Real Estate

Double trouble or easy entry?

Buying a duplex can be a way to get one's foot in the door

Buying a duplex, or any multiple-unit property, could be the first step to single-family home ownership, local Realtors say.

Fewer people are competing to buy more than 20 duplexes on the market in Palo Alto, Mountain View and Menlo Park than to buy comparably priced single-family homes. Multi-unit property prices have been slower to recover from the housing market slump, so first-time homebuyers -- or fledgling investors -- are in a position to "buy low," Nancy Stuhr, a Los Altos-based Coldwell Banker Realtor, said.

"It's a great way to get your foot in the door," Stuhr, with 20 years' experience in Mountain View real estate, said. "Most of the people that I see interested in (occupying one unit and renting out the other) are interested in building their net worth while moving up to a single-family home."

While some duplexes are comparatively priced to or even more affordable than a single-family home, financing duplex purchase may be more expensive at first, DiPali Shah, a Coldwell Banker, Palo Alto, Realtor, said. A duplex buyer would need to pay between 25 and 35 percent of the total cost of the home as a down payment. The steady income from having tenants, however, helps compensate for the higher initial cost, especially in the low-vacancy areas on the Peninsula, she said.

"You really need more of a down-payment for a multi-family residence, but the extra income really pays off," Shah said.

Duplex properties are often sold by retirees, who spent some time as owner-occupants and then traveled, local Realtors said. Such an arrangement helps owners build their income, write off some maintenance costs as business expenses, and ensure a steady monthly income, Stuhr said.

New buyers can build their home equity and pay off the mortgage faster because of income from tenants, she said.

"The advantage is that you have someone helping you with the mortgage," she said.

First-time investors in multi-family residences should keep in mind, of course, that the flip side of this income is taking on the responsibility of becoming a landlord. Maintenance costs that might be put off for a single-family property become more pressing matters.

"Being a landlord can sometimes be challenging, so a prospective buyer has to be up for the pros and cons associated with becoming a landlord," Shah said. "It's like having a second job."

Living in a unit beside tenants -- becoming a neighbor -- means being available to address any concerns, even at inconvenient times.

Shah's friend and associate Walter Kanytski, who worked as an engineer when he first bought a five-plex on Cowper Street in the 1980s and lives in one unit on the property, said being a landlord and being responsible for maintaining his neighbors' units initially presented a challenge. "It was OK, though: I even had fun."

Tenant decorum can be variable, and landlords may need to clean the messes of their tenants' mistakes and be privy to their personal tragedies and failings. Kanytski recalled a tenant whose interpersonal life was turbulent. A playful, friendly character, he didn't have any anger towards her and remembered her fondly. It may take a certain disposition to become a neighbor-landlord, Shah said.

"You have to stay on your toes," she said.

Kanytski's advice for potential investors was the oft-repeated real estate slogan "location, location, location!" Buying a well-situated multi-family residence helps to ensure that tenants pay their rents reliably and establish friendly relations with their landlord, he said.

It's not a struggle to keep his units occupied in the sought-after Palo Alto housing market, Kanytski said, with his last period of vacancy more than a year ago. And while his decision to deal with rent personally means he must return from travels every month, the steady income has translated into trips to Ukraine, Greece and Turkey in the last year.

"I wouldn't be as well off if I hadn't invested," he said.

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