Determining the value of a duplex before offering it for sale shares very few of the rules used to price a single family home for the market.
What do they have in common?
Well, first neither is worth more than the market is willing to pay. And location and condition influence value further.
But that’s where the similarities end.
House values are primarily determined by things like the number of bedrooms, bathrooms, finished square feet and garage stalls. Of course, location and condition are part of the equation as well.
Duplexes are different.
Duplex values are determined by how much rent your property generates, who pays the heat and how much your other operating expenses run.
Buyers recognize a good value quickly using measures like a gross rent multiplier or cap rate. What constitutes good cap rates and gross rent multipliers is highly market specific. Be sure to consult a local duplex expert to learn what is considered a good buy in your area.
However, if your duplex lends itself more to an owner occupant, determining the value becomes a little less scientific. An owner-occuppied unit is usually different in its appeal than a straight investment. It tends to reflect the care of the owner, and often has more of the amenities a typical home owner would demand.
As a result of the rental income from the second unit, those duplexes tend to be a way for a buyer to afford living in a desirable neighborhood where the cost of a single family home is prohibitive. While most owner occupant duplex buyers are also looking for an investment, their primary goal is to find a place to call home.
So, if a typical single two bedroom family home in the neighborhood is selling for $150,000, a duplex listed at $350,000 would actually be more expensive for the buyer. After all, one-half of $350,000 is like buying a house for $175,000.
After all, why bother with managing a tenant if you can afford a house?