i bought a duplex (!)

Duplex - a better investment than a condo or single family home?

OK, so based on the title of this site, you can guess that I’m in the pro-duplex camp. I already bought one, so if anyone tells me it’s a poor investment, I’m not likely to want to hear what they have to say.

I ran across an article today, however, that points out that the duplex is a unique (and relatively scarce) investment and place to live.

Scarcity and uniqueness
Think about all of the development that’s been going on lately — subdivisions full of single family homes and attached “townhouses” (if you can call them that in a new subdivision), and huge towers of condos. Very few new developments include two-family homes with a nice private yard and a garage, on a regular city lot.

But unlike apartments, condominiums or even single-family houses, duplexes are not as prone to overbuilding, which can help enhance their value so long as demand is strong.

According to U.S. census data, there were only about 4.99 million two-unit structures in the U.S. in 2000, only slightly more than in 1990, when there were 4.95 million. By contrast, there were nearly 70 million detached single-family homes in 2000, up substantially from about 60 million in 1990. Buildings with 50 units or more also increased substantially, to 6.13 million in 2000 from 4.39 million in 1990.

It’s almost a house, and homier than an apartment
I know a real estate investor who, when renting out his first duplex, placed an ad under “apartments.” He got very few calls and was starting to get worried. He then realized that there was also a heading in the classifieds under “duplexes,” put his ad there, and the calls started coming in.

For someone who wants to get out of the “living on top of each other” situation that apartments sometimes feel like, or just wants a yard and a garage, duplexes are a nice fit. They’re cheaper than a whole house, but more “house-like” than an apartment. They’re especially attractive to renters with children, and people who want enough space to entertain guests.

It’s a unique investment
If you want to sell your duplex, you have three markets of buyers –

Traditional real estate investors, who will buy the duplex to rent out
People like me, who want to subsidize their cost of living by purchasing a duplex to live in half of, while renting out the other half. A lot of people do this, fix the property up, and then move out and hold onto it as an investment
Buyers who want a single family home, but can’t find a good deal in an older neighborhood and are willing to buy a duplex and convert it to a (usually very large) single family home. For a while, some cities, trying to decrease density in urban areas actually gave subsidies to people who did just that.

But it’s not a sure bet. Here are some more pros and cons from the article

That doesn’t mean duplexes are always sure bets, though. Michael Carliner, an economist at the National Association of Home Builders, notes that duplexes probably had their heyday back in the 1920s and 1930s, when it was more common for strangers to share houses. After World War II, families tended to want more privacy, on large, suburban lots. And some renters prefer the luxury of a new, pristine apartment without a landlord next door. “If [duplexes] were such an attractive investment, they would be building more,” he says.

On the other hand, condos and apartments are more common in some places because they can be cheaper and easier to build, a phenomenon that has spelled trouble in the past, especially in the downturn of the late 1980s and early 1990s. In Boston, for example, condo prices dropped 20% between 1989 and 1991, compared to about 16% for single-family homes.

Another problem with condominiums is that they often are very much alike. That means that if you have to sell quickly in a down market, there’s a good chance there will be similar product available elsewhere, possibly even in your same building, putting you at a competitive disadvantage. Single-family homes and duplexes are often more unique, which could help them sell in troubled times.

“In general, I’d say [duplexes] are safer,” than many other properties, says Karl Case, an economist at Wellesley College and one of the founders of Fiserv CSW, one of the nation’s best-known home-price forecasters.

Related Articles:

Like this story? Share with others on:
del.icio.us digg reddit furl Stumble it!

Entry Filed under: Buying a Duplex, Real Estate
Technorati Tags: duplex investment rental property investment property condo single family home unique real estate real estate investor real estate investment duplexes housing