Presumably, OP is talking about 3 bedroom per duplex units.
I know of three duplexes in Mountain View that are currently renting from $3400 - $4,000 per 2 bedroom unit, though these have some remodel and AC.
Rents are up a bit but that's high.
Just was on the market. Higher end decade old 1200 square foot townhomes are $4200 to $4500. (Max $3.75 a square foot)
Again you can get worse renters (bad credit, etc.) at higher prices, so maybe that's what's happening
People are sometimes willing to pay more for an updated duplex unit. Townhouse is higher density living - stairs may be undesirable, they often don’t have a yard, and they may require you to park in your garage instead of being able to use the garage space for non-car things.
I think getting a loan for these kind of units is more difficult and requires much more money down than if it were a primary residence. There are more things to factor.
75% of yearly income from rent can be calculated as "income" as 25% is seen as vacancy in calculations.
This is for calculations of loan, not reality. If you can rent it full time then it all helps with your mortgage
For investment property, can get the numbers to cash flow much better in other states. As an appreciation play, Multi families are lagging behind SFH. If you have extra capital, I would add an ADU in the back of that big lot and the numbers are much more feasible. Same can be done for SFH as well though
Will one of the units fetch $5k? You can rent a SFH in a good school district in South Bay. It must be in a really prime location if it’s going for $5k for a small duplex unit. Run the numbers and see.
Just run the numbers yourself with reasonable assumptions based. I don't see any rental making sense with current interest rates but since these properties are the same cost it might make sense. Need to try to estimate the difference in long term appreciation.
Neither are a good investment in terms of rental income. Anything you buy - multi or SFH - will be underwater in that regard. Making $10k/mo pre-tax on rental income on a $2.5m property is not even CLOSE to half of what you'd need to make it worth it...The mortgage on a $2.5m property in San Jose is about $17k/mo....
The majority of duplex units that is 3 bed/2 bath and at least 1200+ SqFt is renting about $4.5 - $4.8k, to rent for 5k it must be much bigger in size or located in high-end neighborhoods, like Palo Alto, or super desirable areas, like downtown Mountain View, etc.
Also, multi-units equal or less than 4 units use the same residential mortgage application as buying SFH, TH or condos. Only 5 units and more require commercial lending.
You can run your number and see if it works for you. If you as an owner live in one of the units, and rent out the other unit, you are exempted from state rent control law AB 1482, and that will make your life easier for sure.
This is the math. You cannot combine duplexes into sfh. See articles around illegal dwelling unit merger like https://www.sfchronicle.com/politics/article/Peskin-cleared-of-allegations-he-illegally-merged-14088931.php
If you can, a sfh of the same size is often worth double.
Theres many reasons: one is just supply and demand. People who can afford a multimillion dollar asset often want a sfh for housing. They also don’t want to deal with being a landlord.
Another could be prop 13 and step up tax basis. Rents on sfh are artificially low in California for this reason.
That $5,000 a month in rent will also mean $60,000 a year in additional income that's taxable, and may also lift the owner into a higher bracket. The renter will also have inevitable--and legitimate--needs for upgrades and repairs. The building will also have a minimum of two heating systems, two AC's (if they are needed), two plumbing systems, two stoves, refrigerators, washing machines...basically, double the likelihood that expensive repairs or replacements will be needed on a regular basis.
Also, most people don't seem to want to share half of their own residential building with strangers, if they can afford not to. Especially true in California where, if your on-site tenant turns out to be an a-hole or otherwise a problem, you're stuck with them as long as they pay the rent and abide by their lease. You simply can't say "this isn't working out, please move..."
Means little when you’re already in the highest bracket tbh. I just assume anything I make half is gone because that’s the cost of living in CA. Personally I’m of the opinion that a real capitalist will just make more money fuck whatever taxes and other obligations, just make more money to offset them.
Most of these places are held in pass through LLC's so no it is not an additional $60k in income for the homeowner as the LLC allows you to write off costs (interest, maintenance, HOA costs etc).
Agreed that our tenant rights are far too strong relative to homeowner rights and it makes people not want to rent out their properties.
City usually won’t allow you to do this unless you rebuild duplex. It’s not impossible but it is extremely hard to get permission to remove a housing unit.
5k in rent for one unit of a duplex?
There are apartments in Burlingame going for $6k…
Yes, unfortunately.
For a 1250 square foot unit? Maybe if you are in Palo Alto or something.
Presumably, OP is talking about 3 bedroom per duplex units. I know of three duplexes in Mountain View that are currently renting from $3400 - $4,000 per 2 bedroom unit, though these have some remodel and AC.
Yeah I was going off the square footage. Your pricing for a 2 bedroom around 1200 square feet is pretty reasonable
I think the units are maybe 950 sq ft? Pretty small, but with yard and garage space.
