How much do you make per door on your duplex/fourplexes?

25 Replies

Aloha everyone I’m just wandering what everyone’s criteria is nowadays when evaluating duplex triplex and four plexes? I’ve been buying condos here on Maui that I’ve been able to generate 500-600 a month cash flow on about 100k purchase prices (HavIng the ability to self manage and save $160/month on PM makes a big impact, plus zero vacancies because of the extremely limited housing supply on Maui), but with prices rapidly rising it’s getting harder and harder to duplicate those deals - plus I just don’t want to have all of my eggs in one basket so I’ve been planning to acquire 1-2 more condos in this particular building before diversifying into 2-4 units In another market possibly. It’s just hard to get excited about spending 200-400k on a duplex to make half of what I’m making in these condos! What are you all looking for in terms of monthly cash flow when evaluating potential deals In todays super hot market? I’m particularly Interested in hearding from buyer of 2-4 units under 400k. Looking forward to hearing everyone’s feedback!

@Greg Gaudet , can you share the financials of the condos you referred to? $500-600/ month CF on a $100k purchase sounds too good to be true. That's ~36% cash-on-cash return, assuming 20% down. Even if you self-manage and have no actual vacancy, you should be accounting for those in your financials to account for a downturn in the rental market or your decision to no longer self-manage. Make sure you're seeing the whole picture.

The knock on condos, of course, is the lack of control. Your common fees could go up at anytime, you could get hit with a big assessment, the board could impose a rule limiting the number of rentals or length of time an owner can rent. 

I would stay away from a duplex, unless you find a smoking deal. It's very hard to make the numbers work, since you only have 2 units to spread the expenses across.

@Jaysen Medhurst

I agree you have to consider vacancies and PM for when they do come up. When you factor those in the cash flow is more like 400/month. So that may happen in the future, but my actual cash flow currently averages about 600. I typically run the numbers for worst case scenario - if taxes skyrocket, rents decrease, HOA hits owners with an assessment, maintenance increases, etc. and if I can weather that kind of storm, then I'm good. Then I run the numbers on today's conditions to see what I'll be making if that perfect storm never comes.

I also agree on the lack of control with condos - but you can also mitigate that risk by digging deep into the financials and meeting minutes before buying. I'm running for a position on the board next month, along with two other investor friends of mine so that we can hopefully have a little more control over the destiny of our project. The treasurer of our project is currently working on lowering the HOA's, as long as our reserves won't suffer.

Part of it was just luck - prices and rents have increased since I bought my first two just this year. But here's an example: 

I bought a 2/1.5 foreclosure in March for 70k (appraised for 100k at the time), didn't need any rehab - just major cleaning, rented it for 1,600, HOAs are 585, taxes are 50, insurance is 17, P&I are 300 (80% LTV), so cashflow before maintenance and vacancies is about 650.

Since signing the lease in March HUD has increased their rental standard for these units to $1,781, so upon renewing the lease I'm going to increase the rent to 1650 (keeping it slightly under market rent because this tenant pays cash, not HUD).

That particular deal was kind of a homerun... since then the values have jumped up and the average sales price for the 2/1.5s in this building now are 120-130k, I could refi and get double my initial investment back out now and keep cashflowing... But that also means it's gotten a lot harder to get $600 CF units. Off market deals are the only option for me now. I have one under contract today for 95k that's going to make about 500/month as long as I self manage (and that number goes down to $430 with vacancies).

The negative, and missing piece to this puzzle, is that this is a C-/D class building. So there is risk and it creates more work for someone like me that self manages. But the silver lining is that a D class on Maui is like a B- on the mainland! lol It's really not that bad! And I actually prefer my HUD tenants, because the government pays their rent regardless of what's happening - even if they're being evicted! Rent gets paid until the day they are out! And on Maui, since most landlords just assume HUD is a bad thing, there are thousands of tenants desperately looking for landlords that will accept their vouchers, and HUD just issued hundreds of new vouchers; so the problem isn't going away. Anyway I say that so you can understand why I don't include vacancies in today's numbers - while that could change, and I am prepared for that - today I can have my units re-rented within 24 hours, and there is no end to this housing shortage in sight.

