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So on my channel I have done a ton of videos about how to do these duplex conversions, what to look out for, how the zoning process works, and etc. Check those out for the details.
So why are they such a smart strategy?
BRRRR STRATGY
As many of you know about the BRRRR strategy: Buy Renovate Rent Refinance Repeat, duplex conversions work so well with this. Why is that? Because we can jack the value up so high and pull out a lot of money at once.
I will give you a quick little example of what we are doing in our market. We are buying single family properties around the $400K mark. In order to convert it we first check the zoning to make sure we are legally allowed to.
We then check if it meets all the other requirements for a conversion. So this includes: having a separate entrance, enough basement space to fit 2 beds, not too over priced, and legal ceiling heights.
Then we proceed with the renovations. They usually cost between $80K-$100K for us. This is used to convert the house into two units. One upstairs and one downstairs.
This also includes flipping the entire property. So new baseboards, new kitchens, new bathrooms, new floors, paint, appliances electrical, etc. Once everything is factored in we are usually in $90k in reno.
The after repair value (ARV) is usually $600k in my market. We basically raised the whole value by $110K on average in equity. This takes us usually 60 days to do it. Thats crazy right?
This is a really good strategy for BRRRRing. My partners usually get ALL of their capital investment back in a project like this plus the profit.
You can’t do this by only flipping a single family because you cannot jack up the value as much as you can in a duplex conversion. This is why duplex conversions are so smart.
My local market is currently very hot. It is a sellers market. So single family flips (which were my bread and butter) are harder to do now as they are super high in demand. More buyers are coming in and buying them up. They are putting in crazy offers that we can’t compete with.
However for duplex conversions we can still compete as we know what we are going to do to them, which is to jack them up. The other home buyers aren’t thinking like this.
MORE CASHFLOW
So the average single family property that we are doing will cashflow around $100-$200 after all costs. For me that’s cool, I will do those properties all day long because they are easy, boring, and have quality tenants. These are perfect for long term buy and hold.
Duplex conversions however cashflow around $400 even after the refinance and costs. So there is more cashflow, more money to be made in duplex conversions.
EASIER TO SELL
These properties are much easier to sell than a typical multi-family like triplex, fourplex. Once you start getting into those multi-family properties, it’s usually other investors that are buying those. The typical homeowner won’t buy those normally.
So the con is that we are dealing with other savvy investors. They are not going to overpay, or put in crazy offers. The duplexes however are much more easier to sell than those as these can still be sold to the mom and dad, or family. These buyers will still buy the duplexes which is great for us!
They are easier to liquidate, and they appreciate faster than the other multi-family complexes.
MILLENNIALS WILL STILL BUY THEM
The last reason why they are so great, is because millennials will buy them to house hack, which is another great investment strategy.
So if you are a young real estate investor trying to build a name for yourself and a portfolio You could buy a single family home, and convert it yourself. You can then live in the basement and rent out the top floor. So hopefully that will let you live for free.
I wish I did this when I was 22 when we bought our first property. I wish we bought a duplex conversion and lived rent free for those very important five years. That would’ve been cool and would have been a great strategy.
#RealEstate #investing #Duplexconversion
For full blog, go to: http://www.kwpropertypro.com/why-duplex-conversions-are-a-smart-strategy/?preview_id=1501&preview_nonce=9c57e70c02&preview=true&_thumbnail_id=1504
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