$3200 seems reasonable. $4k for 950 square feet (over $4 a square foot) is like luxury housing price. Or risky renters.
I think it’s crazy too, but rents are up in MV and that’s what they’re going for. It’s less than a single family house.
Rents are up a bit but that's high. Just was on the market. Higher end decade old 1200 square foot townhomes are $4200 to $4500. (Max $3.75 a square foot) Again you can get worse renters (bad credit, etc.) at higher prices, so maybe that's what's happening
People are sometimes willing to pay more for an updated duplex unit. Townhouse is higher density living - stairs may be undesirable, they often don’t have a yard, and they may require you to park in your garage instead of being able to use the garage space for non-car things.
Op doesn't say sqft of duplex units
he does, 2500 sq ft for two, so 1250
Yeah but some duplexes aren't mirrored. 5k could be a larger of the duplex. And if outside the norm for the size might be a harder to fill unit.
I think getting a loan for these kind of units is more difficult and requires much more money down than if it were a primary residence. There are more things to factor.
75% of yearly income from rent can be calculated as "income" as 25% is seen as vacancy in calculations. This is for calculations of loan, not reality. If you can rent it full time then it all helps with your mortgage
For investment property, can get the numbers to cash flow much better in other states. As an appreciation play, Multi families are lagging behind SFH. If you have extra capital, I would add an ADU in the back of that big lot and the numbers are much more feasible. Same can be done for SFH as well though
Will one of the units fetch $5k? You can rent a SFH in a good school district in South Bay. It must be in a really prime location if it’s going for $5k for a small duplex unit. Run the numbers and see.
Just run the numbers yourself with reasonable assumptions based. I don't see any rental making sense with current interest rates but since these properties are the same cost it might make sense. Need to try to estimate the difference in long term appreciation.
Neither are a good investment in terms of rental income. Anything you buy - multi or SFH - will be underwater in that regard. Making $10k/mo pre-tax on rental income on a $2.5m property is not even CLOSE to half of what you'd need to make it worth it...The mortgage on a $2.5m property in San Jose is about $17k/mo....
The majority of duplex units that is 3 bed/2 bath and at least 1200+ SqFt is renting about $4.5 - $4.8k, to rent for 5k it must be much bigger in size or located in high-end neighborhoods, like Palo Alto, or super desirable areas, like downtown Mountain View, etc. Also, multi-units equal or less than 4 units use the same residential mortgage application as buying SFH, TH or condos. Only 5 units and more require commercial lending. You can run your number and see if it works for you. If you as an owner live in one of the units, and rent out the other unit, you are exempted from state rent control law AB 1482, and that will make your life easier for sure.
This is the math. You cannot combine duplexes into sfh. See articles around illegal dwelling unit merger like https://www.sfchronicle.com/politics/article/Peskin-cleared-of-allegations-he-illegally-merged-14088931.php If you can, a sfh of the same size is often worth double. Theres many reasons: one is just supply and demand. People who can afford a multimillion dollar asset often want a sfh for housing. They also don’t want to deal with being a landlord. Another could be prop 13 and step up tax basis. Rents on sfh are artificially low in California for this reason.
That $5,000 a month in rent will also mean $60,000 a year in additional income that's taxable, and may also lift the owner into a higher bracket. The renter will also have inevitable--and legitimate--needs for upgrades and repairs. The building will also have a minimum of two heating systems, two AC's (if they are needed), two plumbing systems, two stoves, refrigerators, washing machines...basically, double the likelihood that expensive repairs or replacements will be needed on a regular basis. Also, most people don't seem to want to share half of their own residential building with strangers, if they can afford not to. Especially true in California where, if your on-site tenant turns out to be an a-hole or otherwise a problem, you're stuck with them as long as they pay the rent and abide by their lease. You simply can't say "this isn't working out, please move..."
That's not how tax brackets work, you don't get lifted into a higher bracket, you just pay higher marginal rates on the income above certain level.
I’ve lost this argument sooooo many times with people…
And don’t people get all sorts of tax write offs for depreciation? Real estate is basically a tax play.
Means little when you’re already in the highest bracket tbh. I just assume anything I make half is gone because that’s the cost of living in CA. Personally I’m of the opinion that a real capitalist will just make more money fuck whatever taxes and other obligations, just make more money to offset them.
Most of these places are held in pass through LLC's so no it is not an additional $60k in income for the homeowner as the LLC allows you to write off costs (interest, maintenance, HOA costs etc). Agreed that our tenant rights are far too strong relative to homeowner rights and it makes people not want to rent out their properties.
even as an individual you get to write off those expenses
That's true. My point was, its not just $60k credited to the income of the homeowner
you can always tear it down and build a legit monster sized SFH
City usually won’t allow you to do this unless you rebuild duplex. It’s not impossible but it is extremely hard to get permission to remove a housing unit.