How can it be that a duplex listed for sale for $50,000 more than another can actually be a better investment?
If you’re new to investment property, or considering buying one to live in, this may seem illogical. How can a more expensive property actually cost you less?
There are several ways.
The first is often overlooked by first time duplex buyers. And that is the number of bedrooms in each unit.
Many times when a property looks to be in a good location and condition but the price seems low, it is because the property simply isn’t and can’t generate enough rent to warrant a higher price.
After all, a duplex, triplex or fourplex is an investment property. Worth is determined, in large part, by the amount of revenue it generates. A property with fewer bedrooms than another simply won’t demand as much in rent.
Another possibile explanation for a low price on a income property may be there is substantail deferred maintenance to be done. Bad furnaces, old electrical panels and roofs at the end of their life expectancy are hard to spot in online photos. In other words, a property may sell for $200,000 and then require that the buyer make $50,000 in repairs; resulting in the same amount of investment, or price, as the more expensive property.
A duplex may also be in an undesirable location such as next to a train track, under a runway, near a major highway or have countless other challenges that are the reason for the price.
We all want to feel like we got the best value possible. It’s important to remember, however, that even though a property has a low price, it may not be a great investment.