How to Buy a Duplex for Your Investment Portfolio

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Written By Justin McGill

DealBloom aims to share the latest tips and strategies to help realtors, brokers, loan officers, and investors navigate the world of real estate.

If you’re looking to invest in property, learning how to buy a duplex can be a great option. I should know – I did it myself! Not only do you get two homes for the price of one, but you can also live in one unit and rent out the other to help cover your mortgage payments.

Of course, there are some things you need to take into consideration before making such a purchase. Here are the advantages of investing in a duplex and how to buy a duplex to create passive income.

How to Buy a Duplex

There are a few things to consider when buying a duplex. First, you need to make sure you can afford the mortgage payments and other associated costs.

Next, you need to find a duplex that meets your needs and is in a good location. Once you find a suitable duplex, you will need to make an offer to the seller and negotiate the purchase price.

Finally, you will need to obtain financing and close on the deal.

Before purchasing a property, calculate how much income you expect to receive from renting it out. Then, subtract the expenses such as a mortgage, taxes, and insurance.

What are some of the expenses you should include when buying a duplex? Some examples might be required renovation work, maintenance, facility upkeep, repairs, and insurance.

The amount left over after paying for these expenses can be put towards a mortgage. Comparing the cost of a mortgage for a single-family home to the cost of a duplex can help you decide if purchasing a duplex is a more affordable option.

When looking to purchase a multi-family home, it is important to consider the budget, location, and condition of the property. There are various types of properties to choose from, so research your options carefully.

With proper planning and careful consideration, you will be able to find the right home for your situation.

Like single-family homes, you’ll have the option of choosing between homes that are ready to move into or ones that need some work.

Buying a duplex can be more complicated than buying a single-family house. There tends to be less inventory for buyers to choose from, and these homes often sell to investor groups who buy multiple units at once.

The ones that are left in the market after foreclosures are most likely in poor condition or priced too high.

You could benefit by hiring an agent, but realize that many real estate agents who deal with investment property have other buyers lined up.

Be sure to show that you are ready and eager to buy by proving you have the funds or ability to get financed.

Most real estate investors find that the best way to find duplexes is by talking to other investors who own them. Most major cities have real estate investor groups that hold regular meetups.

You can reach out to other investors and ask them to put you in touch with someone who’s looking to sell.

You can finance the purchase of a duplex through a conventional loan, which typically requires a down payment of 20% to 25%.

Some sellers, though, will allow the buyer to pay part of the purchase price upfront.

Find a loan provider that deals in mortgages for rental properties. Keep in mind, however, that if you don’t live in the property, the loan will be classified as a commercial mortgage.

These loans are called balloon payments because the loan is amortized over 5-10 years and at the end, the remaining balance is due.

Once you’ve negotiated a price, you have a period to thoroughly inspect the property and make sure it is in good condition. It is highly recommended to hire an inspector to carefully examine the home and provide you with a thorough report of what needs to be done.

If the inspection turns up any needed repairs, you can negotiate with the seller to have them pay for all or some of the repairs. Once you’ve come to an agreement on repairs, you can then move forward with accepting or rejecting the property.

If you’re looking to buy a duplex, it’s helpful to live in one of the units. This way, you can keep an eye on the property and make sure everything is running smoothly. If you don’t want to live on-site, be sure to visit regularly and stay in communication with your tenants. This way, you can catch any problems early on.

You must be vigilant in ensuring that your tenants pay their rent on time.

Why Buy a Duplex?

When I first started, I had no idea what I was doing.

I was 22 years old, and I had just recently sold my first and only home. I was facing a very real possibility of being out on the street. Thankfully, I was able to purchase a duplex and live in one half while renting out the other. This gave me a place to live while also providing income to help cover my mortgage payments.

Why buy a duplex? For me, it was simple. I wanted to get into the real estate game and buying a duplex was my way in. Not only that, but I saw it as an investment that would help me reach my financial goals sooner.

After reading a few books on investing in duplexes, triplexes, and other multifamily properties, I realized that these properties had great potential.

I hired a real estate agent, found a foreclosed property, and bought it for $80,000. I then spent the next few weeks fixing it up, repainting it, and doing minor repairs. Then I rented out the property.

I was able to rent out both units for $600 each, meaning I effectively paid nothing for housing. I later sold the property for $150,000, giving me a $100,000 profit.

