Buying a Duplex: The Ultimate Step-by-Step Guide

Expertise: Real Estate Investing Basics
593 Articles Written
A few years ago, I received a Skype video message from my little brother Chris. He was considering buying a duplex. "What is the first step?" he asked. "Do I get a real estate agent? Get pre-approved? What should I do?" All good questions—and first I directed him to all the articles I've written for BiggerPockets over the years.

But then I said to myself, "Self—" (Because that's what I call myself)—"It's my brother, and I really want him to succeed. So why not tell him exactly how to get from A to Z." After all, my first rental property was a duplex. I’ve purchased several since. I love duplexes, and I’m super passionate about helping others get started in duplex investing.

And if I'm going to help Chris, I want to help my BiggerPockets friends, too.

One thing to keep in mind: This article focuses on duplexes, but you can use the exact same information to buy a single family house, a triplex, or a fourplex—so don’t limit yoursel. In fact, if you are going to go through all the work of finding a duplex, you might as well consider larger three- or four-unit properties, too. Sometimes they're a better deal. 

Let's get started.

Why Buy a Duplex?

In the beginning, I didn't know what I was doing.

I was 22 years old and had purchased, fixed up, and sold my first property—my primary residence. Suddenly, I found myself facing the very real possibility that I was going to be homeless. Sure, I could go find a place to rent, but I had been bitten by the real estate bug and knew that real estate investing was going to be my ticket to financial freedom.

I read a few books, including Larry Loftis’ Investing in Duplexes, Triplexes, and Quads: The Fastest and Safest Way to Real Estate Wealth, so I knew that small multifamilies had serious potential.

I called up my agent, found a small bank repo duplex, and purchased it for $80,000. I spent a few weeks cleaning it up, painting it, and doing small maintenance work—then, I rented it out.

My total mortgage payment was a little over $600 per month, and I rented the front house out for around that same amount—meaning I was living almost for free! (Just paying utilities.) A year later, I moved out and rented out the other side. Ever since, I have received significant cash flow each month, which will continue for the rest of my life.

This property initiated my obsession with small multifamily properties—and duplexes, specifically.

So, why should you buy a duplex?

Well… you shouldn’t. You should buy a great duplex deal.

Anyone can buy a rental property, but true success comes when you find a fabulous deal, which lands you:

  • Great cash flow
  • Rent paid to yourself—not another landlord
  • Two units in one transaction
  • The ability to live free or cheap while the other tenant pays your bills
  • A low-risk introduction to the world of landlording
  • Relatively easy long-term financing
  • Relatively easy leasing of the unit(s).

To be clear, simply buying a duplex is not the secret to success. If you buy a bad deal, you might as well keep renting! However, if you do your homework, shop smart, and snag a great deal, a duplex can be a springboard to a financially stable future.


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Step-by-Step: How to Buy a Duplex

1. Get educated

You are already doing step one, so congrats! It’s important you gain a solid understanding of how the process works and how to analyze deals, etc. before getting in too deep. This will help you find good deals.

Read through The Ultimate Beginner’s Guide to Real Estate Investing to create a solid foundation for your investing future. In fact, I recommend reading through all of the BiggerPockets Guides. There, you'll find invaluable advice—no matter your investment strategy. 

Also, the BiggerPockets Real Estate Podcast is, perhaps, the single greatest resource for real estate investors in the history of mankind. Seriously. And it’s nothing David Greene or I do to make it that way—it’s the honest, brutal truth from our guests.

2. Get pre-approved

I recommend lining up financing first—but you may want to switch around steps two and three. A good agent can refer you to a good mortgage broker. Either way, it’s important to get your financing sorted.

3. Talk to a real estate agent

If you are buying a property listed on the multiple listing service (MLS). This is the most common way to buy properties—especially for new investors—so don't wait to find a great real estate agent. Don't worry, real estate agents are typically free for the buyer. The seller pays the fee.

Look for an agent with the following traits:

  • Knowledgeable about working with first-time homebuyers
  • Knowledgeable about duplexes and other small multifamily properties
  • Tech-savvy
  • Quick to respond to questions
  • Patient
  • Hungry—aka, they want to help you. You are not a burden—you are their paycheck!

4. Define what you're looking for

It’s important that you let your real estate agent know exactly what you are looking for. If you want a duplex, let them know. Any good agent will hook you up with automatic MLS emails informing you of all the new deals, as long as you establish set criteria.

That criteria should include, at minimum:

  • How much do you want to (or can you) spend?
  • What towns or neighborhoods will you buy in?
  • What property type do you want—duplex? Triplex?
  • What kind of condition would you prefer? (Trashed, move-in ready, in need of minor rehab?)

Let your agent know about your criteria and discuss what ideal properties might look like. A good agent will know the local market and can help clarify what is possible... or just fantasy.

5. Start looking

Next comes the fun part: Hunting for a good deal. There are several methods you can use, which we’ll discuss shortly. But most likely, your real estate agent will supply you with a list of potential properties.

