Duplex “Deals” – Look at the numbers

If you are new to duplex investing and wondering how to “time” the market, a good and simple reminder is that a deal is a deal if the numbers make sense. The biggest variable to understand is the context of your numbers. What was wholesale before may be retail value now. The great thing about “deals” is if you buy something at a true deal price level you are protected with margins no matter how things fluctuate.

Know your market, know your numbers in the right context, do your due diligence, and have courage. You are smarter than you think. Fear is good, it makes you think about the numbers. But after you do your homework and the numbers make sense, have some courage. If it is truly a deal, then you are probably hedged nicely.

Duplex Investment Property – The Rule of 72s.

A handy little calculation for the duplex investor is the rule of 72s. The rule of 72s calculates the amount of years it will take  to double the value on an investment duplex at a certain appreciation rate.

To do this, you simply need to plug-in the appreciate rate rounded to the nearest whole number into 72 and that will tell you how many years it will take a duplex property to double in value.

Example:

You purchase a duplex for $150k and has an appreciation rate of 9%.

72 / 9% appreciation rate = 8 Years

It would take a $150k duplex 8 years at a 9% appreciation rate for that investment duplex to be valued at $300k.

This is a quick and handy way to see how the appreciation rate relates to your investment duplex.

Duplex Real Estate Scenarios.

Unlike single residence real estate, duplexes add more options. Yes there is only one more unit but there are several scenarios. They include 4 scenarios:

1. Living in one side, and having one tenant.
2. Living in one side, and having a vacancy.
3. Having two tenants.
4. Having double vacancy.

This may seem like a simplistic break-down of duplex usage but we will look at these scenarios and the different variables in future posts.