# Buying a duplex, renovating, and renting. I want your 2 cents!



## joecaption (Nov 30, 2011)

As far as what? You have not even really asked a question, hard to have an ansewer.
If you have already bought it what can anyone say?
Start to work on it, come up with an issue and come back with a question on how to fix it anyone here would be glad to help.


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## Wildie (Jul 23, 2008)

Lavid2002 said:


> Hi everyone!
> 
> I am looking to buy my first home. I have tossed the idea around for a while, and have asked many friends from property investors, real estate agents, owners, to builders. The answer I get from everyone is to buy a duplex, rent out one half, and live in the other. I would be doing it as a project, an investment, and obviously home. Down the road I could purchase another property and rent out both sides of the duplex.
> 
> ...


 if you live in Ontario, Canada don't do it! Provincial rent controls will kill you!


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## 1910NE (Sep 5, 2010)

Don't buy a place that has centralized heating/ cooling...


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## cleveman (Dec 17, 2011)

Just like Sammy Sosa said, only insert "rental properties".

I don't own anything where there are any rental inspections. In Iowa, you have to have a rental inspection program if your muni has 15,000 people. I'm not saying that is a bad deal, just added cost.

In my area, I have bought 5 repo properties, 3 in the last 18 mos. I used to say that I could probably not buy anything again because it wouldn't have a return like I could make on something I built. That became untrue as prices fell with the repo's.

I also tell people that rentals are good if you or your spouse has some other income, because you can get rid of your income tax liability.

The simple way to look at is if you are competent in the construction area, property maintenance, management, etc., then you can be successful. You have to also have a head for business, which goes without saying. If you want to be successful in the restaurant business, you had better know something about restaurants, and the same holds true for this business.


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## Lavid2002 (Jan 16, 2012)

joecaption said:


> As far as what? You have not even really asked a question, hard to have an ansewer.
> If you have already bought it what can anyone say?
> Start to work on it, come up with an issue and come back with a question on how to fix it anyone here would be glad to help.


I would like to get a good idea of what I am getting myself into before I purchase a property. Any and all advice is welcomed. From carpentry to selecting tenants. If you have had rental properties before how did you make out? Was it a profitable venture that you continue to do. Do you own several properties? Is one rental property a handful? Have you ever lived in a duplex with other tenants?



> Don't buy a unit with centralized heating and air conditioning


 As opposed to what? Separate HVAC systems for each section of the duplex? So it's not a tug of war on the thermostat, or to avoid high maintenance costs on a rental?

I haven't bought a property yet. I am looking around southern NJ. I am hoping to get some good leading advice from this thread. Maybe some good book references or something of the like. I have found a couple resources for help but I need to know what else to inform myself about before I purchase a property and start to seek out tenants after fixing it up. 

Also, I keep mentioning "fixing it up" because my ideal duplex would be one that requires work (That I am capable of, and enjoy doing), in exchange for a lower initial property price.


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## jomama45 (Nov 13, 2008)

This is only my own opinion, but I'd never buy a rental property that was built as a single family and converted to a duplex. Too much unknown & constant attention IMO.

I'd also warn that owning a duplex & living in one half can be tough. Depending on the tenants, you may NEVER be off from work. We own a 6 family unit, and I try to be secretive when I even go on site. What I think will only be a 2 minute stop can easily turn into a 2 hour repair. Seems the phone or e-mail just isn't an option for many renters.......

Lastly, what you're doing now & looking into getting into is certainly going to be worth it longterm. I don't know if there's ever been a better time to invest in real-estate. Prop. values low & interest rates even lower. As for the financial end, you'll certainly need to be able to make this place cash-flow before the bank will borrow you the money. I wouldn't expect to make money from this, but it can certainly offset your own housing costs greatly, while paying off a long-term investment.


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## Lavid2002 (Jan 16, 2012)

jomama45 said:


> This is only my own opinion, but I'd never buy a rental property that was built as a single family and converted to a duplex. Too much unknown & constant attention IMO.
> 
> I'd also warn that owning a duplex & living in one half can be tough. Depending on the tenants, you may NEVER be off from work.


That's a good point, the guy who warned against central HVAC was probably pointing towards that. 

I could write something up in the rental agreement about emailing me problems, and using the phone or knocking on the door only for emergencies. Additionally, I like to do things right. I don't think I would rent a property if it wasn't in tip top working order. 

From someone who was no experience with tenants, I'd like to ask what kind of problems you have with your tenants? What do they come to you for?


