Buying A Duplex As Your First Home Is The Best Investment

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  • Buying A Duplex As Your First Home Is The Best Investment
Author: Joseph Reinke, CFA

Are you a young professional looking for your first home? Maybe you are just starting your real estate investing career. If so, buying a duplex may be the best investment you can make.

Not only does it provide an affordable way to purchase an investment property, but it also provides rental income and potential tax benefits that other housing options such as single family homes don’t offer.

In this article, we’ll discuss the advantages of owning a duplex as well as how to buy one, loan options for financing and other considerations when purchasing this type of property.

With all these factors in mind, investing in a duplex could be the perfect choice for young professionals ready to take their first step into real estate investing, rental properties, or just wanting to buy instead of rent.

Understanding Housing: Condo, Town House, Single Family, Duplex, Triplex, Fourplex, Multi-Unit

When it comes to real estate investing, there are a variety of housing options available for young professionals looking to purchase their first home.

Each option offers unique advantages and benefits depending on the individual’s needs.

Below, we’ll explore the different types of housing because it will help you understand why buying rental property and multi family property before a single family house is a great place to start.


A condo is usually part of an apartment building or complex. It has its own kitchen, bedroom, and bathroom. Some condos also have amenities like swimming pools, gyms, and laundry rooms. In short, you are sharing walls with a neighbor (downstairs, upstairs, and next to you).

The benefit of a condo is you can qualify for low down payment loans such as an FHA loan. However, they can be expensive and price appreciation may not be as high as your other real estate investing choices.

Town House

A town house is a type of home usually found in a group. It usually has its own kitchen, bedroom, and bathroom. Some town houses have extra features like swimming pools, gyms and laundry rooms that you can use.

The primary difference between a town house and condo is that a town house typically only shares one wall with a neighbor.

From an investment property perspective, they share the same pros and cons as condos.

Single Family Homes Or Single Family Residence (SFR)

Single family homes of SFRs are what we typically think of when buying a house specifically in the suburbs. This is the most common real estate investment that people buy. It basically means only one family lives in it and there is no shared walls between you and your neighbor.

These properties are typically located in residential neighborhoods and offer more traditional living experience.


A duplex is a type of property where two separate residences are combined into one building. Each residence has its own entrance, making it ideal for those who want to live together but have some privacy.

Triplex & Fourplex

A triplex or fourplex is similar to a duplex except that it consists of three or four separate residences instead of two. This option allows for more rental income and potential tax benefits than a single family residence.


A multi-unit property is any residential structure that has more than four separate residences. These can range from large apartment buildings to small complexes with multiple dwellings.

The primary disadvantages of buying a multi-unit investment property are high required down payments and using investment loans i.e. you can not use a conventional loan such as a FHA loan or VA loans to buy these investment properties.

Owner Occupied Duplex

An owner occupied duplex is a type of property where you live in one half of the building and rent out the other part.

This means that you get rental income as well as living in your own home.

This is a great option for young professionals as it gives them the financial security of owning their own home while also generating rental income.

Advantages Of Buying A Duplex

Duplex owners have a wide array of advantages which I detail below. As a side note, to take full advantage of the list below, be sure to have a good team.

A good team consist of a real estate agent, tax accountant, lender, and tax/real estate lawyer. Every good real estate investor has this team in place.


Duplexes can be more affordable than single family homes and condos.

Since you are able to collect rental income, the net monthly cost of your mortgage payment, property tax, etc… may actually be cheaper than if you bought a comparable condo, town house, or single family home.

In addition, you still qualify for conventional loans which means you can qualify with a low down payment at cheap interest rates. I discuss coming up soon.

Also, the purchase price of duplex is less than a triplex or a fourplex which makes it a great rental property for a new real estate investor.

Tax Laws

Depending on your local tax laws, you may be able to deduct expenses related to your investment property from your taxes such as property taxes.

In addition, if you are cash flowing on the property, you’ll be able to offset that in come by using depreciation. Therefore, not owing or drastically lowering your tax bill.

Additional Rental Income

If you own an owner-occupied duplex and eventually decide that you would like to move out of one side, you always have the option to rent out both units and generate even more passive income.

This makes it easier to transition into becoming a landlord without having to buy another property or make any major renovations.

Building Wealth

Investment properties and real estate investments in general are often seen as one of the best ways to build wealth over time due to its potential for appreciation in value.

With a duplex or multi-unit property, you can benefit from this appreciation as well as from rental income generated from tenants living in your units.

In addition, you can take advantage of additional tax laws such as 1031 exchanges. This would allow you to acquire bigger properties in the future that can generate more income with less risk.

Future Rental Income

Future rental income is often times overlooked but is extremely important for real estate investing and your personal finances.

Overtime, future rental income will continue to increase. However, if you have a fixed rate loan, your monthly payments will stay the same.

Therefore, your cash flow from the rental property will continue to go up as you get older.

This is awesome because you’ll be able to generate more passive income from the rental property as you enter retirement.

Disadvantages Of Buying A Duplex

When it comes to the disadvantages of owning a duplex, there are several to consider.

Buying A Single Family Home Down The Road

This is the most overlooked part of owning a duplex.

Many people want to buy them as a first home because they plan on living there a few years, renting it, then buying a single family house.

