For many consumers, duplexes arequickly becoming the answer tothe American dream of homeownership. This is especially true for first-timehomebuyers who find that risingprices put single-family homes beyondtheir reach. Many are choosing duplexes.The purchase is currently advantageouswith the historically low mortgage rates,and can also pave the way for investmentpossibilities. Although 2-familyhome ownership works well for many,it's not always the right fit.
Rising Real Estate
According to a recent report, interviews with real estateagents and other housing expertsaround the country reveal that thedemand for 2- and 3-family homes is rising.Sharon Steele, vice chair of theNational Association of Realtors, claimsthat would-be homeowners in manyareas of the country are priced out ofthe market for single-family homes.
The association says that the medianprice of an existing home nationwiderose nearly 10% in October 2002 to$159,600 from $145,400 a year ago. Insome parts of the country, the priceincreases are actually much higher thanthat. For example, the New JerseyAssociation of Realtors reports that themedian price of a single-family home inthe state was $261,000 in the third quarterof 2002â€”an increase of nearly 17%from the period a year earlier. With figureslike these, it's easy to understandwhy many homebuyers are flocking tothe duplex market.
Increased demand for duplexes isresulting in higher prices in some areasof the country. The article notes that inProvidence, RI, selling prices for 2-familyhomes are rising much faster than pricesfor single-family homes. In the thirdquarter of 2002, the Rhode IslandAssociation of Realtors notes that themedian price of 2-family homes was upnearly 25% from the same quarter a yearearlier. That compares to a 10% price increasefor single-family homes.
Despite rising prices in some areas,duplexes continue to have a big following.The tax benefits associated withhome ownership draws in many first-timebuyers. Also, homebuyers caninclude the income from a rental unit aspersonal income to help qualify for amuch higher mortgage.
Duplex Buyer Beware
Duplexes aren't for everyone, expertscaution. The thought of collecting amonthly rent check might be enticing,but be aware of the responsibilities andlifestyle changes that go along withbeing a landlord. Decide if you want theresponsibility of dealing with tenants,and if you will be comfortable sharing abuilding with someone else.
Experts recommend that buyers conductthorough credit and referencechecks on potential tenants and ask forsecurity deposits. If tenants are alreadyoccupying 1 of the units at the time ofpurchase, you will likely be stuck withthe tenant and the terms of the tenant'slease. Ask the seller many questionsabout the tenant. Make sure you find out about theirrent-paying habits.
Prospective buyers must take intoconsideration the expense and timeinvolved in the upkeep of a duplex. Witha 2-family home, you've got 2 of everythingthat will require repair and/ormaintenance at 1 point or another.
Homeowners should keep a sufficientamount of money in reserve for emergencyrepairs, says John H. Vogel, Jr, anadjunct professor who teaches realestate and nonprofit management at theTuck School of Business at Dartmouth.Other experts suggest setting up anemergency fund to help pay the mortgagein case the rental unit is unoccupiedfor several months.
Anita Carter, an associate broker forCharles H. Greenthal Residential Sales inManhattan, advises not to let theromance of home ownership delude youinto making a decision that might not beright for you. Do your homework. Besure to get input from people who ownsimilar homes in the neighborhoodwhere you're looking to purchase. Thentake plenty of time to contemplate yourchoice.