Real Estate Investing Basics

3 Reasons You Should Consider a Duplex as Your First Home Purchase

Expertise: Landlording & Rental Properties, Real Estate Investing Basics, Personal Finance, Real Estate News & Commentary, Business Management, Real Estate Deal Analysis & Advice, Real Estate Marketing, Mortgages & Creative Financing
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Buying Your First House? A Duplex Might Make Sense

When most people think about buying their first home, a nice little brick house with a white picket fence comes to mind. And while there’s nothing wrong with this, maybe you should actually be thinking about a duplex.

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3 Reasons to Consider a Duplex

If you’ve never thought about owning a duplex, then you’re probably unaware of just how many exist in your market. Duplexes are everywhere, and they can be extremely wise investments in certain situations.

While you probably don’t want to buy a duplex if you have a family with kids, it’s perfect for someone who is young and single (or newly married). Here are a few of the benefits you’ll get to enjoy.

1. Mortgage Benefits

Before you can even consider buying a duplex, you have to get your financing squared away. As On Q Financial explains, “The pre-qualification process is the best way to determine the numbers that are right for you. Early in your search, you can work with a mortgage professional to get prequalified and search for homes within your wants, needs, and budget.”

What you’ll find is that a duplex may actually help your mortgage situation, if you plan on renting out the other half. For example, let’s say the mortgage on a duplex is $1800 per month, but you can rent out one half for $1,000. You’re essentially getting 55 percent of your mortgage covered. Not only does this save you money, but it could also help you build equity much quicker (if you choose to make larger payments).

2. Tax Benefits

As you’re likely aware, you can deduct the interest on your mortgage come tax season. And while you can only write off the side you live on (in a duplex), you can gain access to additional write-offs by renting out the other half. This includes fees accrued to rent the place, as well as things like repairs, maintenance, and utility bills (if you share in them).

3. Ability to Learn a New Trade

Another added benefit is that you get to learn the ins and outs of the landlording business firsthand. This will either show you, at an early age, that it’s something you’re not interested, or it’ll give you the experience and confidence needed to launch a career in real estate investing.

Acknowledging the Downsides

Duplexes aren’t perfect. In full disclosure, there are some potential disadvantages that you need to be prepared for if you plan on investing in one. The two biggest are:

1. Lack of Privacy

For some people, the lack of privacy that comes with living in a duplex that you own is just too much. Not only do you have someone living just a few inches away from you at all times, but there’s also the risk of late-night knocks on the door. If the air goes out or a toilet gets stopped up, there’s not hiding. You’re on call 24/7.

2. The Unknown

Finally, there’s the unknown. In a duplex, there are two of everything—including toilets, appliances, and fixtures. This means there’s twice the likelihood that something will break down and you’ll have to fix it (cha-ching!). There’s also the risk that the other half will sit vacant for a period of time, resulting in no rental income. Keep this in mind as you weigh the pros and cons.

risk-paradox

Give Yourself a Financial Headstart

When it comes to buying your first house, perspective is key. You have to realize that you aren’t going to be in this house forever. In fact, most people stay in their “starter” homes for less than five years. Think about the pros and cons, weigh them against each other, and determine whether or not a duplex will work in your situation. For most young homebuyers, it turns out to be a smart decision.

Are you considering a duplex for your first home purchase?

Leave a comment below!

Larry is an independent, full-time writer and consultant. His writing covers a broad range of topics including business, investment and technology. His contributions include Entrepreneur Media, TechCrunch, and Inc.com. When he is not writing, Larry assists both entrepreneurs and mid-market businesses in optimizing strategies for growth, cost cutting, and operational optimization. As an avid real estate investor, Larry cut his teeth in the early 2000s buying land and small single family properties. He has since acquired and flipped over 30 parcels and small homes across the United States. While Larry’s real estate investing experience is a side passion, he will affirm his experience and know-how in real estate investing is derived more from his failures than his successes.

    Nathan Richmond Rental Property Investor from Visalia, CA
    Replied about 2 years ago
    I definitely wish I had bought a multi-unit property as my first property instead of buying a house. If you can afford a triplex or 4-plex, then you’ll probably get the entire mortgage covered! That’s some serious savings!
    Juan Ponce from Federal Way, Washington
    Replied about 2 years ago
    I wonder if there is anybody with kids living in a duplex or had an experienced living in one with kids?
    Mark Jones Rental Property Investor from Indianapolis, IN
    Replied about 2 years ago
    I’m living in a duplex with two kids under six. I haven’t had any issues or complaints. My tenants are typically young professionals. The duplex is pretty ideal for the situation. The units are side by side and the shared wall is a plastered block wall.
    Alma Kenup from Richmond, VIRGINIA (VA)
    Replied about 2 years ago
    That is great to know! My husband and I are looking into buying a multi-unit property and we have a two-year-old.
    Zachary Wilson from Pueblo, Colorado
    Replied about 2 years ago
    I love the idea of paying off your mortgage faster fo sure. Me personally I feel like a 3 or 4 plex might be more beneficial for the exact reason you outlined above about paying your mortgage faster. Good article though man
    Eliseo Medrano
    Replied about 2 years ago
    Thanks for the read Larry. Totally going to do this!
    Eliseo Medrano
    Replied about 2 years ago
    Thanks for the read Larry. Totally going to do this!
    David Etenburn Investor from Everett, Washington
    Replied about 2 years ago
    It’s exactly what we did 20 years ago. And you nailed the pros and cons. In fact, now that the kids have moved out, we are considering downsizing and turning this house into a triplex; although using the equity to buy another 2-4 plex is an option as well. It’s good to have options! 😉
    Erika Vergara Real Estate Agent from Fort Lauderdale, Florida
    Replied about 2 years ago
    Yes I am, I have $20,000 to invest right now in real estate but that’s not enough here in South Florida. I’m not sure to invest it. Please help, any advise?
    Ayoob Kadir
    Replied almost 2 years ago
    Buying a home is an investment, whether it is a home or a duplex, it doesn’t matter. A home is an investment and one needs a lot of money to purchase a home.
    Eric Kissinger from Anchorage, AK
    Replied almost 2 years ago
    Great article! I was wondering, does anyone know if a “mother in law” ADU in a single family home has the same tax benefits as a duplex? It is still 2 units under one roof and the utilities are shared, just curious if it is deemed the same tax situation since the house is not officially a duplex due to zoning?
    Kevin D. Rental Property Investor from San Jose, CA
    Replied almost 2 years ago
    Not 100% sure (and also not a tax pro) but I believe duplexes are essentially SFR in most considerations, same as your personal residence with Granny unit. I believe what matters is if you live on the property or not (Personal residence vs investment property). What tax implications are you referring to?
    Kevin D. Rental Property Investor from San Jose, CA
    Replied almost 2 years ago
    Not a professional mortgage broker or lender but have extensivy researched duplexes in my area for our own house hacking and recently nearly purchased one in the SF area (ultimately stepped away from deal…see my posts for more). One point to keep in mind is lenders we spoke to would not consider future rent in the income portion of our loan qualification. You may experience differently but my advise would be to run your purchase amount numbers ignoring the rent. Of it pencils without it, you know you’ll be money ahead when it is rented. Happy investing all!
    Barry Skaaland Rental Property Investor from Madison, WI
    Replied 2 months ago
    Wish I had bought a duplex as my first home rather than a single family home. I'm trying to make up for lost time with two relatively recent duplex investments. Oh well, better late than never!