Duplexes: A Missed Opportunity?

I just read an interesting article over at Calculated Risk about apartment vacancies being at an all time high while rental rates continue to decline.  I found it interesting because common sense would lead one to assume that as home sales decline, apartment (and other property) vacancies would decline.  Afterall, people need to live somewhere!

So where’s everyone going?  Research and anecdotal evidence says that many people are A) moving in with family, B) getting roommates, C) grouping up with friends to rent a single large property instead of a number of smaller units (I’ll call this the college model). 

Option A’s been around since the beginning of time, much to the chagrin of many parents.  Obviously this options comes with a number of positives and negatives.  The positives are things like low, possibly no, rent, no utility bills, lower food costs, etc.  Some wonderful parents out there will even do their adult childrens’ laundry!  Wow.  (Thanks, mom!  You had me doing my own laundry by the time I was 12.  Hmph!)

Option B, the standard roommate option, obviously makes sense.  Of course, living with roommates, especially strangers, is always hit and miss, but the monthly savings can’t be denied.

Option C, the college model, is really just the roommate model on steroids.  I don’t know where you went to college, but at UCSB living space was at a premium.  If you wanted to live anywhere reasonably cool and within beach cruiser shot to campus, you had no choice but to grab a gaggle of your closest friends and rent a place. 

What’s interesting, though, is how many people are completely willing to live with roommates and look for ways to share cost when it comes to rentals, but very few even consider doing the same thing while weighing the pros and cons of buying a property.  I’m not necessarily advocating that buyers “team up” with friends and buy a house together.  While that works in certain situations as an investment model, those types of partnerships are fraught with peril.  They can be successfully manouevered, but it takes a certain level of finesse. 

No, what I’m talking about is the normal “landlord/tenant” model.  Many first time investors have used this strategy to enter the wonderful world of property ownership and have managed to significantly increase their net worths at the same time.  The theory is simple, purchase a property that you can afford on your own, but lower your monthly costs by getting a roommate.  This can, of course, be done with any type of property from a house to a condo, but it works particularly well with duplexes and triplexes. 

Click the link for a quick read on what I call The Plex Strategy.