Maui is a very unique market! Houses start around half a million for fixer uppers, so although I agree you have to be careful with condos, our investment market is largely based upon condos (mostly vacation rental condos, but I'm not there yet).

What kind of numbers are you seeing in your market? 

@Greg Gaudet , sounds like you've got a pretty sweet thing going there in paradise!

My area of focus is Central / Eastern CT. 4-plexes go for ~$200-250k; 2-bed units rent for ~$1100, 1-bed for ~$800. I look for value-add opportunities with CF of $150-200/door/month.

@Jaysen Medhurst Yeah it’s not too bad... but with the average sales rising price for these units up past 125k now, plus rising interest rates, cash flow is closer to standard rental property numbers. Between those factors, and just my need to diversify, I’m going to be branching out to other properties after I get maybe 2 more of these units (that is, assuming that I can even find 2 more of these for at least 20% below market value!) That sounds pretty sweet too! 250k for a 4plex that makes 150 per door? I’ll take that! So you can pull 600-800 in cash flow per month on a 200-250k 4plex purchase? Is that after PM, maintenance and vacancies? Thats pretty much exactly what I was hoping to be able to find once I start branching out... how many units do you have?
Originally posted by @Greg Gaudet :

@Jaysen Medhurst

I agree you have to consider vacancies and PM for when they do come up. When you factor those in the cash flow is more like 400/month. So that may happen in the future, but my actual cash flow currently averages about 600. I typically run the numbers for worst case scenario - if taxes skyrocket, rents decrease, HOA hits owners with an assessment, maintenance increases, etc. and if I can weather that kind of storm, then I'm good. Then I run the numbers on today's conditions to see what I'll be making if that perfect storm never comes.

I also agree on the lack of control with condos - but you can also mitigate that risk by digging deep into the financials and meeting minutes before buying. I'm running for a position on the board next month, along with two other investor friends of mine so that we can hopefully have a little more control over the destiny of our project. The treasurer of our project is currently working on lowering the HOA's, as long as our reserves won't suffer.

Part of it was just luck - prices and rents have increased since I bought my first two just this year. But here's an example: 

I bought a 2/1.5 foreclosure in March for 70k (appraised for 100k at the time), didn't need any rehab - just major cleaning, rented it for 1,600, HOAs are 585, taxes are 50, insurance is 17, P&I are 300 (80% LTV), so cashflow before maintenance and vacancies is about 650.

Since signing the lease in March HUD has increased their rental standard for these units to $1,781, so upon renewing the lease I'm going to increase the rent to 1650 (keeping it slightly under market rent because this tenant pays cash, not HUD).

That particular deal was kind of a homerun... since then the values have jumped up and the average sales price for the 2/1.5s in this building now are 120-130k, I could refi and get double my initial investment back out now and keep cashflowing... But that also means it's gotten a lot harder to get $600 CF units. Off market deals are the only option for me now. I have one under contract today for 95k that's going to make about 500/month as long as I self manage (and that number goes down to $430 with vacancies).

The negative, and missing piece to this puzzle, is that this is a C-/D class building. So there is risk and it creates more work for someone like me that self manages. But the silver lining is that a D class on Maui is like a B- on the mainland! lol It's really not that bad! And I actually prefer my HUD tenants, because the government pays their rent regardless of what's happening - even if they're being evicted! Rent gets paid until the day they are out! And on Maui, since most landlords just assume HUD is a bad thing, there are thousands of tenants desperately looking for landlords that will accept their vouchers, and HUD just issued hundreds of new vouchers; so the problem isn't going away. Anyway I say that so you can understand why I don't include vacancies in today's numbers - while that could change, and I am prepared for that - today I can have my units re-rented within 24 hours, and there is no end to this housing shortage in sight.

Maui is a very unique market! Houses start around half a million for fixer uppers, so although I agree you have to be careful with condos, our investment market is largely based upon condos (mostly vacation rental condos, but I'm not there yet).

What kind of numbers are you seeing in your market? 

are these fee simple  or land lease ??? 

