In the first post on this topic I describe why investing in a duplex, (at least to start with) can be the safest real estate investment opportunity to undertake. Review part 1 for the specifics and a short list of the benefits a duplex investment can offer. In part 2 we begin looking at the selection process for purchasing the duplex property.
Believe it or not, there are many styles of duplex that have been built over the last 100+ years. Most investors picture a mid 80’s style but I currently own and occupy a 1930’s ‘Victorian’ style duplex, that is a duplex in every sense of the concept. This duplex has its plus and minuses and I can live with the minuses, because I can easily maintain the unit as a resident.
Lets face it, the older the property, the more maintenance there is and the more owner modifications have been done, (for good or ill). If I have to drive 20+ minutes each way to a property I own, I tend to gravitate to a more modern version of a duplex in my purchase decision. Owning a mid 80’s to newer duplex means less overall maintenance and travel, I can personally attest to this. Having electric base boards and a 200+ amp service, which is what most modern duplexes offer, is preferable to having to deal with oil heat and gas appliances. I pay just as much attention to the functional aspects of the property as I do to the aesthetics and tend to block out any minor cosmetic deficiencies I see in a potential purchase.
In my most recent purchase I looked at a dozen or more potential duplex properties and narrowed it down to two good candidates. Here is a brief description of each:
1940’s duplex near the outskirts of a small city. Total square feet about 2,400. Less than 1 acre of land. Nice yard space with a large detached hot tub building (12-14 feet or so, very well done structure). The back yard had shore line to a large pond area which had a dock that was currently in disrepair. The interior was very dated, with an odd kitchen layout and 3 very cramped bedrooms on the second floor. The full bath had a slanted ceiling for the shower area, which would be awkward for showering if you were 5’8″ or above. Overall the property was in good shape and the location was not bad.
Late 1980’s duplex in a suburb area of #1 above (actually on the same road about 2 miles apart). Total square feet also in the range of 2,400 square feet. Nice yard space, (property sat on 3.25 acres). Backyard was completely wooded and shared a property line with a town hiking trail. Interior was in need of minor cosmetic work but had a well planned out layout overall. Bedrooms were large and bathrooms were in good shape. Overall property was in good shape and location was better than average, (seconds to major highway but in a completely wooded area).
What I have left out is the functional aspects of each. Property 1 had an old oil furnace, the old screw in circuit breakers on about 100 amp service and a dated gas water heater x2. In addition the property utilized town water and sewer, (the average bill was $150.00). Property 2 had 200 amp service on each side, on a modern breaker panel, electric water heaters and electric base boards throughout. Property 2 had a private well and a recently inspected septic system.
On the finance side property 1 was listed at 165k while property 2 listed as a short sale at 205k. I knew property 2 was last sold at 300k while property 1 had been owned for decades and had no sale history. I could make an offer of about 145k on property 1 knowing that the settle price would probably be in the low 150k range while property 2 would stay firm, as it was a short sale. I also had to keep in mind the renovation costs, which would run at least 30-40k for property 1 and no more than a few k for number 2.
In part 3 of Buying a Duplex to Rent and Hold I will explain which property I chose and the reasoning behind the decision. I am attempting to keep this topic as brief as possible, not delving to deeply into all aspects involved in the process of buying a duplex as an investment property. It should begin to be clear that buying a property as an investment, is vastly different then buying a property for personal use. There is far more to consider in the purchase and remember the #1 consideration, which is your potential renters.