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## jomama45 (Nov 13, 2008)

Lavid2002 said:


> That's a good point, the guy who warned against central HVAC was probably pointing towards that.
> 
> I could write something up in the rental agreement about emailing me problems, and using the phone or knocking on the door only for emergencies. Additionally, I like to do things right. I don't think I would rent a property if it wasn't in tip top working order.
> 
> From someone who was no experience with tenants, I'd like to ask what kind of problems you have with your tenants? What do they come to you for?


To be honest, I've faced far less problems than I had anticipated, it just seems that the timing is typically bad for things to require repair. Regardless of maintenance, there are certain things you have no control over. If roots deiced to grow into the sewer main and back-up the sewer, you can't really forsee that. If they dump grease down the sink and it backs up, you can only fix it.

As for problems, just recently I had the sewer back-up in the basement due to the grease issue. Friday night at 6pm on my way home from a long day at work, and I have a fairly weak stomach for that stuff. Had to call the plumber to snake it out after hours.

I've had some leaking toilet wax rings, one that let it go for months, and the subfloor needed replacement.

Clogged drains. Insects. Bad thermostats. Dogs in a building with no pets. People parking in each other's garage stall. Young punk parting at night with friends. Loud music. Slamming doors. Failing appliances (big one). Failing water heaters (another expensive one). Lack of heat or AC.

I could go on, but that's only from the last few years.

I don't want to scare you out of doing this, as it can pay HUGE long-term dividends, but don't think it's going to be just like living in a single family remote home because you have a wall between the units.


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## Lavid2002 (Jan 16, 2012)

This is exactly what I am looking for! Thanks so much for the advice! Anyone else have something to share?

I have lived in a duplex before, but as a tenant. Not as a landlord. Im sure they are totally different worlds.


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## EvilNCarnate (Jan 27, 2011)

An iron clad lease is a must. You have to take into account everything. My first tenant taught me to always require a background check and make them pay for it. The people not interested in a place wont pay 20 bucks for processing their application. I also learned that you need to make sure you have what repairs they are responsible for in the house and how they should maintain it. Are you going to cut the grass or are they. Can they park cars in front of the house, can they throw parties. If the toilet gets clogged do you fix it or do they call a plumber. Get walkthrough inspections with them. Verify lights all work, sinks, tub, toilet all drain, heat and air kick on, clean filter in the unit, disposal works, etc. Overall conditions of the walls, flooring.... Have pictures of before to compare to after. Can they paint the walls, do you have paint codes to repaint or touch up after they leave. My house we picked the colors for each room and I kept the paint mix info to touch it up after the tenants moved out. If they can paint you will want the paint code to touch up after they leave or repaint, and if they can repaint it needs to be in the lease and you have to stipulate if their will be a cost for repainting. 

There is a lot to consider. I have had a rental property, it can be hard or easy. All depends on your ability, your tenats, your house, and everything else is left to chance.


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## Blondesense (Sep 23, 2008)

Many years ago I had a friend (female) who rented a duplex. She found out the landlord was going into her apartment while she was out. TOTALLY illegal.

OTOH, I've heard horror stories such as a house being destroyed by turning it into a pot growing facility.

As a landlord, I would want some legal way to stick my head in the door occasionally just to check the general condition. 

Where is the line between their rights as tenants and yours as owner? 

I have no idea, but it is something I would check out.


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## pyper (Jul 1, 2009)

Maintaining a house takes time and effort. The other day I went to take a shower and it wouldn't drain. If you were my landlord, I might have been calling you at 6am to fix the drain. 

If you travel for work, then figure things will always go bad when you're out of town.

You need a lot of money down for commercial loans, and the underwriting is more stringent. You might need to take out a high interest construction loan until you have it fixed up. Talk with a bank and see what kind of loan you can get.

Do a 15 year cashflow statement in excel. Figure you can raise the rent 2% a year, and expenses will go up 3% a year. Be sure to include real estate taxes and any city/county fees, and insurance. Put everything into it you can think of, and then add a replacement reserve of $1000 a year for things you didn't think of. Put that $1000 in a money market account and only use it for major systems repair.

Assume you get a new tenant once a year. You'll need to paint, clean the carpet, windows, blinds, etc. Figure $1000 a year for that if you pay someone else, or a lot of your time and some lower figure.

