Are duplexes a landlord dream or nightmare?

Question

Looking at a duplex that cost 360,000. both sides are 2 bed 1 bath 679 SQFT. One unit is currently rented for 1500 a month. the other unit the renter moves out at the end of July but was paying 1450 a month. I assume you need to save 4000 a year for maintenance, vacancy, cap ex. Pest control is 780 a year. lawncare cost 1,800 a year. I would be buying this as a live in rental for a year. however, on my math the mortgage without pest control, lawncare, maintenance, vacancy, capex the mortgage is 2,942.34. with all the extra cost its 3,425.67. I would only put down 5% so PMI does play an effect however there doesn't seem to be anything I can do to force equity into the property. I'm curious if this is just how deals work in today's market and the interest conditions we face. Do I just play the long game and wait for cash flow in 5 years. it seems in my market rents dropped a little from last year, I just struggle to see how I can make this profitable to grow in the future to allow my wife not to work and potentially allow me to leave work and us travel the world. Any and all advice or thoughts are appreciated sincerely a new investor. i know i could possibly midterm on side however with that extra revenue comes with extra cost. midterm rate is around 2100 a month. basic furnishings would cost anywhere from 10k to 15k

Caleb Brown · Answer

What is market rent? As it is, it's not the great house hack. The perk of doing a house hack is reducing housing cost(cheaper than paying rent), utilizing lower down payment and moving out after 1-2 years. This one you would not really reduce your housing cost. With total rents being around 3K it won't cashflow if you moved out, if market rates are higher than you can push it more. I don't know the market there so this might be what to expect. Not a terrible one but not great either

Vijay Friedman · Answer

@Braeden WargI like that you're running the numbers beyond just the mortgage payment. I'd also stress-test the deal with a few scenarios—slightly higher maintenance, a month of vacancy, or lower rent growth—to see if you'd still be comfortable owning it. If it still meets your goals under conservative assumptions, that's usually a good sign.

Ashley Rigsbee · Answer

Thanks for sharing this Braeden, also curious, since I've mostly seen duplexes come up in Charlotte discussions: is the local inventory mostly duplexes, or are triplexes/fourplexes actually out there too? I wonder if the multi-unit option would be the better option and what the average cost of one is in Charlotte.

Roman Ripp · Answer

Hello @Braeden Warg I personally love duplexes, that is all I own in CA, MN and OH. In some areas, those are harder to get tenants, like in OH, and CA, people do not want to share the home with other family. This is location specific, I have not seen this problem in MN for example. My secret sauce is I buy duplexes in single family areas. Another thing to look for with a duplexes is a tenant quality. With 600 sqft units, you might find it harder to find long term tenants, and families with children wont be your clients.

As for market, there are deals in any market, I bought in COVID, after COVID, with high rates, low rates, does not matter, there are good deals all the time, you just need to look more for them sometimes.

Never buy a property that does not look good TODAY. This is a recipe for disaster. If you have doubts, keep looking.

What is your buy box?

G. Brian Davis · Answer

At first glance, it looks like the numbers are really tight, especially with a 5% down payment and PMI. This is pretty common in today’s market with higher rates and lower rent growth. If your goal is cash flow right away, this one might not hit it, you’d basically be banking on appreciation and long-term income.A few ways to improve it: a higher down payment to reduce PMI, consider mid-term or furnished rentals if the extra income covers the costs, or look for deals where the spread between rent and expenses is wider. Otherwise, yes, it becomes more of a long game.

Adam Tafel · Answer

At current interest rates a house hacker needs to hit the 1% rule with market rents. If 1500/mo is under market you might be ok, but if that’s the most the market will bear this deal is not good enough to purchase IMO. The best deals have a value add component, or they are under rented.

Do not use MTR to force a deal into “working”. Use midterm or short term to increase cashflow, but the deal should work with a normal strategy. If Class A it’s a fantastic way to juice up the numbers.

4k/year sounds reasonable for reserves, depending on the condition of the property. It’s always been tough as an owner occupant with 5% down to find true “cashflow” after a healthy reserve budget, but even without reserves this margin is just too slim IMO.

We sell lots of duplex/triplex/4plex properties to buyers in St Paul Minnesota. We are shooting for market rents 1k over PITI for most deals right now and hitting this goal consistently . The 1% rule is just the fastest way to determine that this can work.

A single duplex will not allow anyone to quit their job and travel the world for many, many years.

Aaron Zimmerman · Answer

Hard to say but this doesn't seem like an ideal house hack. Ideally there's a few things you can do to add value to the property to boost rents and price.

Are duplexes a landlord dream or nightmare?

Are duplexes a landlord dream or nightmare?

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