Thinking about buying a duplex in Easton but not sure how to tell a solid deal from a money pit? You are not alone. Small multifamily properties can build long-term wealth, but only if the numbers and local rules line up. In this guide, you will learn a simple step-by-step way to run the numbers, plus Easton-specific checks that protect your cash flow and timeline. Let’s dive in.
Start with your investing goal
Before you underwrite a property, decide what success looks like. Are you targeting cash flow now, long-term appreciation, or house-hacking with owner occupancy? Your goal shapes your assumptions, the financing you choose, and your risk tolerance for older homes and renovations common in Easton.
The simple worksheet you will use
You can evaluate most duplexes with a short worksheet that turns rent and expense estimates into key metrics.
Key definitions and plain-English formulas
- Gross Scheduled Rent (GSR): total rent if both units are occupied and paying.
- Effective Gross Income (EGI) = GSR − vacancy and credit loss + other income.
- Operating Expenses: taxes, insurance, owner-paid utilities, maintenance, management, supplies, legal, accounting, advertising, reserves, and HOA if any.
- Net Operating Income (NOI) = EGI − operating expenses.
- Cap Rate = NOI ÷ purchase price.
- Debt Service: annual mortgage principal plus interest.
- Cash Flow (pre-tax) = NOI − debt service.
- Cash-on-Cash Return = cash flow ÷ total cash invested.
- Gross Rent Multiplier (GRM) = purchase price ÷ GSR.
Inputs to collect
- Purchase price and your estimated closing costs.
- Anticipated monthly rents for each unit and any other income (parking, laundry).
- Vacancy percentage, property management fee, and maintenance budget.
- Annual property taxes and insurance premium.
- Owner-paid utilities, reserves, and expected initial repairs or capital expenditures.
- Financing terms: down payment, interest rate, amortization term, and loan amount.
Step-by-step math
Compute GSR: rent A + rent B.
Vacancy and EGI: vacancy allowance = GSR × vacancy %. Then EGI = GSR − vacancy allowance + other income.
Operating expenses: total the annual amounts for taxes, insurance, owner-paid utilities, management, maintenance, reserves, and other line items.
NOI: EGI − operating expenses.
Cap rate: NOI ÷ purchase price.
Debt service: use your loan terms to find annual principal and interest.
Cash flow: NOI − debt service.
Cash-on-cash: cash flow ÷ total cash invested (down payment + closing + initial repairs).
Quick example (illustrative only)
- Inputs: purchase price 300,000; rents 1,450 and 1,350; vacancy 6%; other income 0; taxes 6,000; insurance 1,700; management 8% of EGI; maintenance 7% of EGI; reserves 500 per unit per year.
- GSR = 1,450 + 1,350 = 2,800 per month, or 33,600 per year.
- Vacancy allowance = 33,600 × 0.06 = 2,016; EGI = 33,600 − 2,016 = 31,584.
- Management = 31,584 × 0.08 = 2,527; maintenance = 31,584 × 0.07 = 2,211; reserves = 1,000 total; owner-paid utilities assumed 0 for this example.
- Total operating expenses = taxes 6,000 + insurance 1,700 + management 2,527 + maintenance 2,211 + reserves 1,000 = 13,438.
- NOI = 31,584 − 13,438 = 18,146.
- Cap rate = 18,146 ÷ 300,000 = 6.05%.
- If you finance 75% at a market rate and 30-year term, plug in your rate to estimate annual debt service and finish cash flow and cash-on-cash. Rerun with a higher rate to see your sensitivity.
Benchmark ranges for first passes
Use conservative starting points, then refine with local data.
- Vacancy and credit loss: 5–8% for Easton unless your nearby comps show different.
- Property management: 6–10% of EGI if you hire out. If you self-manage, still budget time and some cost.
- Maintenance and repairs: 5–10% of EGI or 500–1,200 per unit per year for routine upkeep.
- Capital reserves: 300–1,000 per unit per year depending on age and condition.
- GRM: use as a quick screen. Lower is generally better, then verify with full underwriting.
- Cash-on-cash target: many first-time investors look for 6–12% depending on leverage and risk.
Easton factors that move your numbers
- Tenant demand mix: renters include college students from Lafayette College, healthcare workers, municipal employees, commuters to Allentown and Bethlehem, and local families. Your rent comps should match the unit type and location.
- Older housing stock: many Easton homes were built in the late 19th or early 20th century. Expect higher capital needs for roofs, windows, electrical, plumbing, and HVAC. Budget reserves and immediate repairs.
- Block-by-block variation: rents and turnover can vary within short distances. Downtown and college-adjacent areas often support higher rents while inner-city blocks may have higher maintenance and turnover.
- Utilities and metering: verify separate meters for gas, electric, and water. If not separate, estimate tenant allowances or allocation methods and reflect owner-paid utilities in expenses.
- Flood risk: properties near the Delaware River or local creeks may require flood insurance. Add this to your insurance line and stress test cash flow.
Permits, zoning, and rental registration to confirm
Before you make an offer, confirm the use and compliance items that affect occupancy and cost.
- Zoning: check that a duplex is permitted as of right in the property’s zoning district. Older conversions may need documentation or a variance.
- Permits and inspections: any electrical, plumbing, heating, or significant renovation work requires permits and city inspections.
