Best market for duplexes under $100k

Multi-Family and Apartment Investing
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Best market for duplexes under $100k

Sean Johnston
Rental Property Investor · Westminster, CO · Member since 2022 · 12 posts · 12 votes

I am looking to invest in a duplex or triplex for under $100k. My goal is get $150/door after the mortgage. Overall I would prioritize cashflow over appreciation. Is this realist? If so in what markets?

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Drew SygitBusiness Member
Property Manager · Royal Oak, MI · Member since 2012 · 12k+ posts · 9k+ votes
4y

@Sean Johnston

Many OOS investors set themselves up for failure because they don't truly take the time to understand:

1) The Class of the NEIGHBORHOOD they are buying in - which is relative to the overall area.

2) The Class of the PROPERTY they are buying - which is relative to the overall area.

3) The Class of the TENANT POOL the Neighborhood & Property will attract - which is relative to the overall area.

4) The Class of the CONTRACTORS that will work on their Property, given the Neighborhood location - which is relative to the overall area.

5) The Class of the PROPERTY MANAGEMENT COMPANIES (PMC) that will manage their Property, given the Neighborhood location and the Tenants it will attract - which is relative to the overall area.

6) That a Class X NEIGHBORHOOD will have mostly Class X PROPERTIES, which will only attract Class X TENANTS, CONTRACTORS AND PMCs and deliver Class X RESULTS.

7) That OOS property Class rankings are often different than the Class ranking of the local market they live.

8) Class A is relatively easy to manage, can even be DIY remote managed from another state. Can usually allot 5-10% vacancy factor and same for maintenance.

9) Class B usually also okay, but needs more attention from owner and/or PMC. Vacancy and maintenance factors should be higher than for Class A as homes will be older, have more deferred maintenance and tenants will be harder on them.

10) Class C can be relatively successful with a great PMC (do NOT hire the cheapest!), but very difficult to DIY remote manage. Vacancy and maintenance factors should be higher than for Class A or B. Homes will have even more deferred maintenance and tenants will be even harder on them.

11) Class D pretty much requires an OWNER to be on location and at the property 3-4 times/week. Most quality PMCs will not manage these properties as they understand most owners won’t pay them enough for the time required and even then it’s too difficult successfully manage them.
***Only exception is if an owner has plan & funds to reposition Class D to Class C or higher.

https://www.biggerpockets.com/forums/776/topics/960183-what-they-dont-tell-you-about-cheap-rental-properties?highlight_post=5562799&page=3#p5562799

Also, SERIOUSLY consider - do you really have the time to be a DIY landlord or should you hire a PMC?

[email protected]248-209-6824
Logical Property Management4.9451 Reviews
WebsiteView Page
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  • Caleb Brown
    Real Estate Agent · Kansas City · Member since 2018 · 4k+ posts · 3k+ votes
    4y

    Are you oaky with doing a rehab? Duplexes in that price range will either be a rough area or need work. In my market turn key C-B duplexes are 180-250K and we are in the Midwest

    3Reply
  • Joe HammelBusiness Member
    Real Estate Agent · Metro Detroit, MI · Member since 2018 · 612 posts · 666 votes
    4y

    @Sean Johnston

    You can find that..but it’s either going to be in a rough area or rough condition.

    More context would help…

    Are you just looking for an investment under $100k

    A nice 2 bedroom in metro detroit for $75-$90k than rents for $1150-$1250 makes and amazing low cost to entry rental but that will be in a nice location.

    I own one with that same criteria and it’s one of my favorites.

    Otherwise, for a decent location, metro detroit has duplexes closer to $150k.

    $130-$175k

    If location grade or condition definitely doesn’t make then can find closer to $100k

    [email protected]248-422-1685
    FIRE Realty Team - Keller Williams5377 Reviews
    WebsiteView Page
    2Reply
  • Aj Parikh
    Rental Property Investor · Centreville, VA · Member since 2019 · 1k+ posts · 799 votes
    4y

    This can be done in Cleveland. You might be looking at a B- or C neighborhood and you will need some deal finding. But it can definitely be done. I have used turnkey companies to scale my portfolio in Cleveland since I am also out of state. Let me know if that interests you and we can connect! 

    3Reply
  • Drew SygitBusiness Member
    Property Manager · Royal Oak, MI · Member since 2012 · 12k+ posts · 9k+ votes
    4y

    @Sean Johnston

    Many OOS investors set themselves up for failure because they don't truly take the time to understand:

    1) The Class of the NEIGHBORHOOD they are buying in - which is relative to the overall area.