Look for properties yourself, too, in case your agent missed any. Websites like Zillow, Trulia, and Redfin can be great for scanning potential deals. But keep in mind that these sites never contain all the information and may even contain faulty data. Your agent will ultimately have the best information.

6. Do the math

Once you find some potential deals, it’s time to get out your pen and paper and start analyzing. We’ll talk more about analyzing deals in a moment, but I’d recommend that you use the BiggerPockets Rental Property Calculator to analyze potential deals.

Just the other day, I looked at a duplex deal that appeared to be awesome—but after running it through the calculator, it was clearly terrible.

7. Make an offer

Once you find a deal that pencils out, it's time to make the offer. Your agent will do the bulk of the heavy lifting by filling out the (mountains of) paperwork needed. If you aren't using an agent, you may have to find the correct forms yourself—which you can usually obtain for free from a local title company.

At this point, your offer will either be:

  • Accepted (yay!)
  • Rejected (boo!)
  • Countered (most likely)

Negotiate with the seller until you either come to an agreement or part ways. Keep in mind, negotiating can force you to get emotionally involved and encourage you to pay more than you should for a property. Stick with your math and don’t pay more than you should.

8. Do your due diligence

Once you and the seller agree to all terms (known as "mutual acceptance"), it's time to do your due diligence. Now, you inspect the property to make sure it has everything it is supposed to have. I'd highly recommend hiring a professional home inspector to look at the property and give you a detailed report of what needs to be fixed. This usually costs less than $500.

After the inspection, you can either choose to accept or reject the property—or make the seller pay for all or some of the repairs. It's all up to negotiation. During this time, you will also finalize the loan documents, which can be annoying, and review any leases on the property.

9. Close

Next, it’s time to make the property your own. Depending on what state you live in, you will either close at a title company or an attorney’s office. Your agent should help you walk through any difficult spots up to this point.

10. Rent the units out

Finally, it’s yours! The fun is just beginning.

Now, it's time to manage the property (or hire a property manager to do it for you). This is when BiggerPockets comes in really handy. Everything on the site—from the podcasts and blog to the forums and calculators—is geared toward furthering your success, so take advantage of this incredible social network.


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How to Find a Great Duplex Deal

There are a lot of different ways to find good deals—some easy and some hard.

In addition to the MLS and other sites, like Zillow and Redfin, there are creative methods for finding deals. These are suited for buyers who either need an extra push because deals are too hard to find on the MLS or who want to score an even better deal.

Keep in mind that the following techniques are outside the realm of what a real estate agent will do—simply because there is little chance that they'll make money this way. Therefore, if you pursue any of these options, understand that you may be slightly alone.

1. Driving for dollars

This is the art of driving around potential neighborhoods, looking for signs of “motivation," such as long grass and boarded up windows. Then, you track down the owners via the public record. For more info, read The Driving for Dollars Bible by Chris Feltus.

2. Craigslist

You can actively look for potential deals in Craiglist's “For Sale” section, of course. But you can also contact landlords who are listing properties for rent on Craigslist. 

You can even place ads on Craigslist, telling the world that you are looking to buy a duplex.

3. Direct mail

Direct mail is the process of sending out hundreds or even thousands of letters to specific property owners with the assumption that a small number will contact you about the letter—and an even smaller percentage will be a good enough deal to buy. Many wholesalers and other real estate investors find the bulk of their deals this way.

4. Networking

A lot of landlords are tired of their rental properties. Through networking, you can find incredible deals. A great place to do this is in the BiggerPockets Forums, where you can meet investors from all across the U.S.—and even in your backyard.

Use BiggerPockets to locate members in your town
and grab coffee or lunch with them. Also, attend (or start) a local real estate meetup where you can get to know the movers and shakers in your local investment community.


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How to Analyze a Duplex

If you order a bad hamburger from McDonald’s, you can throw it away. If you buy a bad stock, you can sell it. If you get a bad dog, you can train it. However… if you buy a bad property, you might be stuck with it for years.

This is why you must learn how to properly analyze a deal. Here are the facts: If you don’t have the right math going into a deal, you’ll never get the right profit coming out of it. You make your money when you buy. A thorough analysis is essential.

First, whether you plan on living in the duplex or not, run the analysis as if you were not. Why? Because chances are you won’t live there forever—so it must make sense as a rental.

We'll look primarily at the cash flow—the extra money left over after rent has been collected and expenses paid. The concept of cash flow is fairly simple (income minus expenses), but calculating it can be difficult. There are numerous easy-to-forget expenses, like:

  • Mortgage insurance
  • Property taxes
  • Property hazard insurance
  • Flood insurance
  • Earthquake insurance
  • Water
  • Sewer
  • Garbage
  • Electricity
  • Natural gas
  • Propane
  • General maintenance and upkeep
  • Landscaping
  • Repairs
  • New appliances
  • Capital expenditures
  • Office supplies, such as stamps and envelopes
  • Software
  • Gas and mileage
  • HOA (homeowner's association) dues, fees, and assessments
  • City taxes
  • Advertising
  • Payroll
  • Property management
  • Vacancy rate.
If you forget to account for any one of these things, you'll wind up with less money than you planned. That’s not good! So when you look at potential cash flow, take all these expenses into account.