- Rental registration and C.O.: many Pennsylvania municipalities require rental registration and periodic inspections. Verify current City of Easton requirements and fees.
- Historic districts: exterior changes in designated districts may require historic review. Plan timelines and costs accordingly.
- Life safety: smoke and CO detectors, egress, and habitability standards must be met before occupancy.
Due diligence checklist for duplexes
Collect and verify these items early so you can underwrite with confidence.
Documents and financials
- Current rent roll and lease copies with tenant names, expiration dates, and deposits.
- 12–24 months of income and expense statements and any Schedule E if applicable.
- Last 12 months of utility bills for owner-paid items.
- Most recent property tax bill and any pending assessments.
- Insurance loss runs, current premiums, and any claim history.
- Permits, certificates of occupancy, and any open code violations.
- Seller disclosures and any inspection reports.
Physical inspections
- Full home inspection for structure, roof, foundation, moisture, HVAC, electrical, and plumbing.
- Separate inspections for pests, chimney if present, septic if applicable, and HVAC servicing.
- Lead paint and asbestos assessments for pre-1978 buildings if you plan work.
- Confirm separate metering or plan for utility allocations.
Capex plan
- Line-item costs for immediate repairs and a 5–10 year plan for roofs, windows, HVAC, hot water heaters, and exterior maintenance.
- Add a contingency for surprises common in older Easton homes.
Tenant and lease risk
- Rent payment history, stability, and any eviction history.
- Security deposit amounts and compliance with Pennsylvania rules.
Site and neighborhood checks
- Parking availability and any zoning minimums.
- Proximity to transit, downtown, college areas, and employers.
- Local crime trends and comparable rent levels by block or zip.
Financing choices and how they affect returns
- Owner-occupied 2–4 unit loans: conventional conforming and FHA programs can offer favorable terms if you live in one unit for the required period. Confirm current rules with your lender.
- Investor loans: portfolio and small-balance commercial lenders often underwrite based on NOI and DSCR. Down payment, rates, and terms will differ from residential loans.
- Underwriting rent: lenders may use the lesser of market rent or your projected rent with vacancy and expense adjustments.
- Interest rate sensitivity: small changes in rate can flip a deal from positive to negative cash flow. Run a higher-rate scenario in your worksheet.
Taxes, insurance, and risk controls
- Property taxes: use the current tax bill or Northampton County’s assessment data for accurate expense underwriting.
- Insurance: landlord policies often cost more than owner-occupied insurance, especially for older duplexes. Check flood zone status and consider umbrella liability coverage.
- Depreciation and incentives: federal depreciation can improve after-tax returns. Speak with a tax professional about your specific situation.
- Reserves and management: keep 3–6 months of operating expenses in reserve. Consider professional management if you are remote or new to rentals.
Build a conservative first-pass pro forma
Use these assumption ranges to screen deals before deeper analysis.
- Vacancy and credit loss: 5–8%.
- Management: 6–10% of EGI if hiring third-party.
- Maintenance: 5–10% of EGI or 500–1,200 per unit per year.
- Reserves: 300–1,000 per unit per year.
- Taxes and insurance: plug in actual bills when possible, not guesses.
- Utilities: include only owner-paid items, and price out water, sewer, trash, and any common-area gas or electric.
When a duplex pencils in Easton
- Cap rate: compare to recent small multifamily sales in Easton and nearby Northampton County. Use cap rate to compare deals, not as a stand-alone rule.
- DSCR: many lenders look for at least 1.20. Your target may be higher if you want a stronger buffer.
- Cash-on-cash: many first-time investors aim for 6–12% depending on leverage and risk.
- GRM: use GRM to screen quickly. If it passes, complete the full NOI and cash flow analysis.
- Stress tests: rerun with 1–2% higher interest rate, 1–2 months of vacancy, and an added repair to see if it still holds up.
Work with a local, hands-on advisor
You will make better decisions with local rent comps, permit guidance, and contractor estimates that match Easton’s older housing stock. If you want help building a clean worksheet for a specific duplex or need introductions to lenders, inspectors, and property managers, reach out. Schedule a Consultation with Renee Marinelli for tailored guidance on your next Easton duplex.
FAQs
What numbers matter most when analyzing an Easton duplex?
- Focus on NOI, cap rate, DSCR, cash flow, and cash-on-cash after you price in realistic vacancy, maintenance, reserves, taxes, insurance, and any owner-paid utilities.
How do I estimate Easton rents without overpricing?
- Pull recent local comps by unit size and location, cross-check with multiple listing sources and property managers, and match amenities and condition to your target units.
What vacancy rate should I use for a first pass in Easton?
- Start with 5–8% unless your immediate area comps justify lower or higher, then update your underwriting with block-level data.
Do I need separate utility meters for a duplex in Easton?
- It is not required in every case, but separate metering simplifies billing; if utilities are shared, budget owner-paid costs or a clear allocation method in your expenses.
Why are insurance costs higher on older Easton duplexes?
- Multifamily use and older systems can increase risk and premiums, and properties near waterways may also require flood insurance.
Is there rent control in Easton, Pennsylvania?
- Pennsylvania has no statewide rent control, but always check current City of Easton ordinances for any local tenant protections or requirements.
