If a duplex has similar total square footage, # of rooms, neighborhood, condition, school, etc as a single family home, the duplex will tend to sell at a lower price. That's because a single family home has almost universal appeal whereas duplexes/multifamily will only appeal to a fraction of the population.
The biggest problem with comparing with your parameters is that legal duplexes are not found in the same neighborhoods as single family homes for the most part. The city has to zone for multifamily homes so you can not put a duplex in a single family home neighborhood. That being said, right now multi family homes are selling for less than single family homes in similar neighborhoods. For example, I just sold a duplex in Cupertino in the Monte Vista area. It was in a very nice neighborhood of duplexes with Stevens Creek Elementary and Monte Vista High. It has 2760 sq ft on a 9K lot and sold for $1,150,000. A similar sized single family home on a similar lot would probably have sold for $1,250,000 to 1.3
I suggest using a a property search like the Home Scouting Report where you can map comps of a specific type and see the differences for yourself.
Second, when everything is all said and done, a properly stabilized, professionally managed, income property typically will have net operating expenses in the range of 35% to 50% of the gross income. The older the property is, the closer one's expenses will be to that 50%. There is plenty of research available both on- and off-line for one to check out on this. You could also confirm this with any reputable property management companies. Furthermore, many investors (myself included) use this data to quickly assess how effectively a property is being managed.
Third, the yield (ROI in this case) is ratio formed by the CFBT (the numerator) and the total cash invested (the denominator [which included the down-payment, closing related costs, and any immediate repair costs if applicable]). If one is looking for a ROI of at least 10%, then one has to either purchase a property for at least a 10% cap all-cash, or one has to structure one's deal in a way that does the following: caps the initial cash invested, acquires the property at a high enough cap, and sets up the financing with with the right rate/terms.
I could write a lot more on this, but the goal is to show you that good deals are made--not found. It's probably good for you to sit down with a commercial agent to get a feel for that s/he has to offer, but I'd strongly recommend that you'd also attend at least one of your local REI club meetings, and network with several other investors, before you buy anything. They'll be able to tell you what they're buying, where they're buying it, why they selected the area, and how the investment(s) is/are working out for them.
Keep in mind that the numbers always work on paper; it's your job as the investor to ensure that they'll also work in reality, because it will be your dime on the line.
Well, some other things come into play when evaluating income property. IF you work with a Commercial Realtor they can explain how we use formula's to determine the value of income property.
We have a formula that takes into consideration the income the property brings in, then subtracts the price that was paid for the property,taxes, as well as what it takes to maintain the property. That way, you can clearly see what kind of investment you are making, and what the return will be.
The better the return, the highter the value...all other things taken into consideration.
Let's say that you could get $2K/month/side. The following numbers are an estimate of what I'd be looking for in the deal; the actual numbers might be a little better/worse.
gross rent = 2($2K)(12) = $48K/year
NOE = $24K
NOI = $24K
min CFBT = 2(12)($100) = $2.4K
max debt service = NOI - CFBT = $24K - $2.4K = $21.6K/year (or $1.8K/month)
DCR = 1.11
max purchase price (at 8% cap) = NOI/.08 = $24K/.08 = $300K
Interesting enough 0.008($300K) = $2.4K, so Dale's figure for rent is in the same ballpark. (I'll have to play with that some more. :) )
Another factor to consider is planned use. Are you considering living in one unit and renting the 2nd? From a pure investment, I like to use the 0.8% rule, that is, the collected rents should equal 0.8% of the purchase price each month, assuming 100% occupancy, to be considered a viable investment. There aren't many places in this county that will give that type of return.
I hope this helps. If I can answer any questions, please feel free to e-mail me at Dale@DaleWarfel.com.
Real Estate Consultant
Keller Williams Realty