You’re talking to your real estate agent, and they’re taking you through your options for property types: single-family home, condos, townhomes, multifamily, apartments — it can start to feel like a neverending smorgasbord of choices, and when you finally think you have a grip on all the different property types, they drop a new term on you: duplex.
Now, don’t worry if you don’t know what a duplex is — it can be complicated.
Also known as twin homes, side-by-sides, or multifamily dwellings, duplexes are homes that more than one family occupies. You might even think of duplexes as two houses for the price of one. And with almost one in five families living in some sort of multifamily home, duplexes are as popular as ever today.
What makes a property a duplex?
There are several criteria that a property has to meet in order for it to be called a duplex.
Design is the first element that defines a duplex. A duplex is a property containing two living units in one building. Typically, those units are symmetrical and of equal size, and either sit side-by-side or are divided into first-floor and second-floor units. The key thing to keep in mind is that a duplex will usually share either a wall (side-by-side or twin home) or a floor and ceiling (upstairs/downstairs).
Though the two units are in the same structure, often looking something like a single-family house, each unit has its own entrances and exits, kitchen, bedrooms, bathrooms, and functions like a townhouse or even as an apartment.
Often, there are shared spaces within the property, such as a backyard or garden space, laundry, and storage. Parking is either shared or assigned, depending on the individual landlord and renters.
Duplex ownership breaks down into two categories. With a classic duplex, one individual or family owns both units of a property. However, the situation with twin homes is different. Twin homes look like duplexes — they usually sit side by side and share a wall — but there are two owners of the property. Each unit has an owner, instead of both units being owned by one individual.
Land, or ‘lots’
There is a difference in the ownership of the plot of land when distinguishing between a duplex and a twin home. With a duplex, there are two units on one lot; with a twin home, there are two lots, so each owner has their own lot or plot of land.
“If you went on the county assessor website and you look up a specific address, a duplex will have its own address, but would also be its own parcel,” explains Omaha-based agent Tyler Bundy. “A twin home could be owned by either two different people or one person, but it would still be listed as two different parcels.”
For a twin home, each owner is responsible for upkeep of the property and land on their side, including landscaping, painting, and maintenance. With a duplex, the single owner is responsible for the maintenance of the entire property.
With a twin home, the individual owners must also get their own insurance policy for their side of the home.
Duplexes are sometimes confused with maisonettes. The term maisonette comes from a French word meaning “small house.” While a maisonette might have some characteristics of a duplex, it is usually an apartment that occupies two floors.
Maisonettes typically have their own entrance, whereas apartment buildings (or even duplexes) will have a shared entrance. These properties are popular in large cities with a high population of renters, like New York and Chicago.
Why buy a duplex?
With a duplex, you have the option of purchasing a home to live in as well as having an investment property. Many duplex owners choose to live in one unit on the property and rent out the other as an income-generating stream. If you’re purchasing the property as an investment, there are two opportunities for income built into one property.
If you purchase a duplex as an owner-occupant, the interest rate on your mortgage will likely be lower than if you purchased the property as an investment. You can also take advantage of tax breaks because you can deduct certain home expenses, such as property maintenance, because it’s considered an income-producing property. Insurance breaks are also available for some duplex properties.
Living in a duplex, you’ll be close to your tenants, but you each have separate spaces that are your own. Being close to tenants means that you can keep an eye on the property and address any issues that come up quickly. You also have some legal protections and leeway that a non-resident landlord doesn’t have.
This also could come in handy if you want to be close to relatives; you can live in one half and rent the other half to your loved ones. For example, if you want to move your parents into your home but they want to remain independent, a duplex is a good compromise since everyone has their own space.
If you’re looking to dip your toe into the real estate investment game, a duplex is a good way to start because you’re only responsible for one other unit (if you decide to live in the home). “No matter what stage of life you’re in, owning a duplex could be valuable,” explains Bundy. “If you are a young adult looking to build wealth and want to keep your costs low, buy a duplex. Then on the other end would be retirees. It’s a great way to supplement Social Security income.”
You could also use the second unit as an Airbnb if you’re not interested in having permanent tenants occupying it. Again, being close to the second unit makes it easy to keep an eye on whoever is in the other unit, and it is also convenient for any issues that might arise. When the guests leave, it’s easy to get the unit cleaned and flipped because you’re always on site.
Friends who want to buy a property together because it makes financial sense are also great candidates for a duplex. You can split the cost of homeownership and still have your own property, so it’s a win-win. There are even some couples who find that duplexes work best for them, where one person will occupy each unit. They can stay close to each other and have their own space without moving to separate properties.
Why not buy a duplex?
Space can be an issue when considering buying a duplex. You’re either right next door to each other, or right on top of each other…literally.
If you need privacy and don’t enjoy sharing walls, a duplex is probably not a good choice.
Cost is also a factor to consider when looking at a duplex, as they are generally more expensive than single-family homes because of their income potential.
These can be awkward if your household configuration changes (divorce, separation), especially if you have family members occupying the second unit.
Remember, when you own a duplex, you are responsible for all the maintenance on the property. This can be more burdensome than a single-family home because there are two sets of people living in one building. Sometimes the lots for duplexes are larger, so that means more landscaping and yard work as well.
If you occupy your duplex, you’ll have to share common spaces like laundry, garages, or yards with your tenants, which can be uncomfortable if you’re not used to it.
When you purchase a duplex as an investment property, you need to get renters to occupy the other unit. Vetting renters can be time-consuming because you have to look through applications, verify references, employment, and so on. It can also be costly if you choose to pull credit reports or do background checks on potential renters.
“Unfortunately, it’s very common for people that don’t have stellar credit, stellar payment history, that are renting to look for duplexes that are privately owned,” says Bundy. “Most renters feel they have a better chance of playing on those individual’s emotions to get a better deal or if they’re late on rent.”
If you don’t want to deal with these sticky situations, you can always hire a management company to take care of the property. Management companies generally charge between 5% and 10% of the monthly rent, plus an upfront payment once they place a tenant, so be sure you’re ready for the costs that come with hiring one.
Owning a duplex can be great, but it also comes with drawbacks. If you’re looking to start investing in real estate, buying a duplex is a good start. Be sure to look at the choice from all angles before you take the plunge!
Header Image Source: (Mary Ann Wooten / Unsplash)