It’s for this reason we created the Rental Property Calculator. You can simply plug in the numbers on a potential deal and see how it pencils out.

Let's say I found a duplex that I thought should be a great deal. With a $60,000 purchase price and $800 monthly rent, the numbers seem to work out—but running it through the Rental Property Calculator indicated the total cash flow would be just $20.88 per month. With the $20,000-plus investment this property requires, that's a miserable 1.19 percent return on investment!

Yikes! You could do better with a bank CD.

How to Finance a Duplex

There are a few good options for financing duplexes. I’d recommend researching each option in a bit more detail to decide if it suits your investing strategy and goals—then make some phone calls.

1. Cash

If you have the cash, then this one should be easy. However, most people don’t.

2. Conventional loans

Conventional loans are same run-of-the-mill loans you get at pretty much any bank or credit union. Typically, you will put down 20 percent, depending on the bank, and usually—but not always—offer a fixed rate, which means the interest rate will never change. That interest rate is typically pretty low.

If you can get a conventional loan, and you have the 20 percent-or-so down payment, this is a great option because of the stability that comes with a conventional loan.

To find a conventional loan, just talk to a lender, mortgage broker, or credit union. These are the most popular loans on the planet—they're easy to find. But here’s a word of wisdom: Nearly every bank has the same rules and can do the same loan. But while the bank loans may be identical, the banker is the important piece of the puzzle.

A good banker can close loans that no one else can—because they are smart, creative, and persistent. So, talk with four to six different banks and find an exceptional banker. Even better: Get recommendations from other investors.


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3. FHA loans

The FHA (Federal Housing Administration) is a government agency that exists to help Americans become homeowners through a loan program that allows banks and other lenders to finance extremely low down payment loans to homeowners. An FHA loan requires just 3.5 percent down payment, which means on a $100,000 property, you only need to pay $3,500 (plus closing costs).

In comparison to the conventional loan, which usually requires 20 percent down, this can be a life-saver for homebuyers. Keep in mind that the FHA loan does have a few extra costs that can make your payment a bit higher, like mortgage insurance, so be sure to calculate that when doing your analysis.

In addition, FHA loans are only available for individuals who plan on living in the unit for at least one year, so you have to move into the duplex to use this option. The cool thing is, however, that an FHA loan is good for single family houses and duplexes, triplexes, and fourplexes.
 
To find an FHA loan, just ask any local bank, credit union, or mortgage professional if they do FHA loans. Most of them do.

4. 203(k) loans

The 203(k) loan is one of my favorite products on the market. It's actually part of the FHA loan program—but with an interesting twist. You can incorporate the repairs into the loan. In other words, if your proposed duplex was $100,000 but needed $30,000 worth of work, you can get an FHA loan that requires just 3.5 percent of the total cost ($130,000) and finance the repairs into the loan.

Like the FHA, the 203(k) loan requires you to live in the property for a year but is applicable for duplexes, triplexes, and fourplexes.

5. VA loans

If you are a U.S. Veteran, you can obtain a VA loan that requires $0 down. Yep, nothing, nada, nilch! Like FHA loans, most banking professionals offer these types of loans, so speak to your favorite lender.

Referrals from good professionals are the best way to find other good professionals, so ask around. New loans and new loan products are being produced all the time, so you’ll never know what is out there until you pick up the phone and start calling.

I want to end with a personal note to my brother. And since you are all eavesdropping on my emails to him anyway, I’ll let you tag along!


Hey Chris,

I’m so excited you are looking to buy a duplex! I know buying my duplex was the springboard to all the adventures in real estate I’ve had so far, and I’d highly recommend it to you to get started. The experience you’ll gain will change your life, and the financial freedom it can bring will be so rewarding! If you can find a good enough deal, you’ll be able to save so much money each month while getting some great “on the job training” for the rest of your life as a real estate investor.

I’d encourage you to re-read this guide a few times and create a game plan. Yep, actually grab a pencil and paper and write down what your steps are going to be. (Hint: I’ve outlined them above!) Then, figure out what your Next Actionable Step is. (What’s the one small next step you can do to get moving forward?) I’m guessing it’s picking up the phone and calling your bank. Or maybe it’s calling a real estate agent and setting up some appointments. 

Either way—I just want you to know I’m proud of you, and I’m here for you! Let me know how I can help. 🙂

Love,
Brandon
Brandon Turner is an active real estate investor, entrepreneur, writer, and co-host of the BiggerPockets Podcast. He is a nationally recognized leader in the real estate education space and has taught millions of people how to find, finance, and manage real estate investments. Brandon began buying rental properties and flipping houses at age 21, discovering he didn’t need to work 40 years at a corporate job to have “the good life.” Today, Brandon is the managing member at Open Door Capital. With nearly 300 units across four states under his belt, he continues to invest in real estate while also showing others the power and impact of financial freedom.
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