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Everything You Need to Know About Duplexes

Ryan Rodenbeck

Ryan started in Austin real estate as an investor in 2001. He looked at all investment opportunities — Austin foreclosures, condos, homes for sale...

Ryan started in Austin real estate as an investor in 2001. He looked at all investment opportunities — Austin foreclosures, condos, homes for sale...

Sep 13 27 minutes read

Show Notes: 

Everything You Need to Know About Duplexes


Ryan: Hey guys, welcome to our broadcast today. We've got a very exciting presentation that we're going to go over with you guys; it's something that we know a lot about. This episode is going to be: "How to find, but and renovate in cash flow duplexes in Austin". So join us in just a second as we tackle these issues on our broadcast.

Intro: Welcome to "Behind The Scenes With Spyglass Realty" with Ryan Rodenbeck and Matt Edwards.

Ryan: Always some exciting news. Alright, let's get into the gist of the show, which is you know basically one of my passions are duplexes, and I own six duplexes, I've probably owned about 20 in my life, but I think that duplexes are one of the biggest paths to building equity slowly. So before we get into that, if you are watching this on Facebook and you want to subscribe to our future broadcasts…What do we type?

Kelly: Agent.

Ryan: Type in "Agent" in the remarks, okay? And you'll be subscribed to our future broadcasts. If you're watching, give us a "Like" on Facebook and if you're watching on YouTube you can subscribe, like, comment if you have any questions about what we're talking about. And Kelly's going to put this link into the comments below in just a minute, but we cover all… Everything that we go in today plus more we have an e-book that we've written and you can find that at So-

Matt: Oh yeah I need to read that.

Ryan: Yeah well I just got through writing [laughter], so… All right so the very first thing that we're going to talk about is: "How to find duplexes in Austin". And your typical way to find duplexes are on MLS through an agent. By the way guys- I can't stress this enough- you really need a real estate agent that you need… First you need a real estate agent. But first you now beyond that, you need a real estate agent that knows what they're doing when it comes to investment property. I can tell you, I won't name any names of any companies here, but I got a call from a major company in California that has an office here in Austin with, I don't know, 300 agents in it. And the guy's like the director of this major company and instead of using one of their agents, they used us, because he's an investor, he knows investment property. When it came to the Austin market he wanted to find someone that specializes in investment. So you know this is from a broker in California that knows what he's doing, he knew he needed a local investment expert. Matt's working with this guy right now.

Matt: Done.

Ryan: Done. So first is MLS, obviously, we'll go into the ins and outs of that later. Another way that you can find duplexes rental property it through wholesalers. Now what I'd like to tell you about wholesalers is, Matt and I and anybody that's in investment residential property, they are keyed into all of the wholesalers in town and they probably get you know-

Matt: Okay so let's put the brakes on right there. So what is a wholesaler?

Ryan: Good point [chuckle].

Matt: So it is basically they flip contracts. So they do a lot of direct mailing, SEO, things like that for distressed homeowners.

Ryan: Door knocking.

Matt: Door knocking. Several different ways they get leads and then what they do is they go out, they get the property under contract and then they blast that out to their network of investors and agents, and then you can evaluate the property. They do find some good deals, but I'm not the biggest fan on how the operate, because they put such stringent timelines on evaluating the property, looking at it and then writing an offer. And it's so quick sometimes I just… Even if it's a good deal, if I have to stop what I'm doing because I get it at noon and they need to know by five-

Ryan: It's a little though.

Matt: It's tough because for one you're not going to be able to do your due diligence and nine times out of ten you have to stick a 5000$ deposit down and it's nonrefundable. 

Ryan: Right.

Matt: And all the properties are as is.

Ryan: That's right, but I will tell you this is not for the faint of heart here, but I bought at least five homes are duplexes from wholesalers. What you need to know is that about 90% of the properties they send you are not going to work for one reason or another. And here's another thing I'd like to say is, what they're doing in most cases is they're promoting these properties as being flips. Well, we're not talking about flipping so you'll have a bigger percentage of these that are better buy and hold, and that's right that they always sort of like "Rush, rush, rush, rush", but I had one all me when I was on vacation like, "It's going to go at five o'clock", and I'm like, "Sorry man I can't make it". And they call me the next day coming three times the next day. So you've got to take it a grain of salt be like, Gideon is an agent that's going to be able to evaluate that property, you will lose your 5000$, so you can do one-

Matt: And I have negotiated lower than 5000, but I just told him that this is not going to happen, and to their credit they said, "Well what's going to work?" and I told them, and they said "Okay, we can do that."

