Duplexs and up to 4 unit buildings

Thoughtful explanation of Investment Real Estate in Marin County and beyond.

In theory, duplexes triplexes and fourplexes are a good idea. You can get more rent from one piece of land in a low-density neighborhood that they’re conveniently located in. They’re cheaper to build per square foot so they must make more money, right?

The issue is we’re not buying at construction prices and few communities were build with large numbers of small rental units interspersed within stable family suburban neighborhoods.

The exceptions are usually in the neighborhoods built over 100 years ago … although some developers in the 1960’s built units on infill lots of undeveloped land in certain cities.

When there aren’t hobbyist investors around, you may haven an opportunity to buy these buildings right

Certainly people have made money owning urban units built in the early 1900s in San Francisco (or in Manhattan for that matter) the key is buying them right, and buying them better than your other alternatives.. single family dwellings or larger apartment buildings. There are times and places and markets when you can get a steal on a duplex….but during those same periods you can get good deals on many properties that can be sold with less of a tie to availability and rate of financing a purchase. If you can buy paying the lower rent multiples of a complex in a high crime or lower income area and the area changes in a way that higher income people are willing to pay a premium to live there, you can also do well.

financing There are various lending rules that require certain types of chartered lenders to treat one to four unit buildings the same way as a single family home would be treated. Usually those rules require that you Occupy one of the units as your primary place of residence. As an investor owner you’ll likely be

less flexible, less liquid The greater real estate and investment market has it’s ebbs and flows. Investment units take longer to sell and can be difficult to sell in poor economies at any price. That could be your opportunity…but usually that opportunity comes at a period where borrowing is also very difficult.

alternative opportunity Avoiding the smaller multi-unit buildings is even an easier decision to make when you have a market where you can buy rental homes at prices that let the rents carry the mortgages, or provide a far better than available interest rate returns available on a holding cash in the bank.

25% is a number off the top of my head , and a number that would take quite a few words to support, but if you can’t get a minimum of 25% more rent per dollar of purchase buying a 1 to 4 unit building over a single family house next door to it, it doesn’t make much sense even if both were in excellent shape. Most of that is due to liquidity risks, and liquidity opportunities to take money out to make other investments from an appreciated home.

see single family rentals as and investment and

see why huge private equity investors loaded up on single family homes in the housing bust.

Still, if you’re looking for the maximum income you can get on one investment, know that you won’t be selling for a decade or two and aren’t as concerned with financing, are willing to re-invigorate a tired building with new windows, bathrooms and kitchens, a duplex might still be for you.

And… of course a “deal is a deal” - a property could come cheap enough to make sense. I just don’t see that happening in the short term in Marin county or much of the easy commute areas in the SF Bay Area.

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