I got outbid on the first place in SF on which I made an offer, and I’m finding it difficult to find another place I really want at my price point. (You can ask what that is, but when I answer I’m going to be deeply embarrassed. Most of you are much higher rollers.) So I’m thinking about adding another strategy alongside the search for a single-family home. A very long time ago I owned a duplex, living in one half and renting the other half. I was not bad at it, taking good care of the other unit, making a little money, and selling the place for a tidy sum. I thought I’d try this gambit in SF: buy a duplex, live in one half, and then rent out or sell the other unit. The upside is that the prices and square footage for duplexes seem better (once you split the cost in half) than for condos. And I’m up for the work of owning a duplex, or of selling half in a TIC or other arrangement. But there are some downsides. People have wildly divergent opinions about the sanity of buying into a TIC property, though in another thread here some people thought that a TIC might be OK with just a couple of owners. But my principal objection to TIC’s is the roughly one-point premium placed on the interest rate for TIC loans.
Here are my questions.
1. Can I get a loan? Because a duplex will cost a LOT in comparison with condos, I may not qualify. I haven’t yet gone to any lenders to find out because I want to go to them with a specific plan. But I’m almost certain that, were I to ask a lender for that much money for a single-family home, s/he would laugh in my face. Will a lender grant me a mortgage if I tell them that I have a business plan to either rent or sell the second unit?
2. Should I rent or should I sell the second unit? On the one hand, a regular rental income might be a nice retirement income supplement. On the other hand, I don’t want my retirement to be affected by any instability in the rental market.
3. If I sell, do I have to do a TIC or can I simply proceed with a regular sale? I know there are duplexes that aren’t TIC properties, but that are, rather, sort of mini-condos, with each owner owning his own apartment rather than a percentage of the whole. Will a bank let me arrange mortgages this way in SF? It doesn’t seem the norm here.
4. Is there a way to find people who might go in for half of the purchase price? Is there somewhere I can find a pool of other people with the same notion? Do any real estate agents specialize in bringing co-buyers together?
5. Is this simply a bad idea for an amateur who has some experience, but perhaps also some unearned confidence?
6. Are there other reasons that this is a good or bad idea beyond the ones I can think of?
Apologies for the length of this post, and, as always, thank you in advance for your responses. (I’m always a little floored at how generous forum members here are with good advice and counsel.)
For me I’d never buy a multifam in SF. They fall under the city’s rent control regulations and it could be tough to get rid of bad tenants.
Hi, Manch. Nice to see you! I don’t think that the building is tenant-occupied. At least that’s not in the description. But it’s a good question and I’ve emailed the listing agent for an answer. I’ll post here when I find out. Thanks as always.
But you will put a tenant there right? Although you can do your screening to minimize the risks of having a bad tenant.
Oh, I see what you’re saying, and point taken. That’s one good argument against renting. I think I could screen tenants pretty well, or hire a management company to do it. But, no, I would not want tenants who might trash a place they didn’t own. But do you think that selling the other unit, or finding a co-buyer to purchase when I do, is unworkable?
aren’t duplexes treated like SFH for JCE and rent control or is the city different?
btw why don’t you house hack? have room-mates. I had room mates (were college buddies) for the first place i bought. Saved me big time having 2 rooms rented out. Did it again for a little bit with an in-law unit when i upgraded.
I don’t know the answer to your first question, though it’s worth finding out. House hacking sounds intriguing. Is it a variation that I should know about on simply renting out the second unit?
My understanding is that only single unit housing is exempt from rent control and just cause eviction. I could be wrong though.
Sounds completely reasonable.
House hacking is just the term people use today for renting out rooms in your house 
Just buy a place that is easy to rent one or two rooms out, get good room-mates, and watch the cash roll in while you have good friends to hang out with.
Some things to consider is how amenable the common areas are to joint use, how many bathrooms you have, etc.
That’s such a wonderful notion! I think I would have loved doing this when I was younger. At my age, though, I’m not really sure I can share interior spaces very well any more. Backyards are terrific common spaces, but I think I need my own kitchen and living room now. Perhaps age made me a little selfish.
I got started out renting out a room… great way to turbo charge appreciation. My parents had two units on their property, so I was experienced. Duplexes do not appreciate as fast as single family. Don’t buy a duplex in SF. Daly City is a better idea. Especially illegal ones. They are cheaper.
Hi, Elt1: Does it make a difference if I say that I’ll be living in one unit as my permanent primary residence, so that appreciation isn’t as important to me as it might otherwise be? Would you still advise against buying in SF?
Yes. SF is against owners in general. Great time to get a rent controlled apartment in SF
Fair enough. My other strategy is to simply sell the other unit, so that I’m not a landlord. Under that circumstance, do you think buying a duplex in SF still a bad idea?
Well, the unit I’m looking does have a tenant who’s paying an unbelievably low rent. Oh, well.
insist on receiving a vacant house (both units) in your offer.
You can’t sell one unit of a duplex as a duplex by definition is titled as a single entity. You will have to do something (not sure if it’s even possible and it’s not common if possible) where you break up the duplex into separately titled units and form a TIC or something. My recommendation is don’t pursue this. It will be a nightmare.
Right. Don’t buy a duplex or any multifam in SF as a newbie. It’s a game played by the pros.
Much better to aim lower like buy a condo in SF or a house in Daly City.
Well, it was worth a shot. I’ll continue asking for advice elsewhere, but you’re convincing me that the duplex idea probably won’t fly. Nevertheless: thank you as always!