Ryan: It's a good point. I've had a property that there's no negotiations at all supposedly, and I’m like, "Look you've got to knock another 5000$ off of this or we're gone", and we didn't do 5000$, more like 25,000$. But the point is that's one good avenue, when you're looking for duplexes you need as many different sources as you can. The third one is going to be for sale by owner. Now with for sale by owners, again… Oh by the way with the wholesaler what you really need to know is that your agent is looking out for you, whatever that price is they stack the commission on it. Same thing with for sale by owners. For sale by owners are very rare but I thought I'd mention them. And the fourth thing that I-

Matt:  I got a duplex in the spring.

Ryan: Oh, right.

Matt:  For sale by owner.  It was about 60,000$ under market value, yeah.

Ryan: Yeah. Again we talk about these things being rare but they're not as rare as you think. So the last one is direct mail, this is the needle in a haystack, unless you're just pumping out tons and tons of direct mail, but I've had an owner or a buyer that I've worked with over several duplexes and he was doing it himself. I bought it off of direct mail. I bought two off of direct mail. But one of my investors basically called me like, "I got this property, I want you to represent me", I've represented him in two more before, and we went in and I was able to find a few things that he would not have known that he could get in some money off of it. There was some [incomprehensible] that was supposed to be done right and it wasn't so we knocked a few thousand dollars off of that.

Matt: Direct mail can work but you have to have a game plan and it's extremely tedious.

Ryan: And you have to be consistent. The same thing with farming for real estate agents, if you send out one postcard to a neighborhood you're not likely to get someone to call you. You have to do it over and over and over to the exact same places. And there's a technique to that, again, we can help you with that. Before we move into our next little segment of the duplex buying process, I want ot remind you guys to go to and I think Kelly's got it already in the comment section, and then you can download our free duplex buyer guy, this is all of this information and a lot more. Next thing: Evaluating a duplex. I was talking to a friend of mine this morning he was like, "Man there are no duplexes in the market". What I want you to understand with this is that… He said no duplexes, no cash flow duplexes on the market, so what I want you to understand with this is that on the surface these duplexes, the price may look good, the rent is going to be bad, it won't cash flow. So what we're looking for is the potential in a duplex, the after repair rent value as it is. So when you're looking at that you're looking at, and I'll give you an example, your average duplex in Austin that's kind of run down and has a good price is about 275. The rents on in are going to be anywhere from 1,800 to 2,100, not a great cash flow product. But what you’re going to want to do when you evaluate this property, is you’re going to want to pull comps and I say comps, you’re going to want to pull lease comps for repaired properties, repaired units. And I can tell you from vast experiences, when you’re looking at a duplex even the ones that had been renovated are probably going to be a little undervalued, and the reason is because they’ll hire some property manager that goes in with their camera phone and just looks… There’s not presented to the market. We do beautiful renovations on our duplexes, and maybe not during the broadcast but at some point we’re going to put a link into some of our before and after videos of that-

Matt: Oh, didn’t mean to interrupt this.

Ryan: Go ahead.

Matt: And so what he just talked about goes back to even if you have an agent that you’ve worked with on just purchasing a house or selling a house, doesn’t mean that agent is right to represent you on a investment or a duplex property, because there’s a lot of things to look at as I built out kind of my system of evaluating properties, it goes through looking at what to rent for now, what are rent comparables right property, meaning the condition. Then I look at post renovation rents and post renovation value and all of that goes into several different spreadsheets, so basically it’s a pro forma based on where it sets today and where it could be along with what would it cost to renovate this property. All that goes in and it spits out the numbers and we have them as is today and then what it could be.

