Investing in duplexes triplexes

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You, as the owner, live in one unit. Your extended family lives in the other unit s. Another scenario is that extended families purchase the duplex together as a way to become homeowners and build equity. You, as an investor, buy the property and rent all the units. The consolidated properties reduce the overall cost of maintenance. The right purchase terms help the property become an income-producing asset in your real estate portfolio.

The Advantages of Duplexes, Triplexes, and Fourplexes 1. Affordable housing For owners that choose to occupy one unit, housing becomes more affordable than a single-family home with similar square footage and available bedrooms. When the other unit s are occupied by renters, their monthly rent payments contribute towards your mortgage. Keep family close Millions of Americans are tackling rising healthcare costs, living expenses, and reduced retirement funding.

How do adult children take care of their parents in the golden years of their lives without impacting their retirement? Some choose to allay these expenses through duplex and triplex living. This living arrangement is helpful for families with special needs, for those looking to help young adults just starting in their careers, retirement, and other situations. You might be able to deduct home expenses for maintenance and yard work if a property unit is rented.

One caveat: taxes for duplex, triplex, fourplex properties can be complicated. Location Duplexes have some amenity benefits of a single-family home like a garage, a yard, and some privacy. Another advantage is their ability to house more people in a smaller location.

This might help position you close to work or amenities that matter to you for less than buying or renting a single-family home. Your rules The owner-occupied option means you set the rules when it comes to pets and smoking. The tenants are encouraged to be on their best behavior because they know the landlord is next door. The Drawbacks to Duplexes, Triplexes, and Fourplexes 1. The tenants next door Owner-occupation has its upside and downside.

Keeping a closer eye on your tenants also means the tenants can knock on your door anytime. You must be comfortable dealing with people. Be prepared to live with the sounds coming from next door. While having this space to rent helps offset your costs, never count on your units having to pay tenants all the time.

This could leave you on the hook for the full mortgage payment. In an owner-occupied duplex property, you have only one unit for rent. If that unit is not occupied, you are responsible for percent of the mortgage payment.

In a triplex, you have two rental units available to offset the mortgage payment. In a quadplex, you have three other units available. So, the more units you have for rent, the greater your income potential. Remember, the more living units, the higher the initial purchase price and your monthly mortgage. And what about expenses? Landscaping, maintenance, property improvements, and marketing will reduce your profit.

Be prepared for some stipulations, including the need for a down payment and caps on financing amounts. Every program is different, and mortgage rates are in flux. Anticipate needing a down payment anywhere from 5 to 25 percent depending on your situation, credit, and financing program. You have to be comfortable dealing with their noise and smells. As the landlord, you must be able to tackle conflict in a calm and courteous manner.

Fewer amenities Multifamily properties like condominiums or apartment complexes attract and retain occupants with additional shared amenities, like a pool, tennis court, or fitness center. That means paying HOA dues. What is a duplex or triplex or quadplex? What is a Duplex?

A duplex is a two-unit multifamily structure. The units can be side-by-side, back-to-back, or top-to-bottom. Each unit has a separate entrance and each is usually the same or similar in size. From appearances, most duplexes look very similar to a duet home, twin home, or townhome. The difference is in the ownership structure. A duplex is sold as a single real estate transaction giving the buyer ownership to both units of the duplex.

Owners of duplexes commonly do one of the following: Rent both units, collecting monthly rental payments from two different tenants. Live in one unit and rent the other. Live in one unit and allow a friend or family member to reside in the other unit in a non-rental arrangement. Live in one unit and use the other as a guest house when family and friends come to visit.

Utilize one or both units as a vacation rental. Similar to a duplex, a duet home, twin home, or townhome will share a common wall or ceiling in the case of a top-to-bottom arrangement , however, these are single-family attached homes that are sold separately. What is a Triplex? A triplex consists of three individual dwelling units combined into one building, with the individual units sharing one or two common walls. Each unit of a triplex has its own kitchen, bathroom s , living room, separate doors to the outside, and its own address or unit number.

A triplex is similar to a duplex or fourplex, but instead of the property being a two-unit or four-unit structure, a triplex is a three-unit multifamily structure with one owner. While a triplex consists of three individual dwelling units combined into one building, the individual units will typically share one or two common walls.

Each unit of a triplex is self-sufficient, meaning each dwelling space has its own respective kitchen, bathroom s , living room, a separate door to the outside, and its own address or unit number. Good, quality tenants are worth every minute or dollar spent. What if your tenants oven stops working and you have to purchase a new one? What if part of the roof is leaking and needs to be fixed? All of these unexpected expenses will cut into your rental income.

Otherwise, budget for the cost of hiring a property manager. Tip: Most repair and maintenance costs are tax deductible, as mentioned above. Investing in Duplexes Con 3 — Potentially Share a Wall with Your Tenants Sharing a wall with your tenants may be enough to dissuade potential investors from buying a duplex. However, as a landlord, you get to choose your tenants. So if you find great tenants, these issues are easily avoidable. If you end up with bad tenants, it could make your living situation a nightmare.

Investing in a Duplex vs. Single-Family Home Earning Potential Real estate investors often compare different types of properties to try and determine which will help them reach their financial goals. To start, a vacant single-family home will affect your monthly return on investment much more than a duplex. With a single-family home, you are responsible for percent of the mortgage if left vacant. On the other hand, property insurance for a duplex is typically 15 to 25 percent higher than single-family homes.

As mentioned earlier in the article, duplexes usually cost more out the gate than single-family rentals. However, duplexes produce more cash flow over time, which is appealing to buy and hold investors. ROI Potential Whether we decide to buy a single-family home or duplex, all investors are looking for the best return on investment. The key is to figure out which will generate a better long-term return.

Many factors go into your ROI including, property condition, appreciation potential, and how well tenants care for your rental. In the graphic below, we compare buying two single-family homes versus one duplex. Keep in mind, this is strictly from an investment perspective.

The Bottom Line As a first investment property, duplexes can offer a wide range of advantages as discussed above. Do your homework, crunch the numbers and ensure your investment has the potential to create the greatest return. Location, Location, Location!

Where Do I Want to Buy? Conclusion After comparing the pros and cons of investing in duplexes, hopefully you have a better idea of which type of property to invest in. Buying a duplex as your first rental property can be an excellent route for new investors, especially if you live in it.

Remember, buying real estate is all about finding a quality property in strong markets.