Seeing Double
The Basics of the Deal:
“Seeing Double” was purchased for 45K. It is a duplex that offers a 1/1 on one side and a 2/1 with an extra room on the other, with a total living space of almost 1,300 square feet.
We called this “Seeing Double” because we were able to secure a duplex for the cost of a single-family home in a nice area of town. The units required the basics of paint, carpet, and blinds. In addition to the standard stuff, each unit needed extra attention in the kitchens and baths which were in poor shape.
We planned to turn the 2/1 into a 3/1 by adding a closet to the extra room. We knew this would create a functionally obsolescent bedroom, but it would also bring in an extra $50-$100 a month.
Expected and Initial Plan:
We initially expected the duplex to cost 10K in repairs. We planned to rent the 1/1 for $550-$575 and then rent the now 3/1 for $725-$750
Actuals
We ended up spending about 12K on repairs and we rented the 1/1 for $550 and the now 3/1 for $775, for a total of $1,325.
Besides cleaning up all of the interior items and creating a 3rd bedroom on one side of the duplex, we made the outside far more appealing for tenants.
First, we added parking strips of cement from the driveway back to the carport (It was originally a dirt path). We then redid the rear fence to ensure security and a private backyard for each tenant. These items ensured the property was far more tenant-friendly.
Current Status of Property:
We currently have the property listed for $85k. I don’t want to sell it, but given the current lack of quality multi families, we felt this was an easy way to convert equity so we can continue buying distressed assets.
If the property doesn’t sell inside of 90 days, we will just keep the property and the cash flow.
We turned each of the original tenants inside of 18 months and quickly rented both units for the same price. We had one floor heater expire after about a year, but outside of that, we didn't encounter any nasty surprises.
Lessons Learned:
Don’t forget to review the multifamily listings, because you'll never know where a deal may pop up.
With older homes/duplexes, you may be given the chance to create a functionally obsolescence bedroom, and we recommend that you review the cost and rent increase to see if you have an easy increase in rents on your hands.
If you sense an opportunity to sell, feel free to list the property at the high range of value and see what happens. In a worst-case scenerio, you can just keep the cash flow if the property doesn’t sell.
Grade the Deal and Why:
We give this duplex an A-. We found a steal of a deal, created an extra bedroom, and added some nice exterior features, and the property has re rented at original values once already.
The only negative was we went 2K over our original budget, but given the success of the finished product, we are happy with the results.
Future Plans for Property:
As mentioned earlier, we currently have the property listed at 85K. If it sells we will take our equity and buy several more properties. Never take real estate cash and spend it elsewhere!
If the property doesn’t sell, we will eventually look to extract 30K in equity via a bank equity line or a Private Money investment, as we only owe about 22K on the property. We look forward to leveraging the equity in this duplex into multiple properties.
