As a duplex and small multi-family property agent, I get a lot of questions I can’t answer.
“What’s a good gross rent multiplier (GRM)?”
“Doesn’t a fourplex cash flow better than a duplex?”
“Don’t all duplexes cash flow?”
While I welcome these questions, the problem is there isn’t a universal answer for any of them.
The value of a duplex, triplex or fourplex is determined by a number of factors, including but not limited to its expenses, the number of bedrooms in each unit (which affects the amount of rent collected), the location and the condition of the property.
For example, if a property has a low GRM, one might automatically think it’s a good investment. However, the problem with this measure of value is that it doesn’t factor in expenses.
If property taxes are high, the boiler’s shot and you can see sky through the ceiling of the third story apartment, odds are it’s not only going to not cash flow in the way you want, but it’s going to require a lot of your cashout of pocket, as well.
The best answer as to whether or not a duplex is a good investment can be found with a Realtor who specializes in that kind of property. He or she should be able to work up an income property analysis spreadsheet for you to help you objectively determine whether or not the property meets your financial goals.