Are you factoring in any vacancy or capex? These can suck up a full year of cash flow or more and should be planded for. if you can truly continue achieving these returns why stop?  I’m personally realizing similar but usually slightly lower returns in NJ but only on value add properties that require some renovations 

@Greg Gaudet is it long term rentals? I am watching hawaii market for couple years already. It would be nice to grow a short term rental portfolio there. Also I kind of reluctant to entry it, as vacation homes usually get a largest hit during the recession. Likely the price will drop quite a bit following the stock market.
@Adam Anderson I don’t factor in capex. Since these are condos, the monthly association fees are essentially your capex. When we need a new roof or parking lot it comes from our HOAs. I factor vacancies because things can change, but currently there is a major housing shortage on Maui. But I’m sure that, like everything, this will change at some so I factor vacancies but mostly for future projections. After vacancies were on the lower end of that, like 450-500/month.
@Kate J. No these are long term rental only. I agree that vacation rentals get hit in recessions, but if you have enough cushion you could weather the storm. Losing value wouldn’t really matter unless you needed to sell your VR during a recession. But like other have said, property values have gone down once in 90 years, even when the stock market corrects that doesn’t necessarily mean that property values are going to go down. Personally I like Aina Nalu for vacation rentals on Maui.
Originally posted by @Greg Gaudet :
@Kate J.

No these are long term rental only.

I agree that vacation rentals get hit in recessions, but if you have enough cushion you could weather the storm. Losing value wouldn’t really matter unless you needed to sell your VR during a recession. But like other have said, property values have gone down once in 90 years, even when the stock market corrects that doesn’t necessarily mean that property values are going to go down.

Personally I like Aina Nalu for vacation rentals on Maui.

If I am not mistaken Hawaii had a decline in 2000 following dotcom crash. Can this info be verified somehow? My primary issue for entering is the short term vacation housing, as people might just stop going for vacations during a recession. Are your tenants local? 

@Greg Gaudet funny while on vacation I was close to buying a condo where the locals would live up in the north shore. It shocked me how simple and SMALL this unit was! This was 10 years ago and if I remember correctly is was around $170k for 700 sq feet 2 bedroom and was across the street from the ocean Anyway, in the Pacific NW, I am getting roughy $500 cash flow per unit, but I have several 4 plexes, 5 plex and 8 plex type properties. I have very little vacancy and also PM myself and cannot trust someone to do what I do incredibly well. Hope this input helps! If its not broke, dont fix it. Keep on your successful path!

@Greg Gaudet we are averaging $600/door/month of cash flow in C/D+ areas of Oakland. This is after all expenses.

We are putting 25% down and forcing appreciation/raising rents on every deal.

Our COC% is usually infinite because we are refinancing most of our money out within 12 months of purchase.

WoW! 1600/month is low rent C- building??? Geez. In the 'burbs of Akron brand spankin' new A++ 3 bedroom single story attached 2 car flats rent for 1250. 

At the end of 2016, I spent 65000 + another 10k over the course of the first year of ownership on a 4-unit (C-/D+) that cash flows around 600/month after all expenses, vacancy and capex. I guess for the investment class I'm making close to (but not quite) what you get but I'm pretty sure 4 of these units is a whole lot more work than one condo.

@Jill F. Lol yeah but there’s not a lot of difference between these D/C- units and B properties. Like the average 2/2 rental here is 1800-2000 a month. The house I rented before I bought was a 4/2.5 brand new A class and was 3,000 and actually that was a screaming deal lol. The reason I get so much for these units is because landlords here don’t want to take HUD; they think it means trouble, so HUD has to pay top dollar in order to incentivize landlords to accept their tenants. It’s a big problem.. lot of people can’t find a rental because they receive HUD assistance. But it’s good for me as a landlord! That sounds great, that’s exactly what I’m looking for next... A fourplex that has similar returns to my condos.. but that’s a good point, 4 units is more work.. but it’s also safer because if someone moves out you still have 75% occupancy.... is that $600 a month you make In CF after PM, or with you self managing? Is there a decent supply of similar deals like that? And would you recommend those properties to an out of state investor, assuming they had the right team in place?
@Account Closed Love it! Same thing here, haven’t refied yet, but considering using a heloc to get my down payment out so I can put it into a larger deal next year. Is that 600 after PM or is that with you self managing? You probably have pretty high purchase prices being CA right?
@Todd Powell Wow! I bet that place is worth a whole lot more than 170k now! If it was a SFH I’m guessing 500k+... Sounds like most people are saying 500-600 total cash flow. Good to know there are similar numbers out there for when I’m ready to look into other markets. PNW would be great for me because of its relative proximity to Maui.. what are purchase prices like on those 4,6&8 units you mentioned that make 500/month? Can you get one for under 200k? Thanks for your input!
Originally posted by @Greg Gaudet :
@Saj Shah

Love it! Same thing here, haven’t refied yet, but considering using a heloc to get my down payment out so I can put it into a larger deal next year.