    2) The Class of the PROPERTY they are buying - which is relative to the overall area.

    3) The Class of the TENANT POOL the Neighborhood & Property will attract - which is relative to the overall area.

    4) The Class of the CONTRACTORS that will work on their Property, given the Neighborhood location - which is relative to the overall area.

    5) The Class of the PROPERTY MANAGEMENT COMPANIES (PMC) that will manage their Property, given the Neighborhood location and the Tenants it will attract - which is relative to the overall area.

    6) That a Class X NEIGHBORHOOD will have mostly Class X PROPERTIES, which will only attract Class X TENANTS, CONTRACTORS AND PMCs and deliver Class X RESULTS.

    7) That OOS property Class rankings are often different than the Class ranking of the local market they live.

    8) Class A is relatively easy to manage, can even be DIY remote managed from another state. Can usually allot 5-10% vacancy factor and same for maintenance.

    9) Class B usually also okay, but needs more attention from owner and/or PMC. Vacancy and maintenance factors should be higher than for Class A as homes will be older, have more deferred maintenance and tenants will be harder on them.

    10) Class C can be relatively successful with a great PMC (do NOT hire the cheapest!), but very difficult to DIY remote manage. Vacancy and maintenance factors should be higher than for Class A or B. Homes will have even more deferred maintenance and tenants will be even harder on them.

    11) Class D pretty much requires an OWNER to be on location and at the property 3-4 times/week. Most quality PMCs will not manage these properties as they understand most owners won’t pay them enough for the time required and even then it’s too difficult successfully manage them.
    ***Only exception is if an owner has plan & funds to reposition Class D to Class C or higher.

    https://www.biggerpockets.com/forums/776/topics/960183-what-they-dont-tell-you-about-cheap-rental-properties?highlight_post=5562799&page=3#p5562799

    Also, SERIOUSLY consider - do you really have the time to be a DIY landlord or should you hire a PMC?

    [email protected]248-209-6824
    Logical Property Management4.9451 Reviews
    WebsiteView Page
    10Reply
  • Bill B.
    Investor · Las Vegas, NV · Member since 2013 · 8k+ posts · 10k+ votes
    4y

    I assume you’re planning on that $250/mo going to repairs, capex and vacancy. So the plan is to just break even while the loan is being paid off?  There is zero chance of buying a duplex that doesn’t need work, where people see lining up to rent and pay on time for $100k. 

    If you’re buying in an area you know nothing about just make sue you’re financially capable of walking away from this property and writing it off as a total loss if it goes sideways. 

    5Reply
  • James Wise
    Real Estate Broker · Cleveland Dayton Cincinnati Toledo Columbus & Akron, OH · Member since 2013 · 30k+ posts · 20k+ votes
    4y
    Quote from @Sean Johnston:

    I am looking to invest in a duplex or triplex for under $100k. My goal is get $150/door after the mortgage. Overall I would prioritize cashflow over appreciation. Is this realist? If so in what markets?

     Cleveland a few years ago had these numbers. Today you're gonna be closer to $120k or so after the property is renovated and tenanted and things of that nature. At that point you'd be getting $1,600/mo or so in rent for a duplex.

    4Reply
  • Sean Johnston
    OP
    Rental Property Investor · Westminster, CO · Member since 2022 · 12 posts · 12 votes
    4y

    @Caleb Brown I am looking to be an OOS investor. With no experience or knowledge in rehab I am looking more for turn key properties.

    3Reply
  • Sean Johnston
    OP
    Rental Property Investor · Westminster, CO · Member since 2022 · 12 posts · 12 votes
    4y

    @Joe Hammel Thanks for the info. From what I have heard a lot of investor avoid Detroit area due to economic reasons. (Jobs, infrastructure, growth rate, etc.) Is Detroit a good market for cashflow but not appreciation or am I missing something. I am just starting out and down have a large amount to invest.

    2Reply
  • Sean Johnston
    OP
    Rental Property Investor · Westminster, CO · Member since 2022 · 12 posts · 12 votes
    4y

    @Aj Parikh Definitely!

    1Reply
  • Sean Johnston
    OP
    Rental Property Investor · Westminster, CO · Member since 2022 · 12 posts · 12 votes
    4y

    @Bill Brandt I am expecting 10% for property management, 10% for vacancy, and 5% for Capex. The idea is to still profit after loan costs as well.

