income off your property in renting it out to other people. Before you buy a duplex for profit, examine these 2 things you may encounter.

Financing

The biggest thing you will notice about buying commercial real estate is that financing is quite a bit different than if you were to buy a residential home. When you buy residential property, your loan is spread out among several years, commonly 15 to 30 years, where payments are made with interest over this time. With a commercial loan, however, your loan is shortened exponentially, typically covering less than 10 years with a balloon payment to be made as your final payment. This means you will pay a monthly mortgage for several years after working out terms with your real estate agent, then pay the final sum at the end. This can be several thousand dollars, so you need to prepare yourself financially for the payment process as it doesn't have the same leeway that buying traditional property may offer you.

You may also need additional financing to allow you to fix up the duplex so it is safe to rent. These additional funds, which are often used for repairing or updating appliances, changing locks, and updating landscape, can be included in your original loan.

Insurance

Since you will be using your duplex as a rental for other people to use, you will need insurance beyond typical homeowners insurance. Part of your financing for your property may require the purchase of an umbrella insurance policy. This is a policy that helps pay for additional costs once your liability insurance on your property has reached its limit. Umbrella insurance can is very useful when owning property you rent out, as it covers you in the event of being sued by a renter or if there is property loss that involves other peoples' belongings. Your real estate agent can discuss an umbrella policy with you and how it can be beneficial to your property investment.

Before you jump on any opportunity to buy a duplex for profit, you should talk to your real estate agent about the costs that will be involved in the process. Since commercial real estate financing can be much more detailed than typical residential financing, it's important you understand all the aspects of commercial property ownership prior to continuing in your investment.

For commercial real estate financing, contact a company such as NAI Norris Beggs & Simpson.