Archive for the ‘How To’s’ Category

Often we are asked if a duplex unit should be left vacant on one side to facilitate a sale.  There are pros and cons to this and having one side vacant certainly allows for an owner occupant buyer and broadens the buyer pool.

There are two primary kinds of duplex buyers:  the owner occupant who wants to live on one side and the investor who wants a pure investment and prefers both sides rented out.

It would be a good idea to have a short term lease or have a tenant go month to month to keep income coming in for the owner and to keep options open for an owner occupant buyer.   Another option is to have any new lease have a 60 day landlord written notice to tenant to move-out clause.

Another technique is to consider charging a premium rent to allow a shorter term lease of say 3 to 6 months.  A higher rent will translate to a higher selling price for the duplex too.  Higher rents = higher cap rate/return on investment.

Thanks for reading.

Hong and Dianne Lee

DuplexDianne.com Team


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Often we come across properties that have expenses that can be trimmed down.  That is by removing the expenses or changing providers, a duplex/property owner can realize hundreds of dollars more net income per month.
For example, a fourplex in north Austin had the garbage service paid for by the owner.  The owner was paying for garbage service for 4 units and therefore 4 trash can receptacles each month.   Each trash can cost about $22 month x 4 = $88 month.  That doesn’t include taxes and related city fees.  We cancelled that 3rd party private service and switched to the city of Austin garbage.  As each lease ended, we started new lease terms of the tenant paying for their own garbage service.  Within a year or so, the owner quite paying for garbage service 100% and now the tenants pay for their garbage service.
Another area of reducing expenses is water service.  Some fourplexes and even duplexes have a single water meter.  While this help cut expenses at construction time due to less plumbing materials and less labor to construct, it creates a long term problem:  Does the owner/landlord just keep paying the water bill or how to bill the tenants back?  Some owners have been simply paying for the water bill for years.
In the Austin area, tenants expect to pay for their own utilities.  Paying for water really is an unnecessary expense for the owners.  I recommend creating a water chargeback agreement in the lease.  That is either prorate the water bill each month based on number of occupants or similar.  Or figure a flat fee to charge with a variable contingency.  Note that prorating the bill each month can create some overhead and be a hassle.  A flat fee is easier to administer but can have more discrepancy on water use in relation to charge.  By switching owner paid water to tenant paid water, a landlord can save $80 to $175+ per month.
There are even more areas to reduce expense:  let’s discuss lawn care, repair deductibles, home warranty services, to name a few and other options next.
Thanks for reading.
Hong Lee
The DuplexDianne.com team

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I am often asked how do I figure out monthly cash flow for a duplex?  First we have to define what cash flow means.  Cash flow is commonly referred to as the net income per month after expenses are paid and deducted from the rental income.   The primary expenses can be:

  1. A mortgage payment each month is dependent on the size of the loan and the interest rate.  So, you could use any of the many mortgage calculators online to compute a P&I payment, principal and interest.
  2. Property taxes.  Property taxes will vary depending on the property and taxing jurisdiction.  If you are provided with a yearly figure on property taxes, divide that figure by 12 months.
  3. Insurance.  Home owners insurance is typically required with most lenders.   Insurance is quoted on a yearly premium basis.  So, again take that figure and divide by 12.
  4. HOA.  If you have home owner’s association dues.  Figure that monthly cost.
  5. So,the above list is used to calculate basic cash flow:
    1. Take gross rents per month
    2. minus principal and interest mortgage payments
    3. minus property taxes
    4. minus insurance
    5. minus HOA
    6. =  Basic Cash Flow Per Month

Now to get more advanced, you can figure these additional expenses:

  1. Average monthly maintenance/repair costs (consider $50 to $100+ per month)
  2. Average vacancy cost (consider 5% to 10% or more depending on your area)
  3. Property management fees (if you manage yourself, then it is $zero!)
  4. subtract all the above and then you will have a more precise picture of Cash Flow!

Thanks for reading,

Hong Lee, CCIM

DuplexDianne Team

http://www.DuplexDianne.com for articles and property listings

Not in the Austin, TX area?  Ask us for a duplex Realtor referral in your city!

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A duplex is a great way to invest and start home ownership at the same time.   Interest rates are around 5.5% now,which is historically very low.  Uncle Sam can also help with the $8,000 tax credit and help you make an investment at the same time, if you live in the duplex. 

You can always buy a single family house 6, 9, 12+ months later after buying a duplex, but the reverse can be more difficult.  You see, when you owner occupy you get the best interest rate and can lock-in that low rate for 15 or 30 years.  So, even after you move-out to a house or upgrade your living situation a year later, your mortgage rate stays locked.

Compare that to buying a duplex as a pure investor (not owner occupying), the interest rate will be higher for an investor.  The higher interest rate might be 6.5%, which translates to about $120+ more a month on a $175k mortgage.  This is a big deal and adds up over 15, 20, or 30 years!

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Google maps pretty much has all of Austin, Texas mapped out with “you are there” type of street views. Enter the property address and select “street view”. Google maps will then zoom you straight to the property as if you are standing in the street and viewing the front of the house. This is a great preview tool to see the curb appeal of the property, not just a single front of view photo. That is, you can see the street, the neighboring properties, and “walk” the street and experience the neighborhood.  The first time I saw this, it was pretty amazing, like seeing Google Earth for the first time.

Often a property looks better than the typical neighborhood make-up, and the Google street view will reveal so. You may save some time and automatically remove an undesirable property from your list to visit.  You can have a great looking property in an undesirable neighborhood or a rundown property in great neighborhood.  If you must choose, pick the latter, as you can fix a property but you can’t fix a neighborhood.

Sometimes duplexes do NOT look like duplexes but more like single family houses.  Look for things like two chimneys, two mailboxes, two front doors and lettering like “A” or “B”, as indicating factors. Also, a quick search of the county tax records (www.traviscad.com in Austin), can reveal the property’s classification to be “2 family” or “duplex”.

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