To find out what the rent can start at, shop other rentals in the area. You might be able to get the info from realtor.com. Since you don't have a particular property in mind, just look at something in the same area that looks like the kind of place you would buy, and then find out what rent they're asking. Be aware that if there are a lot of vacant properties, then asking rents might not be reflective of what they'll actually rent for.


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## Beepster (Oct 19, 2009)

The route I am taking, and I wished I would have started at a much younger age, is fixxing up my own house and selling it. Being a CPA, I know that after living in the house for two years, any gain is tax free. Obviously buy a run down house in a good sellable neighborhood.

I have heard too many horror stories of bad tenants. Obviously there are ten times as many good tenants that you never hear about. I have also seen too many clients take baths in the last few years from bad buys.

I am half way through my second house in the middle of a total basement gut/redo. Its hard enough to get home and get to work, can't imagine what it would be like if I had kids ('that's a crappy mudding job Timmy, no supper for you').

B


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## Lavid2002 (Jan 16, 2012)

Wow! Outstanding responses!

Lets see if I can respond to everyone 



> The people not interested in a place wont pay 20 bucks for processing their application.


 I read this in a book a week ago! They said to charge application fees. The list of things I have to check on tenants is 
*Credit Score
*Rental history w/ references
*Income / Employment?
*Criminal history?
*Have you ever been evicted?

Though I am unsure of the legalities of checking these things. I know I can't rent to someone based on race obviously. I wonder if it is illegal to not rent to someone on account of their criminal history, as it is a type of profiling. 



> Have pictures of before to compare to after.


I am totally keeping a word document on all of these suggestions for when the time comes. 

No time now, more later. Thanks guys!


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## Calgary Renos (Jun 3, 2011)

Something that I learned in the last three years of renting and managing properties is that putting the effort in to call you tenants. If you call them once a month to check on this. Ask how is everything, does anything need to be fixed or is anything not working right. 

This gives the tenants a chance to let you know about problems without feeling bad that something broke. It will also open up the communication so that if something goes wrong they feel ok with calling you. 

One big thing though is if they do bring up a concern get it fixed as soon as possible or they will stop trusting you.


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## 1910NE (Sep 5, 2010)

my comment about centralized heating/AC has more to do with the cost of heating than anything else. Not sure how a landlord can compensate for fluctuating heating costs during the heating season...


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## Lavid2002 (Jan 16, 2012)

1910NE said:


> my comment about centralized heating/AC has more to do with the cost of heating than anything else. Not sure how a landlord can compensate for fluctuating heating costs during the heating season...


Why don't I just make them pay for utilities? There is a way to seperate utilities between the two halves of a duplex right? Different meters and boxes? How does this work for a central bill for heating? Do the tenants split it? Is that fair or how it is normally done?


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## 95025 (Nov 14, 2010)

Lavid2002 said:


> I would like to get a good idea of what I am getting myself into before I purchase a property. Any and all advice is welcomed. From carpentry to selecting tenants. If you have had rental properties before how did you make out? Was it a profitable venture that you continue to do. Do you own several properties? Is one rental property a handful? Have you ever lived in a duplex with other tenants?


I've not lived in a duplex, renting out the other half. But I do have rental property.

THE single MOST important make or break factor is going to be renters. If they're good, you'll be fine. If they're bad - and many are - you will be in for an absolute NIGHTMARE. Do not, under any circumstances, think it will be a good idea to rent to "rent assisted" people. Frankly, most of them are worse than animals when it comes to taking care of a place. And most of them have worked the system long enough to know that it is almost impossible for you to evict them.

The second most important factor is whether or not you have the tools and ability to do most/all of the work necessary on a house/duplex. If you have to pay a plumber $100 per hour every time there's a little leak or a clog, you're going to go broke. 

The third aspect of this type of venture is your local real estate market, zoning & ordinances, and insurance & taxes. None of us can do more than just speculate about that. Here in Omaha, there are several duplexes that I could buy for well under $100,000. I could rent one side out for $850 per month and live in the other side essentially for free. But that's my situation, not yours.


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## Lavid2002 (Jan 16, 2012)

DrHicks said:


> THE single MOST important make or break factor is going to be renters. If they're good, you'll be fine. If they're bad - and many are - you will be in for an absolute NIGHTMARE. Do not, under any circumstances, think it will be a good idea to rent to "rent assisted" people. Frankly, most of them are worse than animals when it comes to taking care of a place. And most of them have worked the system long enough to know that it is almost impossible for you to evict them.


