Can I get some opinions on a low-cost duplex? (apartments, leases, tenant)

[Da Grouch]

Due to an investor's inability to pay us for work performed my business partner and I recently acquired an over & under duplex with about 1250sq.ft. of floor area per unit. It's an older structure (I found a certificate stapled behind the upstairs furnace for the final plumbing inspection, dated 1969) situated in a reasonably good, family oriented neighborhood. What threw us was that everything in the downstairs unit was built to the 1978 and newer codes.


Upon further investigation of City Hall's records we discovered that the duplex was originally a rancher style SFD that had been raised in order to put a bottom floor under it in 1980. The work was well done at the time and we had nothing more than minor, mostly cosmetic, issues to deal with before re-renting both floors. The intriguing part about this whole situation is that due to the construction now being, basically, two entirely separate living units each has its own electricity, gas and water meters as well as its own phone and cable service. This alleviates a lot of potential problems normally associated with a suite and “shared” utilities/services. Each rental even has its own laundry. My partner and I already BIG TIME like this place and the simplicity of it.


Now, in our area there are many older single storey houses in good condition and on large lots selling for what are rather reasonable prices. The two of us have been thinking that since it is relatively easy and certainly not too expensive to raise a house and put a basement under it, this might be a good way to add several units to our rental inventory. Town council has stated directly to us that they would welcome higher density multi-family housing that didn't create a larger building footprint on the property, too.


So here's the question to you, and I don't want to hear from only other landlords - renters please chime in, as well:
“Do you see any potential SERIOUS drawbacks to creating over and under, family oriented, duplexes that we could rent to solid tenants at or even somewhat below going market rates?”


Thanks in advance for any feedback.

[Ultrarunner]

If the numbers pencil out... why not?

Generally, the cost per unit is less with multiple units which is offset somewhat because the rent in multi-unit buildings is less than single family homes.

If your Building and Zoning is OK with your plans and you have the means to do the work in time on budget... why not try it?

[STT Resident]

I'm no expert where your local zoning laws are concerned but I'd caution you as a potential landlord to seriously look into tenant leases and their implications. Being a landlord is a whole different ball game than being a construction/renovator/fixer-upper maven. Just read through the posts on this forum for a mere taste!

[Da Grouch]

Originally Posted by STT Resident

I'm no expert where your local zoning laws are concerned but I'd caution you as a potential landlord to seriously look into tenant leases and their implications. Being a landlord is a whole different ball game than being a construction/renovator/fixer-upper maven. Just read through the posts on this forum for a mere taste!

Truth be known, the company my partner and I created and have owned since 1976 currently runs 11 crews and we tend to specialize in MFD's. We contract to build mostly 20 to 48 unit structures with some smaller ones and the occasional 64 unit thrown in for good measure...so with all due respect: we aren't exactly "fixer-upper mavens". Both my partner and I have been doing the landlord gig for over 25 years now...so with (currently) more than 50 units under our belt, we kinda got that one well covered, too. And of course this is why the good Lord, in His infinite wisdom, created property management companies. Our PMC has handled all our units for more than a dozen years, just so we don't have to deal with tenant related B.S.

...

~Ultrarunner: That's pretty much what we were thinking. Yes, the numbers do definitely "pencil out".

We can do the raise itself on a comparable SFD for around $12K and the total cost for finishing the new ground floor will run between $38 to $40 per sq. ft. Plus a bit more for a large deck, c/w, stairs for the upper floor that just lost its ground level patio. So the average cost per unit is far less than an SFD. The income ratio on these is surprising, at least to us because we're used to renting our MFD apartments. An SFD (in good condition) like I described will rent, in this area, for about $1650 p/mo. Our newly acquired over & under will pull $1500 p/mo each unit.

Zoning and permitting for R-1 (single res) to R-2 (duplex) is pretty much a rubber stamping affair due to the incredibly tight housing market here and the fact that all of the local councils are wanting to get their sorry butts re-elected within the next year.

I appreciate you giving your take on this.

I'm kind of hoping to find out if anybody else has ever owned one of these or lived in/rented one. If there are any noise, privacy, parking or other issues we should know of it would be nice to find out now so that we can build in the necessary upgrades before the fact.

[Ultrarunner]

I have two that I've owned since 1989...

You are correct, the tenant mix is more critical and I ended up putting wall to wall carpet with commercial pad over perfect hardwood to control sound... I also rent with drapes and that makes a huge difference in sound too...

No dishwasher in the upstairs unit and no running the washing machines early or late at night... some of the new applicances are so quiet, it might not be a problem... this was not the case 20 years ago.

I have had all the same tenants since 2004... I did have a lot of problems starting out with noise transfer...

Ideally, each unit should have parking, entrance and even garbage area separated... anything to make it more like a single family is a positive...