Is that 600 after PM or is that with you self managing? You probably have pretty high purchase prices being CA right?

 Yes $600/door/month is after PM expenses, which I pay my own company. I am the owner but have 2 assistants who do 90% of the PM duties (and 100% of the stuff I don’t want to do) 

Same story here.. we take HUD (Section 8) which pays way more than market since most local owners don't want to deal with it. Yes high purchase price, usually between $400K (2014) to $600K (2017) but at market, they each get $8000-$9000/month in rent.

I could squeak that out after paying for property management around here because there is a lot of competition and still have capex reserve but not paying one of the big full fee firms. No, I would never recommend those kind of properties for an OOS investor. Here's an example of why: I had been getting sporadic complaints about my newest tenant "constantly running up and down the stairs." I talked to her about it and she agreed to work on it. A couple Saturdays ago, I'm over there supervising the re-grading of our new parking lot. While I'm there, I see a car roll up the alley driving reeeaaal slow. Then I hear clomp, clomp, clomp, clomp, clomp and two guys come down the stairs from new girls apartment. Reach into a parked car real quick and the run over and hop in the back seat of the car that just rolled down the alley. In about 10 minutes they get out and clomp back up the stairs. I said hmmpf. Twenty minutes later, same thing. Six times in that one afternoon. All the tenants knew. But no one wanted to rat her out for allowing her boyfriends to run a drive-by drug service every weekend. One of them had a gun in his pocket! I was pissed. I described the activities I observed in her non-renewal letter and she's out now but they could have ruined the reputation of that building and run off good tenants.  All the others are glad she's gone; One tenant said she was thinking of moving.. but tenants in that asset class won't necessarily tell you when there's that kind of issue. Once when I was out of town the trash company didn't come for 3 weeks and nobody called me???!!! One tenant said, well I was going to call 'soon.' I guess, on the up side they really don't complain about much... but no news isn't always good news.

Originally posted by @Jill F. :

I could squeak that out after paying for property management around here because there is a lot of competition and still have capex reserve but not paying one of the big full fee firms. No, I would never recommend those kind of properties for an OOS investor. Here's an example of why: I had been getting sporadic complaints about my newest tenant "constantly running up and down the stairs." I talked to her about it and she agreed to work on it. A couple Saturdays ago, I'm over there supervising the re-grading of our new parking lot. While I'm there, I see a car roll up the alley driving reeeaaal slow. Then I hear clomp, clomp, clomp, clomp, clomp and two guys come down the stairs from new girls apartment. Reach into a parked car real quick and the run over and hop in the back seat of the car that just rolled down the alley. In about 10 minutes they get out and clomp back up the stairs. I said hmmpf. Twenty minutes later, same thing. Six times in that one afternoon. All the tenants knew. But no one wanted to rat her out for allowing her boyfriends to run a drive-by drug service every weekend. One of them had a gun in his pocket! I was pissed. I described the activities I observed in her non-renewal letter and she's out now but they could have ruined the reputation of that building and run off good tenants.  All the others are glad she's gone; One tenant said she was thinking of moving.. but tenants in that asset class won't necessarily tell you when there's that kind of issue. Once when I was out of town the trash company didn't come for 3 weeks and nobody called me???!!! One tenant said, well I was going to call 'soon.' I guess, on the up side they really don't complain about much... but no news isn't always good news.

Thanks for example! Yeah there's definitely things like that where you just need to be there for effective damage control. Most PMs probably wouldn't have been invested enough to catch on to that. And that brings to mind the situations I've dealt with in my units that would've been bigger problems if I weren't here and involved in the day to day. 

I guess it all goes back to your asset class... From all the feedback I've heard on BP on how to invest OOS, you just have to be B- and up; C class and below seems to require that extra bit of attention that only an in town owner is invested enough to put in.  

