Buying a Duplex
April 29, 2004 12:36 PM Subscribe
I'm thinking seriously about buying a duplex and living in the bottom unit. Have any of you ever done this? What are the downsides, other than the tenant/maintenance issues?
You also have less risks of break-ins on the top floor.
posted by orange swan at 1:57 PM on April 29, 2004
posted by orange swan at 1:57 PM on April 29, 2004
there are tax issues. the rent is income. i've never done this, but i understand from friends who have that the property tax/mortgage/income tax/rent income calculus is more complicated than it seems.
the up side is that if your neighbors can't keep their stereo down, you can evict them!
posted by crush-onastick at 2:07 PM on April 29, 2004
the up side is that if your neighbors can't keep their stereo down, you can evict them!
posted by crush-onastick at 2:07 PM on April 29, 2004
Are you looking at getting a true duplex - two separate, self-contained living units attached - or converting a two-story home into a duplex arrangement? My parents did the latter (though our second tenant was my grandma) and it has its own set of maintenance and security issues.
posted by Sangre Azul at 2:21 PM on April 29, 2004
posted by Sangre Azul at 2:21 PM on April 29, 2004
"Other than the tenant/maintenance issues"? You aren't brushing those off, right? 'Cuz they are plenty of those.
Other than tenants and maintenance, here's a few just from the "costs you don't usually see when you're a renter" list: property tax, mortgage insurance, property insurance, water & garbage bills, loss of income due vacancy (even in good markets there's usually some gap between one tenant and the next), misc turnover costs (e.g. advertising, credit checks, painting, carpet, all the misc. repairs the last tenant didn't bother to mention while there were still in the unit, etc.), capital gains tax (one hopes!) when you sell...
Another downside is that it's a job (albiet a part-time one), with unpredictable hours. The biggest problems always seem to erupt at inconvenient times, like when you're sleeping, in a meeting you cannot possibly leave, out of town, or had plans involving months of preparation and non-refundable deposits. Make friends early with a few talented, inexpensive, reliable "handyman" types (male or female). Once you find such a person, tip often and tip well because s/he can not only help you keep up with preventive maintenance, but also spot big-ticket problems while they're still small, hook you up with contractors who won't rip you off, take care of emergencies while you're unavailable, etc. A major asset.
If your community has a landlords' association, find out if it has many members with duplexes/tris/quads. Talking to some experienced locals can be very useful. Plus usually the membership comes with various discounts, lists of local vendors, and early warning about various legal changes that might affect your property.
posted by nakedcodemonkey at 3:25 PM on April 29, 2004
Other than tenants and maintenance, here's a few just from the "costs you don't usually see when you're a renter" list: property tax, mortgage insurance, property insurance, water & garbage bills, loss of income due vacancy (even in good markets there's usually some gap between one tenant and the next), misc turnover costs (e.g. advertising, credit checks, painting, carpet, all the misc. repairs the last tenant didn't bother to mention while there were still in the unit, etc.), capital gains tax (one hopes!) when you sell...
Another downside is that it's a job (albiet a part-time one), with unpredictable hours. The biggest problems always seem to erupt at inconvenient times, like when you're sleeping, in a meeting you cannot possibly leave, out of town, or had plans involving months of preparation and non-refundable deposits. Make friends early with a few talented, inexpensive, reliable "handyman" types (male or female). Once you find such a person, tip often and tip well because s/he can not only help you keep up with preventive maintenance, but also spot big-ticket problems while they're still small, hook you up with contractors who won't rip you off, take care of emergencies while you're unavailable, etc. A major asset.
If your community has a landlords' association, find out if it has many members with duplexes/tris/quads. Talking to some experienced locals can be very useful. Plus usually the membership comes with various discounts, lists of local vendors, and early warning about various legal changes that might affect your property.
posted by nakedcodemonkey at 3:25 PM on April 29, 2004
(continued)
Have you considered a couple more units? Personally, the hassle and expense doesn't seem worth it to me for just one. Economies of scale should make it much easier to achieve profitability, and maintain stable cash flow, with a triplex or quad. See what your broker and lender think.
Oh, and FYI: from a tenant's POV, '"owner occupied" == "landlord available 24/7". Define your limits and make them clear to the tenant. It helps if you provide them with alternate contacts upfront (voicemail, 911, your handyperson, etc.) so they don't mistake the boundaries as a brush-off.
posted by nakedcodemonkey at 4:25 PM on April 29, 2004
Have you considered a couple more units? Personally, the hassle and expense doesn't seem worth it to me for just one. Economies of scale should make it much easier to achieve profitability, and maintain stable cash flow, with a triplex or quad. See what your broker and lender think.