    2Reply
  • Alex Talcott
    Attorney · Durham, NH · Member since 2019 · 292 posts · 126 votes
    4y

    I'm active in several, across IN, MO, NH.

    3Reply
  • Joe HammelBusiness Member
    Real Estate Agent · Metro Detroit, MI · Member since 2018 · 612 posts · 666 votes
    4y
    Quote from @Sean Johnston:

    @Joe Hammel Thanks for the info. From what I have heard a lot of investor avoid Detroit area due to economic reasons. (Jobs, infrastructure, growth rate, etc.) Is Detroit a good market for cashflow but not appreciation or am I missing something. I am just starting out and down have a large amount to invest.

    "Metro Detroit is not an appreciation market" is another pretty common misconception. Attached is a photo of the actual MLS data of Oak park, MI. A city just outside of Detroit, where I recently purchased a property. 10 years of year over year 24% average annual appreciation. I paid $125k and rented that property at $1500 a month and it will cash flow $400+ a month. All the markets we buy in have seen 10-24% appreciation in the past 10 years. I can send more charts. The MLS data doesn't lie.

    As far as jobs go. Metro Detroit is home to over a dozen fortune 500 companies. Auto, Hospitals, and Mortgage industries lead the pack, with plenty more behind it. People like to lump "Detroit" and auto, in as all of michigan but they never go a layer deeper and see the crazy growth of the suburbs. 

    My entire rental portfolio is here and I cash flow a lot, have high roi, and GOOD locations. I've almost doubled my equity in the past 3 years through appreciation and sweat equity. We and clients are seeing huge success. We just stay away from areas that don't show signs of growth or such.
    [email protected]248-422-1685
    FIRE Realty Team - Keller Williams5377 Reviews
    WebsiteView Page
    5Reply
  • Mike D'ArrigoPro Member
    Turn key provider · San Jose, CA · Member since 2010 · 4k+ posts · 3k+ votes
    4y

    @Sean Johnston as others on here have said, you're not going to find any MF for under $100,000 unless it needs a lot of work or is in a rough neighborhood, and in which case, I wouldn't recommend that. I also think that you are setting your sights low on how much cash flow you want. $130/mth doesn't give you much cushion for when something breaks or goes wrong which it will. Cleveland and the Quad Cities are among the most affordable markets. I would recommend looking at either one, however, you need to know the neighborhoods well, especially in Cleveland where there are some pretty rough areas. Buying on the low end of the price spectrum is risky. Do lot's of due diligence and make sure you understand where you're buying. 

    3Reply
  • Sean Johnston
    OP
    Rental Property Investor · Westminster, CO · Member since 2022 · 12 posts · 12 votes
    4y

    @Mike D'Arrigo I plan on having a reserve to start and keeping 5% of gross rent for Capex. Is this reasonable? I am looking for $100k due to the lower down payment required. Do you this it makes more sense to save for a couple more years and then look at purchasing a higher priced property?

    1Reply
  • Marcus Auerbach
    Investor · Milwaukee - Mequon, WI · Member since 2010 · 5k+ posts · 7k+ votes
    4y

    @Sean Johnston if that would work, I'd be all over it. To my best knowledge there is no market with more duplexes than Milwaukee, about 66,000. They are either 60 years old or 100 years old. Everything in a house has a finite life expectation, 25 years for a roof, 50 years for plumbing, 15 years for a water heater etc.. 

    To rehab a duplex and reset the clock you can budget roughly 30k per unit and 50k for the exterior (roof, siding, windows, don't forget garage and driveway and that huge dying tree in the backyard). So think about 110k.

    A duplex worth 100k may rent for $1,600 or 19,600 per year; 5% capex is $960 per year, so you need about 115 years to safe up for a whole re-do. The way people still make these properties work sometimes, is simply by kicking the can down the road, patch the roof, patch the plumbing, patch the driveway, paint the cabinets. But at some point you can't patch anymore. So every year you own it, your liability of deferred capex is growing. That's the part a lot of investors don't understand.

    The other problem you have is when you buy a 100k duplex and you stick 110k rehab into it, its still not worth 210k, because of where it is. In fact these properties have "negative land value". In short: property value is land value plus improvement (the house). The build a duplex new in Milwaukee is about 400k. If that total value of the property is only 100k, even if you depreciate the improvements down to half, that means your land value has to be negative. In other words, by rehabbing this property you basically destroy capital. To be sustainable you need some appreciation to make the capex worth while when you look at the long term numbers.

