Vacant Duplex or Below Market Triplex

[Nicholas Mangiafico]

Hi all,

I have two properties I am looking at as my first investments. One is a completely vacant 2 family in a great location, where I can set the rents at market value as soon as possible. The other is a 3 family in a good, not great area, that is full and has each unit at below market rents, but once they are turned over (I do not know the leases they are on) it will have higher cashflow than the duplex. My realtor (who is an investor) and some other investor friends of mine said they would prefer the duplex so I figured I would ask on the forum. Thanks in advance!

[Joseph Salzillo]

Quote from @Samuel Eddinger:

@Nicholas Mangiafico - as a Connecticut based investor I can tell you without fail that I love 3 and 4 families more than I love 2 families (I actually prefer SFR over two families).

Here's the reasons:  The incremental taxes from going from a 2 to a 3 or 4 is relatively small.  In general, the price per unit is higher for a 2 family than 3 or 4 family but the incremental rent is not that much (tenants still think of it as a multi family).  With a 2 family, you still have to pay for landscaping and snow plow services but now that cost is divided over 2 units instead of 3 or 4.

Two family houses will probably appreciate a bit faster than a 3 family because people priced out of the SFR market would prefer living with one additional family instead of bigger apartment complexes. This causes the purchase price to generally be more costly (less cash flow/CAP rate) since you are competing against people that want this property to be their "forever" home.

Happy to talk further if you would like to discuss.  DM me if interested.

 @Samuel Eddinger couldn't agree more. We only purchase 3/4 family properties in CT for this same exact reason; I wouldn't get a duplex unless if it were really discounted to the point where it could cashflow after vacancy / management / repairs / CAPEX. If you have one unit that needs to get evicted in a duplex, you're negative every month and at risk of losing the property.

On another note, some single family properties are great if you can flip them or turn them into a medium term rental if you can't get the sale price you want.