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Updated almost 10 years ago on . Most recent reply

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89
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13
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Travis Washington
  • Rental Property Investor
  • Austin, TX
13
Votes |
89
Posts

Older Duplex with higher Cap or Newly Renovated Home

Travis Washington
  • Rental Property Investor
  • Austin, TX
Posted
Buying first rental property Have offer on the table of $49.5K for a duplex that has renters who pay $550 per unit ($1100/month) -was originally listed at $69K but talked it down -On the corner of the block with a bus station right out front and a restaurant right next door -built in 1900 -will need work very soon probably Or should I wait for: A newly renovated SFH in an up and coming part of town for the same price that rents for $700/month. As an experienced investor, what would you do and what are immolate things I should consider?

Most Popular Reply

Account Closed
  • Registered Nurse (ICU)
  • San Jose, CA
332
Votes |
496
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Account Closed
  • Registered Nurse (ICU)
  • San Jose, CA
Replied

I asked this same question to many investors a few months ago. The consensus was that SFH are a better investment than Multiunit specifically for the Indy market. They told me that the rents for a SFH and a Duplex are very close if not exactly the same. People will go for the SFH every time. It's also easier to manage a SFH opposed to a Multiunit because you don't have to deal with conflict between the units in a multifamily. Specifically noise complaints. A SFH will also be easier to resell as an exit strategy in the future. Both investors and home owners are interested in SFH where as only investors would be interested in a duplex. And in the Indy market it seems like minimal investors are interested in multi units. That leaves a small group of people to resell it to if you ever decided to do so. Cash flow may seem better but is it really?

You pay $60k for a duplex with $1100 rent/ month = 1.8% rent/price ratio.

For $70k you could get 2 SFH ($35k each) for $700 rent each ($1400 total) = 2% rent/price ratio.

Now even if you were more conservative with the rent and said $625 each ($1250 total) with 70k purchase price total for both properties = 1.8%

My point is don't let the cash flow cloud the bigger picture. Think outside the box and put all the pieces together. The numbers are important but only 1 piece to the puzzle.

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