Things to consider before buying a Duplex in San Jose

[Gaurav Mehta]

Hi,

I am looking to make an offer on a duplex. The property has 3/1 and 2/1 Unit. The units are already on rent for $1550 and $1500 each.

The rents appear to be lower than market value so this seems like an opportunity to me. Some questions below

1. Checked zillow for rents in the zip code for similar configuration and seeing $3200 and $2300 rents for the area. Assuming, I put another 30-40K to rehab the property and then rent it at market price. I am seeing Cash on Cash of ~3.3% (factoring in vacancy rates, maintenance and Capex). Maybe a bit higher if I do rehab and AirBnb. I live in SJ so maybe a bit easier for me to manage the AirBnB. Either way LTR or STR, I am finding the 3.3% a little hard to believe. Most of the Duplexes I have seen in SJ hardly have the rent cover the mortgage, taxes and insurance. Is there something I am missing.

2. If I am able to get the duplex, will I be able to ask the renters to vacate immediately or do I have to wait to get the lease term to finish. Have asked realtor to get details on current lease agreement.

3. What other things should I be considering when making the purchase. The duplex is in SJ Downtown.

[Brian Spohr]

I'm not sure what the condition is, but you could probably get rents in that range without any renovations. If you do rehab, I suspect you could get more, but depends on knowing more about the property. I would also refer to Rentometer for rental income estimates. 

Regarding the leases, I suspect that they are month-to-month and tenants have lived there for more than a year, which would require a 60-day notice. If they have occupied less than a year, it is 30-days. If there is a lease, refer to that.

Without knowing more about the property or seeing the numbers you're using, it will be hard to provide any input on the deal and anticipated return.