Since I started receiving residual income, my finances have improved significantly.

This property was the first small multifamily property that I became obsessed with—and duplexes specifically.

Since then, I have bought several more.

One reason to buy a duplex is that you can live in one unit and rent out the other, which can help offset your mortgage payments. Another reason is that duplexes tend to appreciate at a higher rate than single-family homes, so you could make a good profit if you sell down the road.

If you’re going to put in the effort to find a duplex, you might as well consider larger three- or four-unit properties. They may be a better deal overall.

Other times, they may be a better value.

Let’s get started.

Anyone with a pulse can buy a rental, but finding a fantastic property at a steal is the true key to success.

If you’re looking for a solid investment with great returns, buying a duplex is a great option. You’ll enjoy the benefits of rental income, while also having the peace of mind that comes with owning your own property. Plus, it’s a relatively low-risk investment, which makes it a great choice for first-time investors.

Buying a property is not the key to your success. If you make a bad investment, you’ll just end up losing money.

Buying a house can be a great way to build wealth, but make sure you do your research, shop around, and get a good rate.

How to Find a Great Duplex Deal

Finding a good deal can be both easy and tricky.

In addition to searching the Multiple Listing Service, there are additional ways to find a deal. These are better suited for motivated sellers who can’t find a buyer on the open market or for investors who want to get a better deal.

If you ordered a burger from Mcdonald’s and it was bad, you could simply throw it out. If you bought some stocks and it turned out to be a bad idea, you could just sell them.

If you buy a property that turns out to be a dog, you’ll probably have a hard time selling it.

As an investor, it is crucial that you know how to analyze a deal before committing to it. If the numbers don’t add up, then the chances of making a profit are slim. However, with proper analysis, you can ensure that the property you’re buying has potential for growth.

You make money when you sell. A careful analysis of your market is necessary.

Run the analysis as if you were not planning on living on the property. Why?

Because you probably aren’t going to be living there for the rest of your life so it makes sense to rent.

When looking at duplexes, it’s important to look at their cash flows. This is the amount of money left after covering your expenses. Calculating your cash flow can be tricky, but it’s an important skill to have.

There are numerous easy-to-forget expenses, like:

  • Property taxes
  • Property hazard insurance
  • Flood insurance
  • Earthquake insurance
  • Sewer
  • Garbage
  • General maintenance and upkeep
  • Landscaping
  • Repairs
  • Capital expenditures
  • HOA dues, fees, and assessments
  • Property management

If you forget to plan for any of these things, you’ll end up with a lot less money than you expected. Not great!

When looking at your projected cash flows, be sure to factor in all these costs.

How to Finance a Duplex

There are a few good options for financing duplexes that can fit your investing strategy and goals. I recommend researching each option in more detail to see if it suits you, then making some phone calls.

If you are a U.S. military veteran, you can obtain a VA loan that requires $0 down.

Most banks, credit unions, and other financial institutions have FHA mortgage loans available. Speak with your preferred lending institution to learn more.

If you’re looking for a great loan, the best way to find one is by asking around for referrals from good professionals. There are always new loans and loan products being created, so you won’t know what’s available unless you pick up the phone and start making some calls.

Is a Duplex Worth The Money?

A duplex is two homes in one, so you would be living in one half and renting out the other. This can be a great way to make some extra money each month to help with your mortgage or other expenses.

It can also be a lot of work, as you would be responsible for maintaining both halves of the duplex and dealing with tenants.

If you are up for the challenge and think it would be a good fit for your lifestyle, then a duplex could be worth the money.

How Do You Find The Perfect Duplex?

There is no perfect duplex, but there are ways to find a good one. Start by doing your research and looking for areas that fit your budget and needs. Once you’ve narrowed down your search, take a look at different duplexes in the area and compare them.

Pay attention to things like the condition of the property, the size of the units, and the location. You should also talk to the neighbors to get a feel for what it’s like to live in the area.

With a little bit of effort, you should be able to find a great duplex that meets your needs.

Conclusion

How to buy a duplex? There are many things to take into account before making a purchase. But ultimately, it can be a great investment – especially if you live in one unit and rent out the other. Just make sure to do your research first and consult with experts to ensure that it’s the right decision for you.

Justin McGill