Help with deal analysis: SFH vs. Duplex

[Kim Annello]

Hi all -- I'm hoping to get some input on two properties I am deciding between. Both are in a working class suburb north of Dallas (The Colony for you DFWers).  Here are the numbers and some information

Property #1 is a 3BD/2BA single family home with 2 car garage and decent size fenced yard that has been fully rehabbed. Very little work will need to be done. The rehab was high end: granite counters, travertine showers, stainless appliances, bamboo floors, new siding, foundation repair. It is near a middle school and close to the new Toyota HQ, and a large retail complex that will be completed next year. 

The sale price is $163,000

Anticipated rent is $1450/mo

Taxes $200/mo

Insurance $80/mo

Repair reserves $100/mo (just a guess on my part)

Property mgmt $160/mo (based on assumption of 12% of rent, but I will do myself so not a true expense)

Debt service (P&I) $670

Cash flow: $240/mo  (if I include a vacancy allowance, its about $120/mo)

Property #2 is a duplex. Each side is 2BD/2BA with a small side yard. No garage, just 2 spots on a parking pad for each side. Same high end upgrades. It is on a street with other similar duplexes near a playground. It is a little farther from the new office/retail development than property one, but in a slightly quieter neighborhood.

The sale price is $230,000 ($115k per side -- apparently duplexes are separately deeded here in Texas so I'll have two mortgages)

Anticipated rent $2200 (one side allegedly already rented at $1200/mo, I'm being conservative by assuming $1000/mo for the other side)

Taxes $260/mo

Insurance $167/mo

Repair reserve $125/mo

Property mgmt $240/mo (same as above, I will handle myself)

Debt service (P&I) $946/mo

Cash flow: $460/mo (same caveat for vacancy allowance)

My initial thought is to go for the duplex because its more cash flow and slightly less risk that you would be without both tenants at once. But I think the cash flow on the SFH is acceptable and appreciation might be better. My hsuband is concerned about the duplex not having a garage and wondering who would rent a duplex if they could get a 2BD apt with more amenities for the same price. These are valid points. BP experts, what say you?

Thanks in advance!

[Hattie Dizmond]

@Kim Annello  You've included everything that you need to in the analysis.  Good job!

One quick point, before we get to the deal...duplexes in Texas are not always deeded separately.  That is usually an indication the original developer had a larger piece of property, intended some of the development as duplexes, and had the larger piece separated with that in mind, since it facilitates selling 1/2 of the duplex as a semi-attached.  Most duplexes you find in the metroplex are not deeded separately.  If you find the ones that are, that's golden, because it gives you yet another exit strategy.

Now, the deal...Great area.  You not only have Toyota and Nebraska Furniture, but it's an easy drive to the new State Farm HQ, planned Raytheon expansion, and generally all of the Telecom Cooridor players & planned expansion.  Plus, it's a short drive to hit the Dart rail, if you're working further south.

They both sound like great deals. If you go SFR, I would recommend you get a 2-year lease. Those are becoming much more standard in DFW, and it takes care of vacancy issues for 2-years. The question you asked about the duplex and why people would pay more for it, when they could pay less for an apartment and have more amenities. First...I don't think you can get the same size in an apartment, with the same quality of finishes you described, for less money. But, if you can, here's why I would do it...

I have a dog.  We have a doggy door.  We need a doggy door.  She needs a small yard outside that doggy door.  Done.  :)

Another reason...if I were a single parent, with a smallish child, it would be great to have even a small, secure outdoor space my child could go out into, without me having to have eyes on them every second.

Both of those things are reason enough for me to forgo an apartment.  Plus, there is an underlying reason for some people, like me...I just hate apartments.  I don't want to live on top of everyone else.  Maybe it's a Texas thing, because we like our space...we have plenty of it here!