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Double the fun with investment in modern duplexes

Duplexes are becoming increasingly popular, particularly on the Coast, as a way to provide affordable housing and real estate investment opportunities.

“In some cases, people buy them and live in one side and rent out the other,” said Nancy Lane, 2005 president of the Mississippi Association of Realtors and the owner of Nancy Lane Commercial Realty, Jackson. “We also see interest by investors who will buy a group of duplexes and lease them out. For an investor, duplexes are easier relative to zoning right now. There is a need for rental housing, but so many areas are blocking out apartment complex zoning. So with those moratoriums in the market, duplexes or fourplexes are a way to provide rental houses without going into apartments.”

These days duplexes often look more like a single-family home. But Lane said you can generally get more income per square foot on a duplex, triplex or fourplex than by leasing a single-family home.

“Duplexes are becoming more popular,” said Martin Jones, president of the Gulf Coast Association of Realtors and a real estate agent with Ray Crowell Real Estate, Gulfport. “We have the need for affordable housing, and there are people who have targeted that market by building duplexes. If you can build it at a reasonable price, then the investor can afford to rent it out as affordable housing.”

Since duplexes don’t take up a lot of room, the use of the land is maximized. There are two units on one residential lot. That helps keep land costs reasonable. In existing neighborhoods that aren’t built out, lots purchased at a good price mean a duplex can be constructed for a total cost that allows units to be sold or rented out at lower lease rates than single-family homes.

CAL Group in Gulfport is leading the duplex building trend on the Coast. Tom Easter, president of CAL Group, said the company has focused on buying infill lots in older parts of town — including some areas where neighborhoods have deteriorated. It was a bold move based on a gut instinct that investing in urban renewal would be met with interest by investors and tenants.

“A lot of people wouldn’t take the risk we have taken with some of these neighborhoods,” Easter said. “Some people said we were crazy. But every time we have built in a neighborhood, we have seen evidence of resurgence in pride. After we invest in a nice, new building, people in the neighborhood start taking more pride. They start moving junk cars and tires out, and cleaning the place up. We have seen it time and again.”

CAL Group has been building duplexes and fourplexes primarily in Gulfport for about four years now. The group has also built some units in Biloxi and Ocean Springs. In 2002, CAL Group built 18 units (nine duplexes); in 2003, 48 units; and then in 2004, 112 units.

“We probably will build 250 in Harrison County this year,” Easter said. “Most of our product is duplexes, but we have also built some threeplexes and fourplexes. We have been building three-bedroom, two-bath duplexes with close to 1,200 square feet. We’re offering the tenant the opportunity to essentially live in a single-family home in established neighborhoods next to one other family, not hundreds of families.”

Easter said that for investors, the advantage in doing infill developments in different established neighborhoods is that it provides diversity while reducing the amount of rental competition. The investors are varied. Some are very young, often buying the unit to live on one side and renting out the other as a mortgage subsidy.

“We also have a large number of baby boomers who are reinvesting money after the stock market drop,” said Easter, who has two partners in CAL Group, Bill Rodwell and Chuck Tomasello. “We have a lot of investors who are diversifying their portfolios to be less reliant on the stock market. Investors have varied needs. Some are investing for appreciation, others are buying for cash flow and some are buying for a balance of the two.”

Easter estimates that approximately a third of their investors are from out of state. He said there has been a great deal of interest in the Coast by outsiders because of gaming, the enormous amount of positive publicity the area has received and the Coast’s growth curve.

Some of the duplexes are designed so they look more like a single family dwelling than a duplex. With larger duplexes, which are popular in a market where it is difficult to find three-bedroom apartments, different elevations minimize it being immediately obvious the building is a duplex rather than a single-family home.

This year, CAL Group is focusing more on building smaller units: two-bedroom, two-bath, single-story dwellings of 900 square feet. In this case the door to the second unit is often turned to face the inside of the property, so it looks like a cottage or garden home.

Zoning can be an issue when building duplexes if neighborhoods aren’t zoned for them. But Easter said the company has largely been successful in getting permission to build the duplexes, sometimes successfully getting lots rezoned that are B2 (business).

“In situations where there is a lot of residential already in the area, we have been successful in getting business property rezoned,” Easter said. “The Gulfport Planning Department and Commission has been very understanding and knowledgeable. They have worked with us to meet the ordinances and get a building up on a vacant lot.”

Most lots in well-established neighborhoods have mature trees. CAL Group prides itself on situating the homes — sometimes using longer walks or setbacks — in order to avoid cutting down nice trees.

“I haven’t cut down a live oak yet,” Easter said. “We have passed up some lots because of the beautiful live oak trees on them. We didn’t want to cut them down.”

CAL Group has built even more townhouses than duplexes. The company has purchased three older trailer parks on Pass Road, one in Biloxi and two in Gulfport. One is being demolished to build 49 townhomes, and townhomes are also planned on the other two.

“The property is too valuable for trailers, and there is no need for more commercial in the area,” Easter said. “This is an extension of our urban renewal method of operation. We will take 60 units of trailers out, put in 49 townhomes with a village green look, and upgrade the whole community.”

CAL Group is vertically integrated, doing all the work from buying and developing lots, doing the construction, sell and leasing the homes, and managing the property for investors.

Contact MBJ contributing writer Becky Gillette at bgillette@bellsouth.net.

About Becky Gillette

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