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First-time homebuyer’s dilemma: duplex or single-family home?

Literally everyone and their mother is telling you to buy a duplex. We break down the pros and cons.

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During our house hunt, I heard the same refrain from my parents, my aunts and uncles, family friends – even acquaintances at weddings: “You HAVE to buy a duplex.”

The common wisdom is that you live in one half while renting out the other, and the rent will defray the cost of your mortgage while you build up greater equity. What’s better than putting other people’s rent money to work for you?

We were unreasonably excited to live in a freestanding structure with no shared walls, no one stamping around above us, and no significant floor cracks amplifying every conversation in the apartment below. Plus we are not remotely handy. So in the end, we didn’t go for the duplex.

But the idea got me thinking and researching the possibilities (check out the links at the end of this article for more resources). If you have the right temperament and a somewhat entrepreneurial mindset, purchasing a duplex can be a springboard now toward your dream home later. Let’s run down the pros and cons.

Pros to owning a duplex:

  • You could qualify for a larger mortgage, because lenders may take the potential income from the rental unit into consideration. You’ll need to research rental rates in the area. And as long as you are an owner-occupant, you can qualify for low-down-payment options as you would with a single-family home
  • Build equity faster. If you can’t afford a home now in your dream neighborhood, buying a duplex in a more affordable neighborhood can help you build equity faster and move up to your dream house later – at a faster rate than building your savings while renting. Check out our Buy Now vs. Wait calculator to see how the numbers might work out for you
  • Rental income may cover half the mortgage. Depending on your location, the rental income may cover more than half the monthly mortgage payment. That income could help subsidize “your half,” as well, meaning you’ll enjoy the perks of a nicer unit with a lower out-of-pocket monthly cost
  • Tax benefits. In addition to mortgage interest, you can write off any repair and utility costs related to the rental portion of the property
  • Vacation rental potential. If your local regulations allow for it, you could make even more money renting out half your duplex on the vacation market – while leaving it available for occasional personal use if you have visitors or need for a studio
  • Real estate experience. If you think you might be interested in real estate investment in the long term, a duplex can be a great crash course in how to be a landlord

Cons to owning a duplex:

  • Being a landlord isn’t for everyone. You must learn the landlord-tenant laws in your state as well as the intricacies of leases and screening potential tenants. You must be available to your tenants 24 hours a day in case of emergency
  • You’re on the hook for all repairs to the rental unit as well as your own. You can save money by handling repairs yourself – but if you aren’t handy and need to hire someone, this can eat into your savings. Make sure you have enough wiggle room in your budget to afford repairs and appliance replacements
  • Limited locations. Looking for a duplex may limit your location options. Not all neighborhoods in every city offer a mix of single-family, duplex and multi-family units for sale
  • Resale issues. Generally, there’s less demand for duplexes than single-family homes, so reselling may take longer
  • Property insurance rates are higher
  • Appreciation is lower for duplexes
  • Higher up-front cost. While you can qualify for low-down-payment options as mentioned above, you’ll likely spend more on the duplex than you would on a single-family home. So even if you only put 3% down, you may face higher up-front costs
  • Rental income is not guaranteed. Just because you have a space to rent does not mean you will see that rental income each and every month

All familial advice aside, the only person who can determine whether a duplex or a single-family home is right for you – is you. So get yourself into a Zen head space and do some soul-searching.

4 questions to ask yourself when considering a duplex

  • Can I afford the up-front costs of buying a more expensive duplex rather than a single-family home?
  • Will my duplex mortgage be affordable even if I don’t have a tenant every single month? Will I be able to build enough savings to cover repairs or unexpected expenses related to both living spaces?
  • Am I emotionally, mentally and/or physically prepared to be a landlord? Am I prepared for my home to also be my business?
  • Am I looking for a home for the long haul, or a starter home that might be a stepping-stone?

More resources: