What is a Duplex: Everything You Need to Know
No one would turn down living in their dream home free of charge, yet many fail to realize that investing in a duplex provides you with a one-of-a-kind opportunity to significantly lower your living expenses. A duplex, also known as a multi-unit or multifamily property, is a small set of separate apartment living quarters. Imagine buying a mini 2-4 unit apartment building for the price of one home and then leasing to tenants that cover the cost of that building’s mortgage. On the other hand, single-family homes are made up of all shared spaces.
How to Dominate the Duplex Market
There are a few strategies to consider when thinking about purchasing a duplex that will impact your pocketbook. Deciding on whether you want to live in one unit and rent the other or make the entire property a rental property is one of the first decisions you’ll need to make. Unless you are doing a cash buy, this will more than likely impact the type of mortgage loan that you qualify for and the amount of your down payment. A qualified real estate agent can help you identify multi-unit homes that might interest you, and duplexes are often listed on real estate websites.
Buying a duplex is an ideal opportunity for real estate investors because of the potential income possibilities. Renters enjoy duplexes because it offers a house-like living experience that is more comfortable than a larger apartment complex. Access to a fenced backyard, more room, and the feeling of living in a home and neighborhood is also a plus for many renters.
Single Family Versus Multifamily
Owning a duplex requires a very different skill set than buying a single-family home. It’s critical to understand that if you choose to purchase and then lease the property as a homeowner, you must be prepared to assume the responsibility of maintaining the property, deal with tenants, and ultimately assume liability. This also means higher insurance costs, more potential property management headaches, and fewer options if you want out. The upside for many is the opportunity to virtually live for free, financing options, tax deductions, and owning a potential retirement property. If you don’t feel like you can handle long-term tenants, short-term rentals, or event rentals might be a more suitable choice, but all of these options still come with property management responsibilities.
Whether purchasing a single-family home as a rental property or your dream home, houses are considerably easier to maintain and are lighter on your pocketbook when it comes to insurance. If you are renting out your single-family home, then vacancy may be an issue when your tenant moves out of the space. On the other hand, tenant quality tends to be better in-home rentals than apartment rentals. Also, if you decide to sell your single-family home, you’ll have more options than in the duplex market.
Keep an Eye Out for Structural Issues
Structural damage can cost homeowners thousands of dollars per year in repair costs, and it’s vital to inquire about any potential structural issues, especially if you are looking at multi-family homes. Older duplexes may need more work, and you should factor in the cost of any likely work needed into your cost calculation. Keep in mind that double the properties could also mean double the damage. Potential issues should surface during property inspections, but if you see any cracks, mold, rotted areas in walls or ceilings, and gaps around doors and windows, make sure to ask your inspector to look into it. If rehabbing a property isn’t something you desire to do, then you’ll want to pass on a property with structural damage. So you need a structural design firm.
Owning your own home is a central part of the American Dream. It’s an exciting experience that puts people on the path to financial liberation for themselves and their families. There are multiple options in property ownership that are out there. Taking the time to find the right property type that harmonizes with what you want to accomplish through your home buying goals will help you choose your new home or rental property with confidence.