What do you know about duplexes?

Question

I am interested in learning the market around the Lubbock area.  My wife and I are living in a single family home that we moved in to back in nov 2019.  I have aquired equity in the home and the thought of using said equity to start investing in real estate has crossed my mind.  I am not sold on it but while reading Brandon Turner's books he is constantly using the phrase "think 'how can I do this,' not 'I can't do this.'"  So in the spirit of embracing this new mindset I am think "How can i use the equity we have acquired to invest in real estate and grow our money?"  One thought is to sell our home and move into a duplex, triplex, or even quadruplex.  I am just using the thought process if a duplex for now to avoid paralysis of analysis.  All this being said, what are some advantages, disadvantages, and insights you have with duplexes?  Any and all responses are welcome however I am particularly interested in learning from people with knowledge about duplexes in my area.

Jeremy Fleming · Answer

In my pursuit for single family home domination, I did purchase one duplex, one title for both units.

Advantages of Investing in Duplexes

Live in One Unit and Rent the Other: This is a big perk. If you live in one unit and rent out the other, you can cover some or all of your mortgage and expenses with rental income. This is often called "house hacking."

Easier Management: Since you’re right there, managing the property can be simpler. You’re on-site for maintenance issues or tenant concerns, which cuts down on the hassle of traveling to a separate location.

Loan Accessibility: Getting a mortgage for a duplex can be easier than financing other types of investment properties because you can use the potential rental income from the second unit to help qualify for the loan.

Tax Benefits: Owning a rental property can open up opportunities for various deductions like mortgage interest, property taxes, operating expenses, and depreciation.

Disadvantages of Investing in Duplexes

Privacy Issues: Living so close to your tenants means less privacy. You’re literally neighbors, which might lead to tenants knocking on your door for minor issues.

Tenant Risk: If you have a problem tenant, dealing with them can be more immediate and stressful since they live next door. Plus, if a unit is vacant, you lose part of your potential income, which might be more impactful compared to having multiple units in a larger property.

Market Limitations: Depending on the Lubbock market, there might be a limited number of duplexes available, which can restrict your options or inflate prices due to high demand.

Resale Market: Duplexes might not appreciate as rapidly as single-family homes, depending on the area and market trends.

Hope that gets you started, shoot any questions you have my way!

Jim K. · Answer

@Aaron St. Clair

I have two duplexes in my portfolio and live in one. I can't tell you anything about the market in Lubbock, TX because I don't live and operate there, but I can definitely tell you that if you want the life of a local real estate investor, this is probably the smartest step you'll ever take.

Of course, I was operating/renovating four SFRs before I moved into my own duplex. That's because I was a moron. But I went whole hog, at least. I bought my first duplex in unlivable condition for $45K cash on the barrelhead, spent three years of my spare time making the upstairs a nice apartment and the downstairs liveable on a shoestring budget. That's when the rewards are sweetest, Aaron. When the costs of the thing are so low that you can live free off the rent that the other unit is generating, it adds to your life.

I would recommend reading Set for Life by @Scott Trench and looking at his data about living in duplexes. If you're the kind of person that needs hard math and graphing to understand things, this is completely the book you need on building wealth through duplex living.

If your wife is behind you in this idea, and can see it as a move to financial independence, congratulations, you're in the small minority, as I am. This will probably not work out well if your wife is not fully on board. If she is, it will work wonderfully.

My last piece of advice is to buy a few books and learn to self-manage this one unit. Spend an outsized amount of time learning how to do it, even if you believe right now that a third-party property manager is the way to go for you. Investigate how to vet tenants properly, there isn't a one-size-fits-all approach, and the resources and limitations of your locality should play a big part in determining the technique you use. Feel free to contact me if you have further questions about this.

Gregory Schwartz · Answer

Im in College Station which is similar enough to Lubbock that I feel comfortable giving this advice.

House hacking a duplex or fourplex is the single best investment in all of real estate investing.

The questions I'd consider if I were you are the following:

1. Can I keep my current house as a rental and still buy the house hack?

2. Do I want a fixer-upper (force appreciation through renovations) or turn-key?

3. Is there a local REI meet up or network of investors in Lubbock that I can tap into?

My first purchase in CS was a fourplex. It was a dump and full of cockroaches. My wife and I fixed it up doing most of the work ourselves. Now we live in a single-family house and rent out a bedroom on Airbnb. For our next purchase, we'll look for a single-family house with an ADU.

#Househackerforlife

Hope this helps

Alecia Loveless · Answer

@Aaron St. Clair I have two duplexes and house hack one of them and have very few issues.

The one I house hack doesn’t have any debt due to being purchased at the time of a sale. The other side we rent under market value to maintain a certain standard of tenant that we want to live with. It is about to turn over and I am selectively looking for a new tenant who will mesh well with my family. It pays for the water, sewer, taxes, and provides us with a small cash flow distribution each year.

The other duplex was until recently my most expensive property. It still cash flows after paying all bills and reserves. It has two 3/1 units. It also has a large garage, an office space, and a loft room all 3 of which are on my agenda to also get rented this year to maximize cash flow.

I’ve never had any issues house hacking in over 28 years. When you get ready to rent that other unit be sure you don’t discriminate but make sure you think the tenants will be a good fit with you and your wife.

While you can’t guarantee this often you will get a gut feeling.

Wale Lawal · Answer

@Aaron St. Clair

Investing in a duplex in Lubbock has many ups, like being able to live in one part and rent the other, growing your money, getting more cash, tax perks, and facing fewer times without renters. But, it also means more work in managing, tricky loan processes, higher start-up costs, and the risk of market changes.Lubbock, with its high need for rentals and low-cost living, is a top spot for duplex buyers. The steady call for homes to rent comes mainly from college kids, school workers, and young workers. The city's growing number of people and its economy might also help raise home values and the cost to rent.Start by looking at your equity, research the rental market in Lubbock, check out properties with tools like BiggerPockets rent calculator, talk to local pros, look into money options, and choose if you want to run the place yourself or get a company to do it. By making smart choices that fit your money plans, putting money into a duplex in Lubbock can be a smart way to make your investment bigger.Good luck!

Gregory Schwartz · Answer

REI - real estate investor or real estate investment

ADU - is an auxiliary dwelling unit also called a casita, guest house or garage apartment

Shoot me a DM and we can chat.

Jim K. · Answer

Sadly, no. There IS another book that Bigger Pockets published, and I keep promising I'll read it myself, but I've since moved on. Nobody else has published anything on this that I've even seen.The House Hacking Strategy: How to Use Your Home to Achieve Financial Freedom, by Craig Curelop

Aaron St. Clair · Answer

Thank you for your insight!  I appreciate not just hearing what other people have done in the US but what the best market and strategies are for this area specifically, so thank you for speaking to that!

Aaron St. Clair · Answer

Thank you very much for the input!  I will look up that book!  Do you have any others that you would recommend by name?

Aaron St. Clair · Answer

I really appreciate the feedback from yourself and everyone else that has responded.  Since I am new to this I don't fully understand the lingo, can you please explain REI, and ADU?

What do you know about duplexes?

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