You can create your own duplex investment by converting a home into a duplex. This can make a negative cash flow house into a positive cash flow duplex. Of course, zoning and permit problems are definite possibilities.

Houses may be a losing proposition as rentals in your area. They are in many areas now. However, if you find the right kind of home, you may be able to convert it into a duplex and turn that cash flow situation around. Let’s look at an example.

Make A Duplex Investment

First you go to the county or city to find out what residential areas are zoned for both single family homes and duplexes. Take a map and mark it well, so you won’t waste your time looking at houses that you’ll never be able to convert. You don’t want to try to get properties rezoned for small projects like this – it just isn’t worth the trouble and probably won’t succeed.

Suppose you find a 3-bedroom, 2-bath house in one of these areas. The seller is asking $102,000. This is less than the surrounding homes, but it is because the home is in rough shape. You don’t want to tie up more than $20,000 in any one project, so you quickly realize that positive cash flow would be difficult to obtain, since the usual rent for houses like this is around $775 per month. You look at the home anyhow, with the idea of making a duplex out of it.

The repairs necessary are mostly cosmetic. The bathrooms are on opposite sides of the house. There is an office that can be made into a bedroom. There is a natural place to divide the house that will leave a dining room on one side – which will become a living room – and a living room on the other side. One end of this living room will be used to make a small kitchen.

You will end up with two 2-bedroom units, which rent for about $630 in this area. The vacancy rate for the area is 5%, so you project an annual gross income of about $14,360. Taxes, insurance and repairs will be about $4,660, leaving a net income before debt service of $9,700.

You have already checked, and know that you can borrow 90% of the value of a duplex, at about 8% interest on a 30-year loan. You figure (roughly – all of these numbers will need to be firmed up before closing) that you want cash flow of at least $1,800 per year. Subtracting this from the $9,700 leaves $7,900 for debt service. Dividing this by 12, you see that you can have a payment of up to $658 per month.

Now you pull out your amortization book, and turn to the page that says 8% interest. Working your way down the monthly payments column under “30 years” you see that you can borrow up to $90,000 and still make your plan work. Since you don’t want to put more than $20,000 of your own money into the deal, this means the whole project has to be done for $110,000 or less.

Roughly estimating the construction costs, clean-up costs, holding costs, closing costs, loan costs, refinance costs (once the project is done) and other expenses, you figure your total costs will be around $23,000. When you make your offer, you will have an inspection contingency that allows you to cancel the contract if there are problems that put the likely cost beyond this.

Subtracting $23,000 from $110,000, you arrive at a figure of $87,000. You know this won’t thrill the seller, but this is the price you need to make the deal work for you. You offer $83,000, and he counter-offers at $93,000. You offer $85,000 and drop the clause that had him paying $2,000 of the closing costs – you had only put it in there as a negotiating tactic anyhow.

Eventually, when he realizes that you really will walk away from the deal, he agrees to $88,000. You decide that this is close enough. Your inspections and quotes come in and you are satisfied, so you close. You borrow only 80% of the value to avoid mortgage insurance and points. You intend to refinance when you have the place ready anyhow.

You find some cheaper ways to get the job done, and the total costs up to the day you rent the units is just $20,500. This means you have total of $108,500 into the duplex. You shop around and find a new loan at 7.5% interest. You also decide to finance 90% and have less cash flow. You like the idea of having only $11,000 or so of your cash invested.

You borrow $97,650, making your payment $682 per month, or about $8150 per year. This leaves $1,550 per year cash flow – close to what you wanted. Your cash-on-cash return is around 14%, and if rents are rising in the area, it will soon be higher. This is why you might want to create your own duplex investment.

Article Source: http://EzineArticles.com/?expert=Steven_Gillman

Looking for a duplex real estate investment in the Everett area?  How about this property on 63rd St SE! 

Each unit has 2 bedrooms and one bath, and as a bonus each one has two covered and two uncovered parking spaces.  All the appliances including the washers and dryers stay and being just a few blocks to Everett Golf & Country Club this duplex is definitely one to look at!