Ryan: Yeah, absolutely. And a thought just occurred to me about that, when we manage property we don’t manage property for anyone else, and the reason I thought about it is that I don’t manage properties, I’m a horrible property manager. It’s the same thing with a residential agent that has no experience in investment property shouldn’t be doing investment property. I would not be able to manage a property because that’s not what I do. But what we do is we hand that off to someone, if they’ve only got one or two properties, we give them a form that shows you how to do it. And Sunny, if you’re watching, no big deal if you can’t find this, but if you can find the link, we have a link somewhere in our website, “DIY management”, and it’s all the tips and practices we use to manage our own property.  So finding the comps of the after repair value, what we found is a typical scenario, 275,000$ duplex is going to run from 1800 to 2100, we put in about 14,000$ per side. Now that’s kind of the uber, you can go less than that, I’d say about 10,000 per side and we’ll get into renovation in just a second, but the rent will go up from anywhere from 800 to a 1000 or 1100, 800 per side to 14,000, 16,000 per side.

Matt: And I’ll kind of go back, Ryan said at 18,000 to 21,000 I think he meant to say 800 to 12000.

Ryan: 800, 12,000, right.

Matt: [chuckle] Just so no one gets confused on their numbers.

Ryan: You’re here to keep me on track, right. So that’s how you evaluate a duplex, so most cases if the rent justifies the price, it’s going to be in a really shitty area and you don’t want that. So you want something that’s going to be a mix between cash flow and appreciation.

Matt: And cash flow you can look at it, it may not cash flow but depending on how they’re buying the property, if they’re using a mortgage, okay what’s the mortgage rate, what’s the percent they’re putting down, and then you have to figure out, they’re monthly mortgage payment is going to be X, then you look at the taxes on the property, then you have to factor in insurance, operating expenses, things like that and vacancy rates.

Ryan: Yeah, right.

Matt: And so once you factor in all of those, you can get pretty close to what it’s going to do on a monthly and yearly basis.

Ryan: Absolutely. And we have those performances; if you ever need it just drop me a line. The next thing that I’m going to go over is an inner ebook. We have a formula for writing offers when you’re not in a multiple offer situation and a formula for writing offers in a multiple offer situation. For the sake of time, we’re just go into a multiple offer situation, because most of the duplexes that are good are going to go into a multiple offer situation. And I have a whole other video that Matt and I did about writing an offer to multiple offer situations, so we’re not going to spend a whole lot of time on that, but I’ll go through it really quickly.  And you know this as well, you’ve done several of these, multiple offer situations, obviously and aggressive price. What is that price? Who knows. Number two, we always have… We always write in the seller's pick for title policy or really with the listing agent’s pick for title policy. That’s just one of these things in Austin that you don’t want to mess with. Agents are really picky about it and I am too as a listing agent. I worry that we have a process that goes with our title rap. And it just makes things smoother and if you’re going to write an offer and put… If the agent’s going to write an offer and put their choice of title rap, it just… That shows you’re not going to be very easy to deal with. A quick close date- You want to go as quick as possible, quick as your lender will allow. And then finally if you’re going over the list price, you’re going to put the difference between contract price and appraisal price. So I’ve got one more trick with that that I do sometimes- we write really aggressive offers as far as the terms. And we have a reputation for being easy to deal with. So what I do is I will tell the listing agent that if my offer is not the best, and you think my terms are great, I would encourage you to talk to the seller and have them counter me with the price that you want. And then I can go back to my buyer, if he likes it he likes it and he will take it. If not then go to the next guy. It’s a great trick for that.

Matt: Right, and then last couple I’ve done have all been multiple offers and one of them was actually below the list price, and ours was the lowest offer, and we still got the deal. And the two things I’ve really started to do… Well, I’ve done one of them for quite some time, I really honed in on the other one as well, to win this things is I try to do as much due diligence as possible to find out the seller’s needs, what kind of situation the seller’s in. So if you can figure out what they need, I can crack the offer based on that as well as all of my communication with the listing agent and then once I send the offer, I send a very detailed email communicating my background and the seller- or my client’s -background, to solidify-

Ryan: Yeah, your company’s background.

Matt: Yeah to make them feel comfortable, and then I always call follow up and sell myself and the client and the company and say, “Hey this is not our first rodeo”, and that goes a long way to making the listing agent feel more comfortable.

Ryan: Yeah.

Matt: That you’re going to follow through. Because there are certain things a lot of people do, especially in the investing world, to drive listing agents crazy, and if you can communicate that you will not do that and be upfront with them, nine times out of ten if it’s close and you’re a couple thousand bucks off, you’re going to get it.