This seems to be a reoccurring theme from the advice I am getting from people. A few tools I have to protect myself against bad renters are
-application fees
-history with references
-one month lease agreements at first until they establish credit with me
-credit checks
-proof of income

Anything else I should be looking for?


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## jimmyfloyd (Sep 29, 2008)

Lavid2002 said:


> Why don't I just make them pay for utilities? There is a way to seperate utilities between the two halves of a duplex right? Different meters and boxes? How does this work for a central bill for heating? Do the tenants split it? Is that fair or how it is normally done?


Usually if there is a shared heating system, the cost is added to the rent as a flat fee, and it is rented as heat included. The reason this is done is there is no fair way to split it up.

Here's a scenario:

Apartment #1: 4 person family, one of which is elderly. She likes it 78 in the winter and 60 in the summer. 
Apartment #2: Single college student. Saving money, so 62 in the winter and 78 in the summer doesn't bother them. 

How do you fairly split this bill? 

Another option would be to fix the temp for both places so they don't have access to change it. This would be best for a fixed price too, since if in the above example you charges a fixed cost of $50/month, apt #1 would be using way more, and apt #2 would probably use it more since it was included. I know from experience that when I lived in an "All utilities Included" apartment in college, we had 5 computers on 24/7, would leave the TV and lights on, and the heat would be at 72-74 all day in the winter, and 64-66 in the summer. 


Just some things to think about.


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## creeper (Mar 11, 2011)

I've lived in places with shared hvac. I hated having to smell other peoples cooking/smoking
Sorry Dave thats all I've got


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## shadetree (Aug 31, 2011)

Month to month leases for only a lack of history with you may backfire. The type of person who likes the stability of a long term lease is going to be mostly likely to A) stay a long time and B) pay on time. That being said, the type of people who prefer or would be OK with a month to month tend to be a little bit more scatterbrained, and I can almost assure you you're going to need to be pounding on their door for the rent at least one month. If it were me and they had no rental history, I'd just work a security deposit surcharge (say an extra 25%-50% of the security deposit) in to the contract. This way you're catering to renters who potentially have extra cash around which usually translates into good financial habits, which in turn means you get paid on time every month. Your state however may prohibit this.


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## Calgary Renos (Jun 3, 2011)

I would say stay away from a one month or month to month rentals. You get better treants if they are going to sign for a year. Also you are only making money when people are living there. If you have a renter for a month and then it takes a month to rent again plus the cleaning cost of the last tenant leaving your not making any money. If they sign for a year and want to leave early your protected with their damage deposit for ending the lease early.


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## Lavid2002 (Jan 16, 2012)

All very good points. I can see how yearly contracts will bring better tenants. 

I guess I will have to take it day by day, and if I find a house with a single HVAC unit that distributes to the whole house I will decide how I bill then. Is this a typical set up? I would imagine so. How many duplexes have separate HVAC systems? I think that would be an ideal set up, but with higher initial and maintenance costs. 

I have never owned a home so I am very unfamiliar with utility costs. Maybe I could ask an old owner to see utility bills and go off of them. 

How does everyone feel about smoking in rentals? I don't smoke and wouldn't want someone smoking in my apartment. Is this a big turn off for renters?


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## 95025 (Nov 14, 2010)

Lavid2002 said:


> All very good points. I can see how yearly contracts will bring better tenants.
> *One-year leases are very common. In fact, almost a given.*
> 
> I guess I will have to take it day by day, and if I find a house with a single HVAC unit that distributes to the whole house I will decide how I bill then. Is this a typical set up? I would imagine so. How many duplexes have separate HVAC systems? I think that would be an ideal set up, but with higher initial and maintenance costs.
> ...


I think you're on the right track - slow and careful.


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## creeper (Mar 11, 2011)

There will be plenty of non smokers to choose from. Who it will be a big turn off to is the next tenant after the previous smoking tenant leaves. What a huge amount of extra work for you to get the smell out. And if you don't have separate hvac the second hand smoke that wafts into your place will drive you crazy


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## canoes (Sep 30, 2011)

Years ago when we were young, we bought a duplex as our first house, then another and rented first and then a third. It worked out well for us, esp the ones we lived in. When we had 5 units rented, it got to be hard since we both worked and we eventurally stopped being land lords. I tried renting out my house with a manager later and that was a disaster.

Things I learned:

Screen your tenants. Ask for previous landlords ph numbers, verify the landlord has rentals, and call them.
We never did credit checks, but it's a good idea.

