Should Homebuyers Consider A Duplex?

In this post, I show a comparison between two properties, a single-family home, and a duplex. 

In this instance, I used 2731 S. Logan for the SFH and 8330 W 54th Ave for the duplex. Obviously, there are many non-financial reasons to choose a single-family home over a duplex.

In the scenario presented, the monthly out of pocket costs on the SFH are roughly 40% higher at year one.  Because of the offset of expenses due to rental income, monthly costs on the duplex decrease roughly 1.4% annually overshadowing maintenance and debt service while the increasing insurance, taxes, and maintenance costs of a  single-family cause the carrying costs to increase by about 1.5% annually.

Assuming a 10-year hold, even though you walk away with ~$340k in your pocket, the single-family basically provides a 0% ROI. This is largely due to loan amortization. By year 10 you've spent roughly $260k (not including your down payment) to live in the home, this includes ~$130k in interest, about $62k in principal (the rest is maintenance, taxes, and insurance). Obviously, this works out to be much better than renting, but not as good as the duplex, which leaves you with an ROI of 177%. The numbers for both properties get more attractive with longer holds. 

I can provide a similar analysis for any property. If you are interested send an email to mh@peakrealestateadvisors.com. 

-Matthew Haraminac