 Ryan: Yeah. Absolutely. And I think it sounds like fluff when people talk about finding out what the seller’s needs are, but you just never know. The act of calling another agent and asking that in itself gives you a point. So I’d highly encourage you to really not… We see this all the time, and one more thing that I thought of when we get these multiple offers, so we deal with a lot of listings, I’ve had twenty something offers before, you have too, right? If you’re an agent or you’re a buyer or not working with an agent, which you shouldn’t be, but if you’re going to send an offer with really aggressive terms, send in the email not just the contract, but the bullet points to those terms.

Matt: Yeah because reading 20 contracts it’s not fun.

Ryan: No. Professionalism and laying everything out for the listing agent is going to help your case. So we’re going to get into the renovating part of it. So: renovating a duplex to cash flow. Before I do, if you are watching on Instagram, the last couple days we posted renovated duplex on our profile. If you’re watching this on Facebook, check out our Instagram. If you’re watching it on YouTube, check out our Instagram. We’re going to have a link below, Kelly would you put a link to our Instagram profile? Oh, good deal. So-

Matt: We’ve got a new one coming up that’s about to get renovated so we’ll film it and bring an updated one for fall of 2018.

Ryan: Yeah, absolutely. And what I want to tell you is that every one of the duplexes that we have in our profile the last two days, are ones that we have renovated. I didn’t put that in the pictures, but oh well.

Matt: And renovation is not that difficult.

Ryan: It’s not that difficult but you have to be mindful for it. So what we saw when I got into this business in 2004 was that every duplex…The common thread around duplexes in Austin was that an owner when it turned over would do the bare minimum in order to get it rented. Your typical duplex has popcorn, crappy Formica, linoleum kitchen and some shitty carpet that’s been ran over like five times. So it’s very normal for a tentative to wear and tear on that property, and  I have owners- when I was in property management years ago- that would try to shampoo the carpet seven times. Well, as the value started going up in Austin, you would see people… The only way to make a duplex cash flow was to renovate it. Now I want to tell you one more thing about duplexes while I’m at it, is that I think they’re so valuable and the reason they’re so valuable is that they’re not making them anymore. People will say, “Oh they’re all over Zilker” or “They’re all over South Austin.” No they’re not, those are duplex condos. And I think my opinion is that they’re almost recession-proof, because it’s not cost effective to build a duplex, but it’s very cost effective to renovate a duplex.

Matt: Well for one you need a lot that’s over 7,000 square feet and those are far and few between that actually hit the market, and with the cost of land, cost of construction and all of that. By the time it’s said and done it makes no sense to rent that out when you can sell it and make a nice profit on that deal. Selling them as condos, so individual units.

Ryan: Yeah and I have a theory that in 10 years there’s going to be even fewer duplexes, because like you said- the lot size. When we talked before about evaluated duplex, we’re wanting to bring the value up, and not just the value in the rent, but also in the value of a lease. So the things that we do, we put these vinyl plank floors, they’re glued down floors, they look like wood, they look great. We scrape the popcorn, we put quartz countertops in them, which the cost of quartz is going down, and stainless steel appliances. So if you were to take a make… Do a make ready on a duplex with this set: Popcorn and paint and same old appliances, you’re going to spend anywhere from 5000$ to 7000$ per unit. We’re spending about 14,000 because we’re doing that top end one. You can cut a few corners and go for about 10,000 or 11,000 by- IKEA makes this countertop that’s got a Formica top, but with a stainless rim on it, and it’s 99$ per eight foot.  And it looks really slick; we put usually a subway backsplash. So we’re spending a little bit more but not that much more, we usually get our appliances from Lowe’s: Brushed nickel, fixtures and knobs, and we really make it good. One of our core values here at Spyglass Realty is that design matters, and I can tell you it really really does. It makes a big difference. Not only does it bring the lease up and bring the value up, but it also gives you the best tenants that are going to stay longer. And it’s big, so we want to tell you one more thing about financing. Financing and how we built an equity building machine out of buying duplexes. So right now an FHA owner occupied duplex you can get in for 3.5%.