PDF Flyer for This Everett Duplex

Give me a call at 425-773-3149 if you would like to take a look a this duplex or any other investment property in the Seattle area!

The convention is in lending that multi-family properties are those with more than 5 units and as such are considered commercial properties.  Properties with less than 6 units are classified as residential properties and loaned on just like you would a single family home.  The difference being on how they are valued.

DUPLEX & 4-PLEX = COMPARABLES APPROACH
MUTLI-FAMILY PROPERTIES = NOI & CAP RATE VALUATIONS

Doesn’t make much sense does it when they generally bought as income producing properties does it?  The one caveat to this is that because two and four unit properties are counted as residential homes, you can purchase them with FHA loans and live in one of the units.  As I have discussed before, buying a duplex or 4-plex as a first home is a great way to get started in real estate investing.

There are some other tricks that can be applied to rental properties because of the differences in how they are valued as well.  If you are in the Seattle area and thinking of investing in a rental property or twenty call me and we can discuss some of your options!

Obviously if you are comparing a duplex to a condo you are going to be occupying one of the units in the duplex.  What becomes important then, is that you are deferring part of your total mortgage payment by renting out the other half of the duplex.  Let’s look at a real world example.

In Everett Washington right now, the average condo price is right around $250,000.  With 10% down that puts your payment at around $1350 per month.  Looking at new duplex properties in Everett, you could probably find one for around $320,000.  Again with 10% down, your payment will come out to be roughly $1726.  So for a little less than $400 a month more, you get a whole extra unit to rent out.

If you live in one half of the duplex, and rent the other out for $1000 per month that would bring your share of the mortgage payment down under $750 a month!  That is cheaper than rent!  The really great part is that because you are going to live in one of the units, you can get regular financing and FHA loans to purchase your property.  This means that you can get into property with as little as 3.5% down.  Plus there is still talk that FHA will allow buyers to use their $8,000 tax credit towards their down payment.  If this is the case, you could be in a duplex for under $5,000 out of pocket.  That is just downright amazing!

I definitely encourage anyone that is wanting to purchase a condo, but that is interested in owning multifamily property, to seriously consider a duplex or even 4-plex to live in! 

If you are ready to make the jump, and purchase a duplex to live in please give me a call at 425-773-3149.  I can definitely help you track down a property that is right for you!

To be sure there is disparity between the listing price for duplex properties in Snohomish County and what they are actually selling for, and undoubtedly there are several builders out there sitting on brand-new duplexes that cost more build than they are worth.  For ambitious real estate investors, this of course means opportunity.  If you are interested in getting started in real estate investing in Snohomish or King County, call me at 425-773-3149 and set up an appointment to go over your real estate investing goals and what needs to be done for you to achieve them.

Many people want a nice house with a white picket fence and all the trimmings. But in today economy, a house is a huge liability for the average person. Many people should be looking at alternatives to the traditional single family home and look towards creating some wealth and tax benefits for themselves. A duplex or triplex is an ideal vehicle for both.

Buying a duplex has a number of advantages over a single family house. First you have someone helping you with the monthly mortgage payment (your renter). Second you can depreciate the rental portion of the building and many times create a paper loss on your taxes. Thus, saving you more money in taxes every year. Getting a loan for a duplex is just as easy and in fact some Bankers like the duplex more, because they know you will have help (from the Renter) in making your monthly payment to them. Thus, the default rate is generally lower for the Bank on duplex or triplex type building.

Since you will be living in one side or one of the units, should you get a triplex or fourplex building, you qualify for an owner occupied loan which is the same interest rate as someone buying a single family house to live in. In fact you can get a 3% down payment FHA loan, for up to a 4 unit building at the same interest rate as a single family home.

Ok, Back to Robert’s quote above. Remember that owning a house is money that goes out of your pocket, which is a liability for you. A duplex or triplex has rental income and thus “puts” money into you pocket. So to follow the teaching of Robert’s financial lessons, you want to buy assets that create money “into your pocket” and stay away from buying liabilities (like a house for example) that “takes money out of your pocket”.

