How to shop for duplexes

Question

Hello, I'm currently shopping (remotely) for 1, 2, and 3-plexes in Tennessee and looking for advice in particular on duplexes. It seems to be that most listings have the same basic attributes: built mid century, usually some minor renovation in the 80s or 90s, often look like they're renter ready but need some cosmetic work at least (my current tolerance for rehab work is very limited at the moment). The MLS / Zillow listings tend to not have a lot of detail, for example type of heating and cooling is often vague, whether there's existing tenants isn't often stated (although if MLS has a "gross monthly rent" figure I'm assuming it is), and there's often only pictures from one of the two units so it's hard to tell what shape both units are in, or what their layouts, features, and amenities are.

So that I'm not sending my agent to view every duplex in town (especially because I'd imagine the listing agent would have to find a time that both tenants agreed to), is there a way to more quickly weed in or out all these faceless duplexes? They're mostly right at the 1% rule of price to gross rent, and I know how to filter by neighborhood and location, but it's mostly the structure itself and what to look for (or avoid).

Thanks much!

So that I'm not sending my agent to view every duplex in town (especially because I'd imagine the listing agent would have to find a time that both tenants agreed to), is there a way to more quickly weed in or out all these faceless duplexes? They're mostly right at the 1% rule of price to gross rent, and I know how to filter by neighborhood and location, but it's mostly the structure itself and what to look for (or avoid).

Thanks much!

Mike Greenberg · Answer

Hi Aaron, thanks for responding. I'm looking in Chattanooga. Being used to the higher housing costs on the coasts I was initially excited about the more favorable price:rent ratios, but it seems like a decidedly seller's market there right now.

We'd also consider SFHs with de/attached in law units or at least a finished basement with good ventilation, although the trick is that you can't search properties by that.

Tereal Wilsonn · Answer

@Mike Greenberg talk with your agent ask them to send you as much information they can before they go look at it, ask for the list ticket, i use realtor.com, and i click on every tab on a listing im interested in, try to get closer to the 2% test as you can  and work those, i believe you can still find deals on the MLS

Michael Boyer · Answer

Good question...

I am not sure of the exact parameters you would set in your search, but look out for the lemons with all the juice squeezed out of them...

That is, pay attention to CAPEX and try not to grab any hot potatoes where the current owner is selling just as about everything from the driveway to the roof needs to be replaced soon (or before it gets too hot, or costly!).

Some sellers just pass on these hot potatoes, having milked the property by keeping all the rents and not plowing much back into it...Then the exit strategy is to sell to someone who may not recognize all the deferred capital expenses.

Some ideas for avoiding the hot potatoes (where everything is at or near the end of its useful like) might be looking at age (but it sounds like most listings are a bit older), so you might only look at those properties with updated major systems and components (HVAC, plumbing, roof, windows, insulation etc).

I am not sure the exact wording but limiting your search to those properties fully updated or at least partially updated recently might help you avoid looking at every one.

Be sure not to fall for a cosmetic, surface remodel (paint, new floors, fixtures, etc)....And, of course, verify what was done and when (permits, contractor bills, inspection, etc).

Best of luck!

Aaron Lovett · Answer

@Mike Greenberg, Tennessee is a long state; which market are you looking in?  In my area (Nashville, Murfreesboro, Smyrna) the MLS deals are there - but you have to be ready to act very quickly (within 24 hrs).  By the time the listing is propagated to Zillow, it's likely already under contract.  So, eliminating Zillow (except for FSBO) would be my first "weed out" suggestion.  Second would be to get an agent that knows enough to make recommendations to you.  I'm not saying you should send the agent recommendations if you run across something, but shouldn't the local agent be the one digging up prospects for you?

Evan Manship · Answer

@Mike Greenberg

Mike-

Not sure about Tennessee, but I can imagine its close to the same as Indianapolis. Indy has duplexes galore for the uneducated investor to purchase. In my opinion, only a select neighborhood makes sense for an investor to acquire a duplex, particularly one of substantial price. There are many bad decisions to be made regarding a multi-family property in markets like Indy before someone ends up getting burned.

Ian Thompson · Answer

Beware of getting slammed on the Utilities....

Even if they tell you numbers expect more...

And on a duplex,

The margins are slim,

Do your numbers carefully....

How to shop for duplexes

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