Matt: I’m going to stop you right there. So actually my rate was a little above 3.1 when I bought my first house. So my first house I bought was actually a duplex, and I put 3.5% down and my interest was 1.8,%, I don’t know, I think it was 2012 or 2011 or whatever it was. And so I bought this duplex, one of the units was already updated, one was not. The updated one was rented out for the amount my mortgage, taxes and insurance are going to equal so I got in there and lived for free. Only put 3.5% down and with time the rents were credits and the deposits were credited back,  I think I wrote a 3,000$ check. And that was it and then I got in there and painted my unit and did the updates myself over time, because I was willing to live in there and kind of ugly, and increase the value of the property that way when I moved out of that property I could maximize the rent, and they would cash flow very nicely. Now that was in a different market than Austin so…

Ryan: Yeah but I wanted to say that I started my first home, my first home I ever bought was a duplex and that’s how we build well. You got to start somewhere. FHA owner occupied rate is 3.5%, I’m sorry, 3.5% down. The rate on that is 4.65. Conventional is 15% with 4.625 on a owner occupied loan. And you were right, investment property is 25% down at 5.25. So the rates are still really really good. There was a program out there… I guess it was 15% down for the owner occupied, whatever. That’s for conventional. But still, you can get into one for 3.5% down. So I want to paint a picture of how we’ve built wealth on a very, I would say, slow but steady rate. We bought one duplex for, first duplex we bought was 90,000$. We bought another one for 150,000$. So what we did, we set up our accounts the rent would keep flowing in, we never spent a dime on it, and we kept building that up. Our fourth duplex that we bought, and I’ve got it right here. So if you are able to pull money out of your house and do a home equity line of credit, and then you can pay cash for a duplex. I had a partner on this one, we went in half, my line of credit, his line of credit. This is two years ago, so now the numbers will be a little bit more, we bought the duplex at 210,000$ cash, there’s a program called “A delayed Finance” and my friend Max Lehman at… What was that “Northwest Funding” or… I can’t remember. Max Lehman he’s the one that helped us with this, delayed refinance, or delayed finance rather,  you put 210,000 cash on this one duplex, we ended up putting 30,000$ into it. We actually got lucky, because normally we’d spent about 40 on that type of duplex, but we got seller kick in 10,000 for repairs. So at this point we’ve got 240,000$ into the duplex, with “A Delayed Finance” you can finance the property within six months of buying it and they will give you 70% of the value or up to the purchase price.

Matt: I’m actually glad you wrote this out and you’re talking about this, because if I had to go back and educate my 25 or 26 year old self, the strategy I would have laid out for myself would be go in, find something that needs work, fix it up, get the rents up, refinance it at the new appraised value, yank my money and then sell back out, do it again. And do it again, and do it again. So it’s basically buy, renovates, rent, refinance, rinse and repeat.  You do that over and over again- basically you’re recycling your initial cash investment and by doing that you may lower your cash flow, but you’re going to be able to drastically speed up the amount of property you own.

Ryan: The way we did it doesn’t even lower the cash flow, so I want you to think about this for a second, se we at 70% LTV I think we needed to appraise 315. It appraised for 330,000$, so 70% of 330 is 231 [chuckle], but here’s the kicker: They didn’t give it back to us 231, they only gave us 210 because that’s what we paid for it, but I want you to think about that for a second. We go the… After we refinanced we took our home equity line, put it back into our bank accounts, we were out 30,000$ roughly, and we have a duplex that’s worth 320. So if you were going to buy a duplex, a renovated duplex for 330,000$ you would have to put 25% down on that, that’s a lot of money. That’s doesn’t allow you to leverage it, the rents were 1,500 per side, we still own this duplex. So then what we do is we take them money back into our bank accounts and the money that we put for the repairs came out of the rent account, because we never spent the rent, it always just grows and grows and grows and we spin it on a new duplex. So that is our system in a nutshell here guys, and I get a little bit excited about it because I think it’s the fastest way to build wealth, well not the fastest way to build wealth. It’s the fastest safe.

Matt: Safe.

Ryan: Right [chuckle]. So once again if you want to get a copy of our e-book, go to, if you are watching this on Facebook give us a like, type the word “agent” in the comments to subscribe to future broadcasts, if you’re watching this on YouTube give us a like button, comment below and let us know if you have any questions on this, what you thought about this, and if you’re watching this on Instagram, follow us please and let us know if you have any questions. That’s it for the show, next week- before we go- Sunny and I are going on location and we’re interviewing the city council candidate for  district 7 I believe, I should know this,  we’ll put it in the comments later [chuckle]. Other than that, hope you enjoyed it, have a great weekend.

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