The apartment in the unit we lived in was almost always problem free.

I would try to get a copy of the previous utility bills, average them and give the tenant an amt that's half the average as an allowance. If it goes over, charge them more. Otherwise, you'll find tenants in shorts in the winter.
Make the apartments no pets and no smoking. Otherwise, you'll be replacing drapes and carpet often.
Get a deposit big enough to cover hiring a cleaner if they leave it a mess.
Sometimes, you'll need to get it rented before you personally have time to clean it.
Make sure they have tenant insurance (very cheap) and that your agency knows it's used as a rental. 
Being a landlord was a pain occasionally, but mostly it was pretty quiet. We benefited quite a lot financially.


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## Lavid2002 (Jan 16, 2012)

The payout on this question is awesome. I can't thank you guys enough for the help. First thread, and its an incredibly helpful one. Better to learn from people with first hand experience than re-invent the wheel.


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## 1910NE (Sep 5, 2010)

jimmyfloyd said:


> Usually if there is a shared heating system, the cost is added to the rent as a flat fee, and it is rented as heat included. The reason this is done is there is no fair way to split it up.
> 
> Here's a scenario:
> 
> ...


That's what was getting at. And if the cost of heating goes through the roof,...you're stuck paying the difference. Can't exactly shut the heat off on the tenants, or change the lease on them.


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## Lavid2002 (Jan 16, 2012)

1910NE said:


> That's what was getting at. And if the cost of heating goes through the roof,...you're stuck paying the difference. Can't exactly shut the heat off on the tenants, or change the lease on them.


You can't make agreements in the lease that specify that if heating costs go above X and such per month they are responsible for them?


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## Blondesense (Sep 23, 2008)

Lavid2002 said:


> You can't make agreements in the lease that specify that if heating costs go above X and such per month they are responsible for them?


If I understand you correctly, probably not. I know I wouldn't sign that lease. 
How are you going to prove _they_ are the ones cranking up the heat?
Best to have separate utilities if at all possible.


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## Windows (Feb 22, 2010)

The conventional wisdom is to not allow pets in rentals, and for that reason most landlords do not allow them. I have been reading that finding decent rental housing can be very challenging for pet owners. You might find opportunity in making one half of your duplex a pet friendly paradise. Choose appropriate flooring for the unit - fence the backyard, etc. While you may have to outlay more in maintenance and repairs, you will be able to charge more because what you are offering is relatively scarce, and you may find it easier to choose a quality tenant if you are looking at a subset of the general public, rather than the whole class.


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## 95025 (Nov 14, 2010)

Windows said:


> The conventional wisdom is to not allow pets in rentals, and for that reason most landlords do not allow them. I have been reading that finding decent rental housing can be very challenging for pet owners. You might find opportunity in making one half of your duplex a pet friendly paradise. Choose appropriate flooring for the unit - fence the backyard, etc. While you may have to outlay more in maintenance and repairs, you will be able to charge more because what you are offering is relatively scarce, and you may find it easier to choose a quality tenant if you are looking at a subset of the general public, rather than the whole class.


A duplex that allows pets SHOULD be more - at least $50 per month more.

What a lot of tenants do not realize is that a lot of insurance companies won't even write a homeowners' policy if there are dogs on the property. If they _do_ write the policy, they charge a _lot_ more for coverage. 

...and that's not even taking into account the damage that pets almost always do.


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## Tizzer (Jul 24, 2010)

You could say "no dogs". Cats(especially indoor only) seem to be OK pets.
You'll need a good size water heater for each I'd think.
I'd go with hard wood floors for the tenant side. Once a tenant spills something and lets it set in, it's next to impossible to get out after they leave.

Get a deposit, how much is up to you. Take pictures before and after they leave in case they want their deposit back.

I'd try to go all electric if possible. You have to make it as idiot-proof as possible. Someone who doesn't have a clue about a gas stove could have the pilot light go out and blow the whole place sky high striking a match.
You'd better learn the basics of gas appliances if you go that route, as they'll be at your door knocking when something goes wrong.

You should have every right to check for felonies. You don't want child molesters or perverts next door.

Traffic. Loud music. Can or cannot put a satellite dish up... and where.
A 30-60 day notice if they don't plan on renewing their lease.

You want a Master or at least a duplicate key, and make it clear they don't change the lock.


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## sweaty (Jul 18, 2008)

I encourage you to jump in. You can always learn new things. If, down the road, you decide it's not for you, you can always sell it.


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