Oh, and FYI: from a tenant's POV, '"owner occupied" == "landlord available 24/7". Define your limits and make them clear to the tenant. It helps if you provide them with alternate contacts upfront (voicemail, 911, your handyperson, etc.) so they don't mistake the boundaries as a brush-off.
posted by nakedcodemonkey at 4:25 PM on April 29, 2004
A friend of mine and I looked into buying a duplex a few years ago and each living in one unit. What we often found was that one of the units - the "owner's unit" was usually in much better shape than the other one, better decorated, more maintained, nicer appliances, etc. This will probably be good in your situation, but it didn't work for us.
posted by bendy at 7:20 PM on April 29, 2004
posted by bendy at 7:20 PM on April 29, 2004
I have a 2 family (duplex often refers to a side-by-side) and I live in the upstairs unit. Quieter, a bit safer and sunnier. Keep in mind that 2 and 3-family houses are not likely to be in the most upscale neighborhood.
The rent is income. Half of the mortgage interest, water bill, landscaping, taxes, tools, homeowners insurance, new roof, and other joint expenses is a tax expense. All repairs on the rental itself are completely deductible.
It's good to be able to do minor fixit stuff, and to have a good rolodex of repair people. I've had typical luck with tenants - a few that were a real pain, and some that were great neighbors. I've only had 2 months with no rent in 16 years. Every dog that has moved in, with or without permission, has caused damage.
The key for me is to have a good rental application, and to screen carefully. State expectations up front. I warn them that I have a teenager and a dog - we're not really noisy, but we're not sedate. I keep the rent a little below market and I get to make the choice from a larger pool. I try to be a good landlord, and I expect my tenants to return the favor.
I'd really enjoy living in a single family house, and maybe I'll try it sometime, but a 2-family allowed me to keep a roof over our heads during some difficult times. The market has improved, so the rent now pays the lion's share of the mortgage, and the house is worth twice what I paid for it. I think of it as my pension plan. On balance, if you can learn to be a good landlord, and don't mind some hassles, it's worthwhile.
posted by theora55 at 8:45 PM on April 29, 2004 [2 favorites]
The rent is income. Half of the mortgage interest, water bill, landscaping, taxes, tools, homeowners insurance, new roof, and other joint expenses is a tax expense. All repairs on the rental itself are completely deductible.
It's good to be able to do minor fixit stuff, and to have a good rolodex of repair people. I've had typical luck with tenants - a few that were a real pain, and some that were great neighbors. I've only had 2 months with no rent in 16 years. Every dog that has moved in, with or without permission, has caused damage.
The key for me is to have a good rental application, and to screen carefully. State expectations up front. I warn them that I have a teenager and a dog - we're not really noisy, but we're not sedate. I keep the rent a little below market and I get to make the choice from a larger pool. I try to be a good landlord, and I expect my tenants to return the favor.
I'd really enjoy living in a single family house, and maybe I'll try it sometime, but a 2-family allowed me to keep a roof over our heads during some difficult times. The market has improved, so the rent now pays the lion's share of the mortgage, and the house is worth twice what I paid for it. I think of it as my pension plan. On balance, if you can learn to be a good landlord, and don't mind some hassles, it's worthwhile.
posted by theora55 at 8:45 PM on April 29, 2004 [2 favorites]
Response by poster: It's a building that was originally built as a duplex, in a nice neighborhood, with a very long-term tenant on the top floor. She's agreed to allow us to up her rent a bit and the current owner reports that she had no maintenance requests. We would like to spend the summer/fall fixing up the garage and the bottom floor, move the tenant downstairs, spend the winter/spring fixing up the top floor and landscaping/outside, and then rent out both top and bottom.
From our calculations, we can charge a rent of about 1.5 times the mortgage for each unit. That doesn't take the cost of repairs and local taxes into account, but apparently you can write off a lot of the repairs and maintenance.
Thanks for y'alls thoughts!
posted by pomegranate at 6:09 AM on April 30, 2004
From our calculations, we can charge a rent of about 1.5 times the mortgage for each unit. That doesn't take the cost of repairs and local taxes into account, but apparently you can write off a lot of the repairs and maintenance.
Thanks for y'alls thoughts!
posted by pomegranate at 6:09 AM on April 30, 2004
a friend of mine has a duplex, side by side deal, she turned it into a furnished corporate apartment and turned the Monthly rent into the Weekly fee. It's used most of the time since it is cheaper than a hotel and close to downtown, and said she, "no guilt. no tenant hassles, and i can charge more or less if i want."
posted by th3ph17 at 11:16 AM on April 30, 2004
posted by th3ph17 at 11:16 AM on April 30, 2004
This thread is closed to new comments.
posted by _sirmissalot_ at 1:03 PM on April 29, 2004