What Kind Of Minneapolis Duplex Buyer Are You?

One of the most difficult things for many Minneapolis and St Paul duplex buyers to wrap their heads around is that there different types of duplexes.

When I say that, I don’t mean an up/down duplex and a side-by-side. Rather, I’m referring to the properties bought and sold strictly for cash flow, vs those purchased for the buyer to live in.

Shouldn’t all investment properties cash flow?

Yes. Except for duplexes.

Many duplex owner-occupant buyers are looking for everything they may seek in a house, except in a duplex.  By purchasing a duplex instead of a single-family home, the rent from the other unit helps offset the cost of the mortgage, taxes, insurance and maintenance. This often allows buyers to live in a neighborhood where they couldn’t afford to bear the entire burden of a single-family home.

The duplexes these buyers choose often have upgrades and finishes comparable to single family homes. For example, they may have updated kitchens and baths, central air, ample garage space for both units, and be near amenities likes lakes, trails, popular shops and restaurants.

And while these owner-occupants understand an investment property should cash flow, many are happy simply to break even. They tend to see the property as a long-term buy and hold, rather than a means of immediately quitting their day job.

The buyer who is strictly seeking an investment, on the other hand, tends to focus more on the immediate return a property can give on their investment. Updates are often made of necessity, or based upon the amount of increased revenue they can help generate.

For example, money may be spent adding a bedroom rather than granite countertops, or the common areas may look more tired than a building where the owner lives there. They simply don’t generate enough revenue to warrant more investment.

As a result of location and condition, these duplexes typically have different values. Buyers looking to owner-occupy are often willing to pay a premium. Their financial analysis spreadsheet comes down to what their monthly out-of-pocket expenses will be, while an investor buyer is looking for a rate of return.

Duplex owner-occupant buyers and investors have different goals. That’s one of the best things about real estate; it can be tailored to whatever works for the person buying it.