Is it better to buy a duplex or single family in the Indy market? “Buy and Hold” investing in Indy.

by | Indiana real estate, Indy Anna, Real Estate Investing

As a “Buy and Hold” investor in the Indianapolis real estate market, should you buy a duplex or a single family home?

Whether you are doing Fix-n-Flip or Buy-n-Hold you need to know what kinds of properties will fit your criteria best so today we will talk about how to decide between a duplex or a single family home.  Many investors have made good ROI with both, but you’ll make the best decision for YOU when take these factors into account.

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Now for today’s class on picking between duplexes and SFR…

Duplex versus single family residential comparison for Indy buy and hold investors

Is it better to buy a duplex or a SFR (single family residential) for buy and hold investing in the Indy real estate market?

Indy Anna explains:

– The Indiana price point difference between duplexes and SFR

– Potential monthly rental incomes for both

– Examples of both that are LIVE deals

You can download the helpful guide above in a .pdf by clicking HERE.

If you are investing in the Indianapolis real estate market as a buy and hold investor, is it better to buy a single family residential or a duplex?  This question has come up a few times but not as much as it should when I’m working with out of state investors.  So today I’m making this quick video to answer the question.  I understand where our out of state, or our out of country, investors are coming from with their thinking so today I’ll break down the differences and help you decide on SFR (single family residential) or duplexes for long term, buy and hold investing.

What about the cost difference between duplex and single family?

A duplex will cost more money than a SFR property, and that is true in most markets.  It doesn’t always apply to the Indy real estate market though, here there are many price points where a duplex will cost more than an SFR but there are also some price points where it will not.  Here’s an example:

So you could buy a SFR in Indy for around $100,000.  Maybe you buy it and it is rent ready or you bought it at a lower price and you did the rehab to make it rent ready and your all in cost was $100,000.  This would’ve most likely been cosmetic or light rehab work.  Either way you can get a rent-ready property at a total cost of $100,000 and have it rent for 1% a month, or $1,000 a month.  For more on 1% properties see my other classes on this.

If you have $100,000 and want more cash flow?

Now let’s say you want more cash flow but you don’t have much more than $100,000 to work with.  If you had $200,000 for example you could just buy two of those 1% houses and after investing $200,000 you would be getting $2,000 a month in rent.  For our example we will say that you have more than $100,000 to invest but not quite $200,000.

There is what we call the “Duplex Sweet Spot”.

You could buy a duplex between $100,000 – $200,000 and have it rent for more than 1%.  The duplex may produce 1.5 – 2% in monthly rent yield.

But don’t duplexes have lower quality of renters and tenants?

One common concern is the quality of renters that you get with duplexes.  This is usually a spillover concern that investors have from other markets where duplexes are only found in Class D or worse areas.  While Indy does have some Class D duplex properties, this isn’t the only location of our duplex deals.  In Indy we have good duplex deals in GOOD areas.  For more on the Indy market breakdown you can check out my class below and also the my class on the Class A through Class D areas in Indy.

The Indy market has duplexes all over the place, near universities or downtown Indy or in Class C areas and even sometimes in Class B areas.

Here are some good examples of real life deals on duplexes and SFR:

So here’s a property for sale for $80,000, it is rent ready and it rents for $850.  So even after you closing costs and everything else this would easily be a 1% property.  This property is in a Class C area.

So let’s say that you and I working together (to apply you can go to the Investor Profile page) and you tell that you want a higher return.  You could buy two properties like that and invest $160,000 and make $1,600 a month, but let’s say that you want more than just 1% and you don’t have a full $160,000 to invest.

The Indy market has 2% houses

Also a quick note about the Indy market, this is one of the only markets in America with “2% houses” or houses that rent for 2% of the value.  So a $40,000 SFR that rents for $800/mo would be an example.  Usually the limit for 2% houses will be about $40-50k.  With the 1% houses, or SFR that rent for 1% of the value, normally the maximum value is about $120-130k or 150k max usually.

So this usually means that a duplex is one of the only ways to get above 1% rent on 150k+ value property.

Example Two:

So this other property is a duplex in a Class C area and the price is $135,000 with each side renting for $1,150 a month.  That is a monthly yield of 1.7%, much better than the 1% on the SFR.  You see how that solves a problem?

What about Property Management on duplexes versus SFR?

Sometimes investors are concerned about the property management costs that will be added if they have another “door” to manage.  By the way make sure to go through my class on how to find great property management for your Indy deals.  First of all there are some property management companies that will not manage deals that are under $850 a month, so that is something you should know.

There are other companies that will manage each door for $50 a month, a reasonable cost you can expect would be $100 per door or anywhere from 5-10% depending on a few factors.  Also remember to check out our list of Indy real estate professionals (including property managers) at: https://www.bigreia.com.

What about meters and utilities?

Most of the duplex properties in Indy are set up for dual occupancy on one parcel, so they are usually zoned correctly and favorably for landlords and investors.  This means the duplex will usually have separate meters on both sides as well.  So most duplexes in Indy will already have the utilities separated for each unit.

What about having the tenants pay for utilities?

Another common question that investors have about both SFR and duplexes in Indy is about the utilities and who pays for them.  This is one reason that investors can be hesitant to get into a duplex, but that fear is usually another spillover worry from other markets and other legislation.

Here in Indy the tenant can pay for all of the utilities, including the water. This is not the case in each state, and definitely not the case worldwide in other countries, but here in Indy it is totally normal for a tenant to pay for the utilities so this won’t be an issue.

What about TAXES?

So both a SFR and a duplex will be considered dwellings, but the duplex is two units and usually on just one tax parcel.  When it comes to taxes, you have the Indiana property tax cap of 2% as an out of state investor.  Also I made a class about paying taxes on Indy real estate as an out of state investor so you can check that out as well.  The duplex property will likely have a higher property tax assessment as the value of the structure is more, so in the examples I gave you above here is the difference:

On the SFR the semi-annual property taxes are $600, for an out of state investor the next year’s taxes would be around $1,200.

For the duplex property, the semi-annual taxes are $850 a year, next year for an out of state investor you would be paying around $1,700 a year.

So in summary:

I’ve gone over a typical price point difference between a duplex and SFR here in Indy

I’ve gone over potential rental incomes for both types of properties

AND I’ve given you examples of both with current listings from the MLS

Free Download:

You can download the helpful guide above in a .pdf by clicking HERE.

Remember to…

Make the Universe Smile.

Thanks so much!  = )

~ Indy Anna

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Thanks so much!  = )

Make the Universe Smile.

~ Indy Anna
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