Single Families versus Duplexes (in my market)

I was going through some year to date profit and loss numbers on my portfolio of long-term properties.  I do this every couple of months, it really helps me to know the numbers so I can see if there is anything I need to tighten up and what I should buy more of.

After looking at the numbers on some of my duplexes I was really surprised to see how similar the combined P&L was to most of my single family properties.

Duplex House
Total Rent  $1,650  $1,500
Sq Ft 1,416 1,372
Peak Sale  $365,000  $392,000
Valuation Year 2007 2006
Total Cost vs ARV 72.4% 64.5%
Profit after Debt Service
2010 Profit  $4,885.47  $6,572.82
2011 YTD  $4,052.61  $3,039.48
Combined  $8,938.08  $9,612.30

The numbers look pretty close, don’t they?    The problem is: I paid less for the house; I only have to manage one tenant with the house; and in the last cycle they appreciated at pretty much the same pace.

I know I only provided one example, but I have probably analyzed 30-40 duplex in areas I buy and I can almost always achieve a better cap rate with a single family house.

I have no problem buying and managing duplexes, but sometimes investors internally count them as two houses.  The numbers are almost never as good as two houses.

What I dislike about duplexes

  • Duplexes have shared walls (tenants fight)
  • Turnover is Higher
  • Duplexes seem to be harder to buy at discounts (distress situations allow for discounts)
  • You typically pay for water/trash at for multi-family properties
  • Smaller Number of Available Properties

What I like about duplexes

  • You have two incomes
  • Maintenance is less (one roof, one lawn, etc)
  • Less competition, many buyers would not even consider a duplex

Disclaimer: I do not own a lot of duplexes or any fourplexes and I do not specialize in managing them.

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7 Responses to “ Single Families versus Duplexes (in my market) ”

  1. Mark says:

    Tracking your numbers is definitely the most important aspect of this business. I’m personally not into duplexes but i can see that the income is good.

    M Mark

  2. Brad says:

    I completely agree with this. I have done this analysis as well. The two main things I have noticed is with a single family the tenants are responsible for lawn care and even with a duplex, in most cases, water is not separately metered. That can easily account for 150-200 a month in additional expenses with the duplex. I primarily look for singles and fourplex’s because of this. I do own some duplex’s though as a deal is a deal and Ill take anything that cash flows!

  3. Phil says:

    Great post. I was just thinking about this comparison the other day. Great to see some actual numbers proving your point.

  4. Steve,

    You are right. Markets like the IE and centeral valley have better returns on the SFH. In addition, I just think the overall experience is better with SFH. The tenants seems to be better quality, where as the multi-family tends to attract an apartment-type tenant.

    ALso, I hear you on the internal fight. I only own one duplex, but i can tell you that one is always complaining about the other.

    BTW- what do you use for tracking your expenses? And what program do you use to run your P&Ls?

    AG

  5. Chuck H says:

    Steve,

    Another interesting post from you. I have only considered one duplex, but the deal was just not good enough for me to take the risk.

    The biggest problem I see with a duplex is getting out of it. When you go to sell it, your market is small. Its really only other investors. I suppose you could retail each side of a duplex, but here again your market is much smaller than with SFR.

    I suppose if it cashflows, it really should not matter. I guess I just want something that is more marketable if I have to go to a contingency plan.

    Out of curiosity, what is your exit plan with all of your rentals?

  6. Steve says:

    Chuck, we don’t really have a plan set it stone the market is too hard to predict. Best case scenario, the market would go up to 2006 prices within 6-10 years and I can exchange everything into commercial at 3x my cost.

    More realistically, I will sell my Class C properties and pay off my Class A properties and hopefully end up with a decent amount of free and clear Class A properties that are easy to manage.

    Lastly, if I can find cheap long-term financing I might keep them all for a couple cycles.

  7. In my area Davis,California the duplex in some cases are more affordable than the single family home. We have also noticed a few families buying a duplex, living in one side and renting the other

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