They believe the extra rental income will make it easier to buy a home in the future.

However, that isn’t the case most of the time.

When lenders calculate the DTI ratio for the loan on your single family home, they will only use approximately 70% of the expected rental income. They do that to account for vacancies.

However, they will use 100% of the debt payments, property tax, etc…

Thus, it may be hard to qualify for a single family home loan in the future!

Plus, you may use an FHA loan to buy the duplex. These loans will require mortgage insurance fees until you completely get rid of it which will increase your cost.

Maintenance & Repairs AKA Property Management

As a landlord, you are responsible for the upkeep and maintenance of your property. This includes any necessary repairs or remodeling that needs to be done.

This means that you will need to budget for an extra financial obligation in order to keep your rental units in good condition.

Tenant Disputes

Having tenants living on your property can lead to disputes that can get out of hand.

When this happens, it is important that you handle it properly and fairly so that both parties feel respected and taken care of or ish can get out of hand real quick!

Risk of Vacancy

You may have budgeted and included the rental income to help offset the cost of owning the property.

If you tenant moves out, you don’t collect rental income. You have to be prepared for this and should increase your emergency fund to be prepared.

Legal Issues

It is important that landlords stay informed about all applicable state laws when dealing with tenants as they can vary from state-to-state. If any legal issues arise and you are not aware of the correct regulations, then you could face expensive fines or even lawsuits from disgruntled tenants.

Rental Value vs Homeowner Value

Rental value is the amount of rent that an individual or family is willing to pay for a rental unit, whereas homeowner value is the amount that someone would be willing to pay for a single family property.

Rental value is primarily based on rental income and a financial metric called net operating income (NOI).

Whereas homeowner value is based on comparable sales in the neighborhood.

This is a disadvantage because those buying a duplex as a first home have to value it using a combination of these methods. This just means you may have to do a little bit more work.


You may have a dream location that you’d like to live in. Unfortunately, duplexes are most likely not going to be in those locations.

They typically are located in denser sections of cities that are lower to lower middle class income demographics.

This may not actually be a disadvantage though because that is what you’ll most likely be able to afford anyways.

Buying A Duplex: Loan Options

One of the biggest advantages of buying a duplex as you begin your real estate investing life is the ability to claim it as your primary home which you can’t do on a multi-unit property.

This is important because you can qualify for first time home buyers loans such as an FHA loan, a conventional loan or even a VA loan. You can also use a professional mortgage loan if you work in certain professions!

The benefit of this is gigantic.

First and foremost, you don’t have to use an investment loan. Those loans have higher interest rates and require much more of a down payment.

Since this is your primary house, you may be able to buy it with a 0% down payment and get a lower interest rate!

This opportunity may not come to you again as you get older because you can only qualify for a first-time home buyers loan at certain times. Take advantage of it while you can.

Apply for a mortgage with movement mortgage

Tax Benefits Of Owning A Duplex

When you own a single family home you’ll have expenses such as mortgage interest, property taxes, mortgage insurance, HOAs, property maintenance, etc…

You may be able to deduct some of these from your taxes and save money but most you can not.

However, when you live in a duplex you own, you do get to write-off these expenses.

You may not be able to write off 100% of them but you can write-off some and this will drastically reduce your tax bill.

You do this by setting up a limited liability company (LLC).

Every state is different so be sure to ask a tax accountant about the best ways to minimize your tax bill as well as consulting a tax attorney.

Property manager vs Doing It Yourself

I previously, discussed the disadvantages of owning a duplex whereby I highlighted items such as legal issues, tenant disputes and vacancies.

Trying to deal with this stuff can be a major headache.

That is why I recommend if you are going to own a duplex and plan on living in it to hire a property manager.

They will make your life much easier by handling the day-to-day issues that come with renting out your unit.

A property manager can also help you find and screen tenants, collect rent, organize repairs or maintenance and even handle evictions if necessary.

On Big Item To Note

Young professionals that are new to buying investment property get excited when they learn the benefits of buying a duplex.

Often times I hear them say that they are going to buy one as a rental property but they don’t ever plan on living in it. They are just going to tell the lender they plan on it. Therefore, they will qualify for a conventional loan.

In order to qualify for a conventional loan it has to be an owner occupied duplex. Therefore, you have to live in it for at least a year.

If you do not live in the investment property for at least a year the lender may have recourse against you and it can be costly!


As a young professional looking for a first home, buying a duplex can be one of the best investments you make. You will enjoy all the benefits of owning real estate such as rental income, tax breaks and appreciation potential while also having a place to call your own.

Be sure to research all aspects of purchasing a duplex including legal regulations, loan options, location and management options before making any decisions. With careful planning and consideration you should have no problem finding the perfect spot

Joseph Reinke, CFA

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About the Author

Joseph Reinke is a Chartered Financial Analyst (CFA) Charter Holder and founder of FitBUX which has helped over 14,000 young professionals on their journey to financial freedom. Joseph has been personally investing since he was 12 years old.

In addition, he has experience in student loans, mortgages, wealth management, investment banking, valuation, stock trading, and option trading. He has been on 100s of podcast and has been invited to 100s of universities to discuss financial planning with their soon to be graduates.

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