Have you ever noticed that many Minneapolis duplexes sell for as much as a fourplex?
Why? After all, if there are more people paying rent, shouldn’t the property be worth more?
See it all boils down to that law we all learned in our first economics class: the law of supply and demand.
There are simply more prospective buyers for duplexes than there are for four unit buildings.
In the years I’ve been a Realtor, I would say that on average, at least 50 percent of the duplex buyers I’m working with at any given time are owner occupants.
Some are looking as a duplex as an affordable way to move into a neighborhood that’s out of their price range as single family home buyers.
Others are looking to owner occupy the property for a time, before moving on to a single family home while keeping the duplex as an investment.
While the prospect of having a single tenant to manage is palatable to most of these owner occupants, the idea of having three sets of tenants to respond to is overwhelming.
As a result, these owner occupants tend to relegate themselves to duplexes, where they compete with investors who are simply looking to earn a specific rate of return on a property.
More buyers in the market for a property always results in a higher price.