North Austin Duplex MTR Deal Analysis
I am house hacking a duplex MTR in North Austin, this is the numbers for my deal.
Purchase Price: 435k in November 2020
Down Payment: 15%
Rehab: ~$60k
PITI: $2,250
Current rent for the other unit: $2,650
Future rent for my unit: $3,000
Utilities: ~$350/month
Vacancy: 5%
Capex and Maintenance: ~$350
Cash flow when I move out: $2,417.50
Cash on Cash: 23%
Current value: ~575k-600k
I obviously lucked out with 2021 appreciation, but almost all duplexes on the market now will cash flow ~$700-$1,000/month using this strategy!
- Conner Olsen with The Moorhead Team
- 702-521-0034
- [email protected]
That kind of rents for that price point are unheard off in Austin.
How did you find the deal?
Hi Conner. I have a similar deal in North Central Austin. Did you do an FHA? I am considering househacking my duplex as a plan B if I can't get a good interest rate on my refi. Would love to collaborate.
@Christopher Moloney I found it on the MLS, the property was listed for 45 days with no one going under contract. Medium-term rents are around double what LTR are. It's a great strategy!
- Conner Olsen with The Moorhead Team
- 702-521-0034
- [email protected]
@Arvin Poole I did not do an FHA loan because I didn't want the higher monthly payment. Looking back I definitely should have gone with the FHA loan. Let me know if I can help with anything!
- Conner Olsen with The Moorhead Team
- 702-521-0034
- [email protected]
Here is my journey. I never knew MTR existed but figured it out due to Austin's STR restrictions. I have great experience with STRs and my LTRs have so many negatives esp on lower rent homes/duplexes. I decided to try STRs but Austin restricts them. I have 4 duplexes and decided to turn one into a MTRs earlier this year. Been in the Duplex LTRs for awhile and my places/rents are typically on the lower end so the maintenance and kills any profit but appreciation has been great.
Anyhow, typically rent each side for about $1500/month and LTRs at this level typically trashes the homes and leave requiring 10-20K in repairs after 2-3 yrs. So typically after 7 yrs of owning these duplexes, I have been cash flow neutral. With Taxes essentially doubling last 2-3 yrs, these places are money losing holdings.
So in Jan I decided to put in 50K to do a complete inside renovation and furnish both. If MTRs didn't work out, I could do LTRs fully furnished. 1st started on one side furnished then quickly furnished the 2nd as the 1st rented quickly.
Fast forward to June, and both sides have been about 90% rented through July @ 5600/mo both sides.
MTR 5600x.9= 5k - 1k VRBO/Airbnb/utilities/lawn care= 4k income/month. Cash flow prob 2k/mo accounting for PITI.
LTR 3k - 350 Prop manager = $2650/mo income. Barely cash flows and negative when renters move out for another costly rehab.
Major benefit is place is well care for, I check on it every 1-3 months, renters keep the place clean/well care for, lawn always done vs LTRs where condition is always trashed requiring about 20K every 2 yrs. It has been 6 months and both sides look like it was just renovated.
I plan on converting another duplex the same way in the next month and if it works out, I will eventually convert all 4. I would be happy cash flowing each home $24000/yr x 4 appx 100K. My 4 duplexes each have about 50K left on the mortgages and once paid off, should increase to about 125k/yr.
My STRs cash flows about 80k/yr and once I pay off the 500K in mortgages left will cash flow about $130K/yr.
@Michael Win Who does your management? Do you do it? I don't see that as part of your math. I would think that it would be a major time sucker and is the opposite of passive income.
Also, I have never spent 20k in repairs or even 10k. Its all about tenant selection, getting a solid property manager and setting tenant expectations to keep for the long haul. I love ltr where I don't have to do a thing every month except open up the monthly pdf and see my bank account increase.
Aaron,
My LTRs are professionally managed. I understand the importance of tenant selection but my duplexes are on the lower end so the choices are from the same economic Pot so they tend to bring more people in to live, never cut the grass, do the bare minimum. So after they move out, it usually requires new paint, patch holes, some appliances need replacement. My tenants typically stay 2-3 yrs and wear the place out.
