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Items to Consider When Evaluating a Duplex for an Investment

Dustin Edwards • Jul 13, 2022

Duplexes Can Be A Fantastic Investment Option

Duplexes are common properties for new landlords to invest in. Because of the low unit count, there is reduced maintenance cost and an efficiency in management of the tenants. Evaluating a duplex shares many similarities as evaluating an apartment complex, or any other multi unit property. But what should be analyzed to determine if the duplex is a good investment as a rental property?

We invite you to consider a few essential items when looking to invest in a duplex.

Return on Investment (ROI)

When looking for an investment property, regardless of type, the main thing you need to consider is the return on investment or (ROI). Unlike when searching for a home to live in, for an investment property you need to focus on the potential income. Instead of looking at whether or not you like the color of the property or if its location is conveniently near a school, hospital or shopping center, you should consider items such as:

  • How long before I need to redo the siding/stucco of the duplex 
  • How much income the property can provide
  • What key systems (i.e. heating, AC, plumbing, etc) might I have to replace in the next 5 or 10 years

Keep in mind that if you are purchasing an investment property using the Multiple Listing Service (MLS), experienced investors may pass on the purchase at the given listing price. This doesn't mean that it’s not a good property, just that you need to be vigilant when inspecting the property. 

Net Operating Income (NOI)

Sellers have an incentive to report low expenses on the property, however low reported expenses can mean that the seller may have been avoiding major repairs. Be sure to heavily inspect the roof, electrical, plumbing and foundation as these can be some of the more expensive maintenance costs.

The NOI is one of the most important numbers you should look at when searching for a duplex. NOI is the total amount of money earned after expenses with the expectation of interest and principal payments. Some maintenance expenses can be offset to your tenant such as lawn care.

Fair Market Rent

Appropriate rent price can be the difference between vacancies and long term tenants, making it important to gauge the market rent for the area of the duplex. Fair market rent can be determined by investigating surrounding rental options. Communicating with other nearby landlords about how much they are charging tenants for rent on comparable rental properties. Get as many prices as you can, and try to get an average price that should fit within the market.

Duplex as an Asset

For new investors, a duplex can serve two purposes. As you can live in one unit while renting the other, this brings with it a few issues like your tenant living next door and assuming you are available at any time. 

Though generally speaking, unlike a single family house, when you decide to buy a new home, a duplex can provide positive cash flow from both units every month. In the inevitable event that a tenant moves out, rarely will you have both units vacant. 

Maintenance and Management

A duplex usually won’t come with a home owner association (HOA)  or condo fees or guidelines to follow. You can save money by doing maintenance yourself or hiring whomever you see fit for the job. With the property having 2 units, property management can become more cost effective and time efficient. For example lawn care and yard work for both units can be covered as though it were one.

If you have any questions regarding what items you should consider when buying a duplex we invite you to call us at (562) 888-0247 or feel free to fill out our
free rental analysis to see what your rental could yield today.

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