This leads to two obstacles: 2-4 unit properties generally don't tend to be built in B class neighborhoods, and when you do find one the purchase price is pretty steep.

Originally posted by @Kate J. :
Originally posted by @Greg Gaudet:
@Kate J.

No these are long term rental only.

I agree that vacation rentals get hit in recessions, but if you have enough cushion you could weather the storm. Losing value wouldn’t really matter unless you needed to sell your VR during a recession. But like other have said, property values have gone down once in 90 years, even when the stock market corrects that doesn’t necessarily mean that property values are going to go down.

Personally I like Aina Nalu for vacation rentals on Maui.

If I am not mistaken Hawaii had a decline in 2000 following dotcom crash. Can this info be verified somehow? My primary issue for entering is the short term vacation housing, as people might just stop going for vacations during a recession. Are your tenants local? 

You may be right - I shouldn't speak to that point, as I was living in Florida during that time. If you're serious it may be a good idea to call some of the larger VR PM's in Hawaii and ask to speak to someone that's been there the longest. Then ask them what effects they've seen the economy have on their rentals. On Maui two of the big ones are CRH - Condominium Rentals Hawaii for economy class rentals and Destination Residences for higher end, Wailea type rentals. 

I worked in escrow here on Maui starting in 2012 and while things were certainly slower and there were more vacancies than there are now, and the number of people visiting Hawaii was certainly down during the recession, the islands did survive. Many VR's were still profitable, depending on how much they paid. But at the same time, there were a lot of foreclosures because people on the mainland that own a vacation rental in Hawaii are going to stop paying their vacation rental mortgage and HOA's first.

Yes, my tenants are local. The building I own in does not allow vacation rentals (which is one of the reasons the units don't cost 250-500k). Although I have seen a couple of units in my building on Airbnb illegally. 

@Greg Gaudet   Greg do these units have central air.. what most don't realize that properties in Maui a lot of the older units have no AC and there is NO heat  so your capex is simply flooring and the occasional hole in the door.

Hawaii is a great place for rentals becasue of the simplicity of the building there and you dont have to fool with central heat and air in many places..

good job..  My parents lived at the Kuleana on the lower road were the old West Maui airport was. if you recall you flew in right over black rock.. is was way cool. and the wind sock bar on top the terminal was right out of a 50s movie.

good job keep it up..

@Jay Hinrichs Thank you Jay! I love the Kuleana, the aoao is actually a client of mine. Nope, no ac in my units! They’re in harbor lights, if you remember that building by the college/harbor? Also no washers! The building has coin laundry, so no washers or dryers on the units to worry about :) just fridge, oven, shower and toilet. And the building is concrete, which helps to protect my units from other units flooding. But like any property there are also challenges; like the section 8 and lower income tenants and the drama that can come with that. But I like to say that I love owning and self managing at harbor lights because it constantly reminds me how great I have it and how not everyone gets the same opportunities I’ve gotten in life. Thank you for the positive feedback, means a lot coming from the godfather of BP!
Originally posted by @Greg Gaudet :
@Jay Hinrichs

Thank you Jay! I love the Kuleana, the aoao is actually a client of mine.

Nope, no ac in my units! They’re in harbor lights, if you remember that building by the college/harbor?

Also no washers! The building has coin laundry, so no washers or dryers on the units to worry about :) just fridge, oven, shower and toilet. And the building is concrete, which helps to protect my units from other units flooding.

But like any property there are also challenges; like the section 8 and lower income tenants and the drama that can come with that. But I like to say that I love owning and self managing at harbor lights because it constantly reminds me how great I have it and how not everyone gets the same opportunities I’ve gotten in life.

Thank you for the positive feedback, means a lot coming from the godfather of BP!

I just wanted to flush that out.. as most folks buy rentals in areas that demand full hvac and central air.. also have roof issues snow and freeze issues.. 4 walls and full roof.. therefore your capex is a fraction of anyone elses who maybe posting about your numbers not adding in all the long term hold costs..  I remember when ocean front Kuleana's were 125k  LOL..  Anyway sounds like you have a honey pot and other than the section 8 drama some pretty cool rentals and if you buying at trustee/sherrifs sales at less than market value I would say U are onto one of the better cash flow investments anywhere in the country at those price points.