Would a SFR tenant rent at a property with other rental structures?

Question

I am looking at a property where on the same lot are two buildings.

One building is a 4/2 home.  It's own water meter, it's own electric meter, it's own mail box, it's own washer dryer everything.

Set twenty feet back is another building which is a duplex of 1/1s.

Four parking spaces up front.

I am not so worried about finding the duplex tenants.

I am wondering if the 4/2 could be tricky to rent.  May be a typical SFR tenant (most likely a family?) wouldn't want to share a back yard or parking spaces and a typical MF tenant may not be looking for a larger 4/2 home?

Is this a valid concern?

I am not even sure I can advertise such a rental technically as a "SFR"?  Can I?

Elizabeth Colegrove · Answer

@Sam Leon

What kind of market is this house located in ? I have seen this in the Virginia Beach area within walking distance to the boardwalk. I personally do not think you would have any problems renting it. There are alot of people that have a larger family and want to live close to the beach.

In my current area, Central Valley California, even down town. i wouldn't go close to it. As this would not appeal to anyone that I would want as tenants.

Bryan H. · Answer

I'd treat this like a Multi family property. Get the financials from the seller. On the zillow ad they are claiming $33k+ gross income. Take a look at their numbers, history and see how well it's been rented. Their history should be a good indicator of your expected results.

Colleen F. · Answer

The issue here is parking. If you can't set it up as a separate parking I think it is not so successful.  We have a MF on the lot with a SF but there is defined parking for each.  The SF ask about the MF tenants but so far ok.

If the backyard is shared that might also be an issue.

Sam Leon · Answer

I think many of them started out as SFR then the owner wants to bring in more income while staying in the main residence, so they partition off, or building an additional structure, which is often referred to down here as a "mother in law quarter".

But there are also a number of properties with more unique layout.

Here are two such examples on the MLS.

H914311 - Two individual buildings, one lot, main house 4/2, then a separate building with a duplex of 1/1s.

H913059 - Three structures, altogether five units.  The main house, and a bunch of 1/1s and studio on the other structures.

and I am guessing these "main houses" wouldn't appeal to typical SFR tenants, unless you make the rent low enough.

Sam Leon · Answer

Patrick, using a fence to divide it may create a more delineated space.  You still have a row of 3 to 4 mail boxes though.  I agree the rent rate would have to lower compared to a "true" SFR with dedicated everything.

Bill Gulley · Answer

As a SFR, similar type area, age, condition, a 4/2 will out rent a 3/2 every time, if the 4/2 has the same or nearly the same living space, here. You can have about the  same sq ft where you could have a smaller but still functional living room, smaller dinning are or no formal dinning room and even a slightly smaller kitchen. The demand will be from those with 3 kids or wanting a home for 2 kids and the guest room for visiting family or office or hobby room as ladies like to quilt or a guy wants a mini man-cave. A 4th bdr IMO is more marketable than having 150 sq ft more spread in living areas.

5 bdr and even 6 bdr older homes are in demand here as there are large families needing affordable housing, like a 100/120K home vs the 300/350+K larger homes which are still rare. If a larger family finds a 5+ bdr at affordable rents they rarely leave, they are longer term tenants.

I can't recall a 4bdr duplex/townhouse but there are nice 3's with basements that could work as well. You probably don't have the basement option in Texas, unless you're in the hill country. :)

John Chapman · Answer

I've looked at a few of these over the years and have often wondered the exact same thing about who would rent the house.  (Seems like there is usually a normal size house plus a small unit, as opposed to two smaller units that would be more comparable to apartments.)  I haven't ever owned one so I can't comment on who would actually rent the house, but I've never been inclined to buy one.  What I've observed is that these types of properties are kind of weird and not really desired by other investors.  I think it's mainly because you don't see them that often.  They also seem to linger longer on the MLS.  I think it is because they are unusual that other investors, like yourself, pause and worry about them.

I probably wouldn't buy it for this reason alone, as I prefer liquidity.  Again, this is just in my area and based on my observations (not experience).  Obviously, if it's cheap enough, you can make anything work.

Patrick L. · Answer

It'll rent but you won't get the same rent you would if it were truly a single family home, a ballpark figure might be around a 15-20% discount.  If you price it cheaper than any other 4 bedroom houses then someone will bite.    The other concern is you will get a lower quality of tenant that's less concerned about their living environment.   If you had alley access and create rear parking for the duplex and put a fence dividing the duplex from the house you'd be able to get closer to market rate.