Duplex prices

It appears that Austin duplex values are tapering off, which means it is a great opportunity for buyers.  A good quality Austin duplex, depending on the desired area, may be in the $170k to $220k price range.  Considering the median home price of Austin is about $220k, this represents a great value and opportunity:  start home ownership AND an investment at the same time.  Someone told me, “I don’t want to live in a duplex forever…”  Well you don’t have too – consider living there for a short time (maybe 1 year) then upgrade yourself with a bigger duplex or single family house.  A duplex is already has the benefits of a house:  front yard, back yard, and garage.  Be a serial duplex buyer and get the great owner-occupant interest rates versus the higher investor interest rate.

An owner-occupant could buy a duplex and rent out one side for possibly $900 to $1,100 range on rent.  So if your total mortgage payment was $1800, for example, the net difference could be:  $1,800 minus $1,000 = $800 net monthly payment.

Thanks for reading.

Hong and Dianne Lee

DuplexDianne.com Team



Freddie Mac  just reported that interest rates for 30 year mortgages have hit a 39 year low at 4.17%.  The 15 year mortgages rates have dropped to 3.57%.  Combine these insanely low interest rates with buying a duplex and you could get a great investment for the long-term.  Owner occupy one side and lock in on home ownership and an investment simultaneously.  Owning really is less than paying rent with today’s interest rates.

Hong Lee

DuplexDianne.com Team

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


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!

Cash Flow

Cash flow means different things to different people.  Cash flow is a primarily function of down payment, mortgage size, and mortgage terms.  So, when someone says “Does it cash flow?”  that really needs to be qualified.  Is the down payment 5%, 10%, 20%, 25% or more?  What are the mortgage terms, regarding the interest rate and length?

What about property taxes, insurance, and potential HOA fees?  How about an estimate for average repair costs?

Some properties cash flow better than others and location plays a big part of it.  Rents can vary widely depending on condition as well.

Cash flow to some may mean $100 positive per month and others $300 positive is considered cash flow.  So, when someone says “Does it cash flow?”  try to qualify that with some numbers and definition of cash flow.

Since interest rates are now at 40 year lows in the 4.75% and 5% range, cash flow can be better than before.  Note that cap rate is independent of mortgage terms, which we will discuss next.

Thanks for reading.

Hong Lee, CCIM

According to 2010 National Apartment Report by Marcus & Millichap, job growth is going to fuel apartment demand in the Austin area.  What does this mean to duplex owner?  Increased apartment demand often indicates increased duplex renter demand.  Duplexes have added advantages of a fenced backyard, garage, and often more privacy (just one or no shared walls).

Rents are projected to rise 0.6 percent and payrolls are projected to increase by 2.5%.  While other cities are in decline, Austin, Texas is still going strong! 

Here is the article:

Job Growth to Fuel Austin Apartment Demand, Feb. 2010

(RECON, 2/5/10)

The Capital City’s robust employment growth is expected to resume in the coming months, attracting job seekers from areas hit hard by the recession, according to the 2010 National Apartment Report by Marcus & Millichap.

A recovery in the global economy will be particularly beneficial for Austin firms, as technology sales in emerging markets will revive the local manufacturing sector, which has declined by 15 percent since peaking in 2007.

Following are some of the most significant aspects of the Austin Apartment Research Report:

  • Job growth is expected to gain steam this year. Companies are forecast to expand local payrolls at a 2.5 percent clip with the addition of 19,000 positions.
  • A sharp reduction in multifamily development activity is expected in 2010 as 2,500 units come online. Last year, 7,900 apartments were delivered.
  • Population gains and job growth will fuel a 2.1 percent increase in apartment demand this year, resulting in a 40 basis point improvement in vacancy to 10.6 percent.
  • Asking rents are forecast to rise 0.6 percent in 2010 to $849 per month while effective rents retreat 0.7 percent to $752 per month.

The home buyer tax credit has been extended to April 30, 2010.  That is, you must be under contract by that date.  Then the government gives you until June 30, 2010 to actually close on the purchase.  $8k is a good deal to take advantage of while interest rates are hovering around 5%, an all time low for decades!  This tax credit is for owner-occupants and every buyer should check with their CPA for applicability to their situation.

Buy a duplex or a fourplex and let the government help with your investment!  We have posted some new duplex reports at http://www.duplexdianne.com.

Thanks for reading.

Hong Lee/The Duplex Dianne Team