Article Source: http://EzineArticles.com/?expert=Mike_Mclaren

Would you like to purchase a duplex in the Seattle area?  Contact me today at 425-773-3149 so we can talk about your goals and what properties are right for you!

What I learned was shocking to say the least. To arrive at the value for the duplex investment I made a few VERY conservative assumptions. First, 20% down payment, 7% interest rate, 3% long term appreciation(Raleigh has seen more). Additionally, I assumed only a 3% cash return from the duplex.

The original $33K if placed in the DJIA would be worth $32.9K today, yes, LESS than the original investment. But the same $33K investment in a duplex with the above assumptions would be worth $119.2K+ or $86.3K MORE than the same $33K invested in the stock market. I realize the real estate market in some areas has seen a tremendous drop over the last couple years, so I am not suggesting that the duplex option is like a money market account. However, even in the areas that have experienced a tremendous drop keep in mind that they also saw insane and unsustainable gains that place their average return at well over 3% appreciation.
Read Scott’s Full Article on Comparing Buying a Duplex to the Stock Market

What does this teach us about investing for today?  I think the answer is simple:

 Buy and hold Duplex, Triplex and other Multi-Family investment property!

In ten years from now are you going to look back on things and wish you had put money into real estate investments that have positive cash flows, or be looking at your retirement with confidence because you have a portfolio of partially paid off, cash flowing investments that will continue to provide for you for as long as you need them?  The choice is yours!

Of course, there are always hurdles to overcome in converting a single-family home into a duplex.  Of primary concern is whether the property is suitable for dividing into duplex and what the local zoning and permit processes are.  I never said converting a single-family home into a duplex was easy!  When you start considering converting a single-family home into a duplex be sure that you have a competent real estate agent and remodeling contractor by your side.  This will help you make sure you get into the property for the correct price and have a solid estimate of what it will cost to convert the property.

If you are in the greater Seattle area and would like to sit down and talk with me about duplex properties and real estate investing, please send me an e-mail at Jacquie@JacquieCliff.com or give me a call at 425-773-3149.  If you’re outside the Seattle area and looking for a great real estate agent to help you with purchasing your duplex properties, I can  put you in touch with a hard-working and knowledgeable real estate agent in your area.

1. Duplex properties are less expensive per square foot than single family homes.
2. Buying a duplex means you can generate rental income to offset your house payment
   
3. The maintenance costs are lower for one duplex vs. two single family properties
4. Duplex homes, only share one common wall, unlike condos or town homes.

Buying a duplex does have some risk, but most of it can be mitigated by good planning.  Looking ahead and investigating insurance rates, rental prices, and planning for needed repairs and maintenance will greatly reduce the risk of loss over the long term.  I always advise my clients that are purchasing duplex or other rental properties to take a portion of the rent and establish a ‘slush fund’ for any emergency repairs that may come up.

Buying a duplex is a great way to purchase a first home, so if you are considering making the jump into owning your own home, look at your local market conditions, talk with your real estate agent and give buying a duplex some serious thought!

Jacquie Cliff – The Amazon Negotiator
Let me lead you through the Real Estate Jungle!
Real Estate Agent, Loan Officer and Real Estate Investor serving:
Lynnwood, Bothell, Mill Creek, Seattle, Bellevue, Marysville, Mountlake Terrace, Edmonds, Everett, Snohomish, Kirkland and the surrounding areas!

Call me with any of your real estate questions at 425-773-3149 or email me at Jacquie@jacquiecliff.com anytime!

Copyright © 2008 By Jacqueline A. Cliff, All Rights Reserved.
“Buying a Duplex”

Should Your First “House” be a Duplex?
By Ki Gray

There is a lot of talk about getting your first house. Its part of the American Dream to get a house and maybe get a dog named Rover. But maybe someone’s first house should instead be a duplex. Why would I propose such a thing. Is it possible I am a secret Russian spy that hates American pie. No their are simply to many advantages to buying a duplex first.