    What's the solution? Here in our market the long term numbers start to work out at about 250k.

    4Reply
  • Ramada Evans
    Aurora, CO · Member since 2015 · 70 posts · 20 votes
    4y

    @Aj Parikh what area are you in Midwest? I’m looking to do a similar investment as the head post if profitable.

    0Reply
  • Aj Parikh
    Rental Property Investor · Centreville, VA · Member since 2019 · 1k+ posts · 799 votes
    4y
    Quote from @Ramada Evans:

    @Aj Parikh what area are you in Midwest? I’m looking to do a similar investment as the head post if profitable.

    I invested in the Cleveland area and worked with turnkey companies to scale my portfolio so let me know if you want to connect 
    1Reply
  • Bob S.
    Real Estate Consultant · Cleveland · Member since 2020 · 6k+ posts · 3k+ votes
    4y

    1st for that price range you will not be in a decent area, 2nd you are not cash, this basically takes you  " out of the game" . If there is a fixer for all in around that price range you will not get it, a cash buyer will. I suggest find deals for someone who is doing them, earn a fee. Learn, save then go on your own, 

    Good Luck 

    1Reply
  • Bob S.
    Real Estate Consultant · Cleveland · Member since 2020 · 6k+ posts · 3k+ votes
    4y

    @Aj Parikh even in the Cleveland markets in the worse areas, you are not going to get a 3 unit for all in 100k. Maybe I can, but defiantly  not a someone with no experience and using a loan. 

    0Reply
  • Bob S.
    Real Estate Consultant · Cleveland · Member since 2020 · 6k+ posts · 3k+ votes
    4y

    @James Wise FINALLY someone else that understands,,,,,, :) 100k all in on a 3 unit, You and I can get them, but not someone with no experience and not being cash, 

    all the best James 

    1Reply
  • Bob S.
    Real Estate Consultant · Cleveland · Member since 2020 · 6k+ posts · 3k+ votes
    4y

    @Aj Parikh it will be nearly impossible for someone not cash, with no experience, to get a 3 unit all in for 100k. I have done more then 35 mill in the Cleveland markets, I know nearly every deal for sale and have 10 guys bringing me deals weekly  not going to happen for a loan buyer, for me sure. I was in town this month for 2 weeks,  got a 10 unit off Kinsman , when all said and done, brand new everything, net rents about 55k, on gross of about 88k, all in 350k,,SF  on Priday all in 60k, rents 1200, 4 br on E4th in EAST Cleveland all in 55k, rents 1300, and a few others. Someone from out of state , using a loan, would never get  deals like these. 

    I am not trying to discourage only stating reality. I do not like to get people hopes up. There are certain areas of East Cleveland I own and buy. Heck I got an 81 unit 7 years ago for all in 900k,  people said I was crazy , well we are turning down, 3 mill :)

    All the best to you , 

    5Reply
  • Sean Johnston
    OP
    Rental Property Investor · Westminster, CO · Member since 2022 · 12 posts · 12 votes
    4y

    @Bob Stevens I interest in a multiple unit property to help hedge the risk of the entire property being vacant at once. Do you think it is more realistic to find a turnkey single family for $100k? I appreciate the honest feedback!

    1Reply
  • Luke Ache
    Member since 2022 · 25 posts · 11 votes
    4y

    The problem with your approach is that, the cheaper you go, the lowest quality of renters which translates to all kinds of problems. Here in Alabama, there are plenty of cheap multi family properties but the vast majority are Class C and D. Here in Huntsville, I have yet to see a multi family property in a decent area.

    Birmingham and Montgomery have a lot of dirt cheap multi family homes but they are almost all in low income areas. Also bear in mind that it can take a long time to sell a multi family property, even harder if they are in a not so desirable area

    2Reply
  • Bob S.
    Real Estate Consultant · Cleveland · Member since 2020 · 6k+ posts · 3k+ votes
    4y

    @Sean Johnston of course, Its all about your team , but again, cash buyers get the best deals 

    Good Luck

    0Reply
  • Bob S.
    Real Estate Consultant · Cleveland · Member since 2020 · 6k+ posts · 3k+ votes
    4y

    @Luke Ache its all about screening. I have delt with  low income tenants for 10 years. Once in a while there is an issue. But to get the 20%++ net caps its worth it , 

    Good Luck 

    1Reply
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