If you've been thinking of investing in real estate, there's a good chance that somebody has suggested purchasing a duplex. However, you may not know what a duplex apartment is or how it works. In light of that, we've created a guide to this multifamily structure below. Keep reading to learn how a duplex is different from an apartment building and why it might make sense to invest in one.
What is a duplex?
Put simply, a duplex is a type of multifamily housing structure that has two units to it. Typically, the units in a duplex building will share a common wall. However, they can be configured in multiple ways. Specifically, they could be stacked on top of one another or side by side.
While each of the units in a duplex home usually has its own separate entrance, people who live in duplexes typically have to share some common area, such as a joint outdoor space or garage.
In most cases, the duplex building will have one owner who lives in one of the units and rents out the second unit as an investment property. At its core, a duplex works similarly to other types of real estate, such as a triplex or a fourplex.
How is a duplex different from an apartment building?
Living in a duplex house is very different from living in an apartment building. For starters, the defining feature of a duplex is that it only has two units. An apartment complex, on the other hand, can have hundreds of units inside it.
In addition, it's common for an apartment building to have some amenities attached to it, such as a restaurant or hair salon. However, in this case, a duplex building is much more similar to a single-family home. It typically will not have amenities, other than the potential for outdoor space and added storage.
Finally, while each of the units in the duplex has similar square footage, in an apartment complex, the units can vary in size. By the same token, while each unit in a duplex house can have its own floor plan, the floor plans in an apartment building are usually fairly standard.
What are the pros and cons of buying a duplex?
The biggest advantage to buying a duplex is the potential for rental income. Since you have the ability to rent out the second unit to a tenant, you can collect rent from them and use it to cover your expenses. In some cases, it may even be enough to cover your mortgage payment.
Additionally, investing in a duplex gives you more loan options. Since you'll be living in one unit of the home, you should be able to qualify for a government-backed loan. Normally, these loans cannot be used to buy an investment property. However, buying a duplex is a way to get around that stipulation.
Meanwhile, the biggest disadvantage of living in a duplex home is that you may not like your neighbors. In this case, since you share a common wall, there's a good chance that you'll be able to hear a lot of your neighbor's movements. If you don't get along with your neighbor or don't have similar schedules, it could make for a tough living situation.
On the other hand, you also have to be willing to take on the responsibilities of a landlord. Since there is another unit, you will need to be willing to find renters to fill it. In addition, you will need to take care of their maintenance.
Who should invest in a duplex apartment?
Those who are interested in house hacking should absolutely consider buying a duplex. As mentioned above, in some cases, it is possible for a duplex to generate enough rental income to cover your mortgage payment. This means it's possible to live in a home that you own, more or less free of charge. While you will still have to pay for utilities and other expenses, it's a good way to save up money to expand your portfolio even further.
In addition, those who are nervous about buying rental property and being a landlord may want to consider starting with a duplex. In this case, since you’ll live in the other unit, you'll be able to keep an eye on your investment property fairly easily, which may make you feel more secure.
The bottom line
At the end of the day, buying a duplex can be a great way to start investing in real estate. That said, if you're thinking of going this route, you're still going to want to do your research. Do your best to perform an investment analysis and make sure you'll be happy living in the area where you want to purchase.