Buying a duplex has a number of financial advantages over buying a house. A lot of people assume that in a particular neighborhood duplexes would sell for about twice of what a house sells for. This is rarely the case. Duplexes are more frequently about 1.5 times the price of a house in a given subdivision. So to pick an easy number if a house is selling for 100k then a duplex should be selling for 150k.

So lets compare the two. To keep things the same lets assume we have 20k to put down and we are looking in the Austin real estate market so that the taxes are .025 percent of the purchase price and insurance is .004 percent of the purchase price.

- Lower Monthly Payment

To start off with lets look at the house. For the house we are going to have a 6.5 percent interest rate.

100k house price
20k down payment
Monthly Payment = $747.32

Moving on to the duplex. Since duplexes usually have higher interest rates we are going to assume a 7 percent interest rate. We are also going to assume that the other side of the duplex is being rented for $650.

150k duplex price
20k down payment
Monthly Payment = $1184.18

Rent Payment minus 5 percent vacancy = $617.50

Monthly Payment minus rent = $566.68

The monthly payment on the duplex comes out to be 31.8% less than on a house. You might get different numbers based on your area. In most areas a duplex leads to a lower monthly payment but there are a few real estate markets where the opposite is true.

- Increasing Your Future Real Estate Purchasing Power
Besides the advantages due to a lower mortgage payment there is another advantage over buying a duplex first. Buying a duplex first allows you to make additional purchases while buying a house first can negate your ability to buy additional properties.

To understand why this is the case we need to understand a few rules about how banks determine whether or not to provide loans. When you are purchasing your first investment property banks will usually not count the rent as income unless you have owned investment properties for over 2 years.

So if a buyer first buys a house and then wants to buy a fully rented duplex they will need to be able to qualify for the full price of the house and the duplex combined. This can be difficult for someone in the beginning stages of their career. If a buyer first purchases a duplex first in 2 years when they are looking for a house they can count the rent from the duplex as income which can help them qualify for the house purchase.

- Faster Payoff
Another interesting way to look at it is that if instead of simply spending the saving you incurred by owning a duplex if you were to pay off your mortgage faster. So if you applied 747.32 to your house it would take 30 years to payoff. But if you paid your duplex of $566.68 and then took the additional 180.64 and applied it to your mortgage you could pay off your duplex in 18.5 years. So in 18.5 years you would have a $150k duplex paid off instead of a $100k house partially paid off.

- Greater Benefits of Mortgage Payoff
Not only will you pay off your duplex faster but once you paid if off you will be in a better position. Once you pay off your house you are living mortgage free but not payment free. Based on the original assumptions (Austin Texas 2.5 percent tax rate and .4 insurance rate) you are still making a payment of 241.66 a month for taxes and insurance. In contrast once the duplex is paid off you are not only living in your duplex for free you are actually getting a profit of $255 a month.

Buying a duplex is not for everyone. Some people do not want the hassle of managing a property. And our article is not proposing that everyone should buy a duplex. We are simply showing the financial benefits of buying a duplex.

If you are looking to purchase a home or duplex in the Austin Real Estate market Ki can help you in your search. Ki is an Austin Realtor with a long history of helping clients purchase personal and investment properties. His website has a search of the Austin Homes.

Article Source: http://EzineArticles.com/?expert=Ki_Gray
http://EzineArticles.com/?Should-Your-First-House-be-a-Duplex?&id=787836

If you have been thinking of buying  a home or a duplex in the Lynnwood or Everett, Washington areas give me a call and we can discuss if buying a duplex as your first home is right for you.

Jacquie Cliff – The Amazon Negotiator
Let me lead you through the Real Estate Jungle!

Real Estate Agent, Loan Officer and Real Estate Investor serving:
Lynnwood, Bothell, Mill Creek, Seattle, Bellevue, Marysville, Mountlake Terrace, Edmonds, Everett, Snohomish, Kirkland and the surrounding areas!

Call me with any of your real estate questions at 425-773-3149 or email me at Jacquie@jacquiecliff.com anytime!

“Why your first home should be a duplex.”
Copyright © 2008 By Jacqueline A. Cliff, All Rights Reserved.