The MTRs I manage it myself. People leave it very clean. I essentially spend 1 hr to bring sheets/towels home to wash, put in new set, run dishwasher if needed. Cleaners come. I come back for another 1 hr to replace consumables like paper towels. I am getting the processes streamlined where I spend about 2 hrs for each turn over x 6 a year, so I think about 12 hours. Throw in another 10 hrs for repairs I can do myself and I am thinking 24hrs/yr/side. Rest is just communicating with guest.
I will say that this is much less time than I would spend if I had LTRs dealing with all the repairs that they requests.
Plus with MTRs, I get to inspect it regularly and people renting these are high income professionals with occupancy of 1-4 people who rarely have any regular get togethers. LTRs in my price range may say 4 renters but it ends up 4-8 on a regular basis with weekly parties.
From what I can see, it is night and day. I expect to have very little maintenance requirements for my MTRs.
Hi Michael,
Happy to see you being successful in the MTR market. Can I ask what kind of tenants are booking? and also what part of Austin are your duplexes located in?
@Michael Win Thanks for sharing your experience, I could not agree more! MTR tenants are super friendly to the property because they are higher earners and pay a lot more to live there. It is nice to check on the property every 1-3 months. I have been doing your same turn strategy of washing the sheets and bringing them back for the cleaners and right now I'm transitioning out of that because I don't have the time. If you are looking to do the same, I suggest offering the cleaners an extra $50 to go to the laundromat to use multiple machines at once. They can have everything done in under 90 minutes. My next step is setting up an owner's closet so the cleaners will refill all the products and purchase more when they get low. Congrats on your success!
- Conner Olsen with The Moorhead Team
- 702-521-0034
- [email protected]
@Aaron Gordy MTR need hardly any management, with the right systems in place they can be just as passive as a LTR.
- Conner Olsen with The Moorhead Team
- 702-521-0034
- [email protected]
@Conner Olsen I can turn a place over in less than 1 hr now. I have 2 sets of all sheets/towels/bedding. I bring a new set in, remove all the old ones, cleaners come and make it ready. I wash the old set at my leisure. Put dishes back as renters runs the dishwasher. Throw out anything they left. Check to make sure everything works. Change door lock codes.
Takes about 1 hr in the place. Renters have been renting between 2 months and 8 months. So this year for my duplex, I will be doing a total of 4 turn overs this year and next year probably 4 turn overs. So I am guessing about 12 hrs total for 2 yrs. Add 12 hrs for minor maintenance so about 24 hrs total for 2 yrs.
I would consider letting them clean the sheets but I rather just wash them and throw out anything that looks old/missing. Otherwise, I will get calls that sheets are missing which creates a turnover headache.
Quote from @Yuuki Smith:
Hi Michael,
Happy to see you being successful in the MTR market. Can I ask what kind of tenants are booking? and also what part of Austin are your duplexes located in?
I have had travel nurses, people renovating homes, people looking to buy a home, people visiting their family for long periods of time, people coming for long work stints. I actually had to painfully reject an 8 month work booking b/c I am full. I have 3 units I do MTR and no issues with interests. I will be converting another in a diff part of town which if it does as well, I will be converting all of my duplexes. If I get too busy, I will just get someone to manage it but its not very time consuming yet.
I do not think that area matters b/c there is a need all over Austin plus hospitals everywhere. More importantly, I think close to the highway would be good and the place presents well. I am experienced with high end STRs ($1000/nt), so I know how to do a nice presentation on the cheap. I would guess it costs me about 3K to fully furnish each side of my 2/2 duplex.
Awesome! Good to hear @Conner Olsen When I was leasing per room at some properties it became a headache. I prefer passive hands off. There was drama from time to time as the residents were squabbling over relatively small things. Some folks prefer to be a little more active in their properties. Got it. Nothing wrong with it. To me, it doesn't make sense as its sorta an opportunity cost.