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A Guide to Buying a Duplex

December 22, 2020 · 5 minute read

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A Guide to Buying a Duplex

At face value, buying a duplex might seem like a BOGO deal, but it isn’t as simple as getting two homes for the price of one. They may have quirks and potential drawbacks, but a duplex can be a great choice for the right type of home buyer.

Defining ‘Duplex’

A duplex is composed of two living units on top of each other or side by side.

Duplexes have separate entrances for each occupant . That means single-family homes that have been subdivided do not count as duplexes.

For a side-by-side duplex, both entrances are likely on the street. If a duplex is stacked, the second-floor occupant might share an exterior entrance with the first-floor occupant, and then have an entrance to themselves upstairs.

In addition to private entrances, the units have their own bathrooms, kitchens, and other living features. On the exterior, occupants may share a backyard, garden, or driveway.

Every duplex has one thing in common: a shared wall. If the duplex units are side by side, the occupants will share a wall. One on top of the other? Occupants share a ceiling/floor.

Just because properties share a wall doesn’t inherently make them a duplex. Sometimes duplexes are confused with twin homes .

A twin home may look like a duplex, but the shared wall is in reality the lot line between the two homes. So it’s two connected properties, each on its own lot. A duplex is two properties, owned by the same person, on a single lot.

The square footage of each duplex half is typically like the other. In many, occupants will find that the layouts mirror each other (if they’re side by side), or duplicate exactly (if they’re on top of each other).

Properties with carriage houses or guesthouses are not considered duplexes: They usually do not share walls, and the smaller residence is considered an accessory dwelling unit .

Duplexes fall in the category of multifamily dwellings, which also include triplexes and quads (aka fourplexes). According to the National Multifamily Housing Council, more than 18 million renters live in two- or four-unit dwellings.

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Benefits of a Duplex

Duplexes have the exciting “two for one” energy, which can make buying them enticing. The style of living comes with benefits for the buyer, including:

•  Income to help with mortgage. Duplex owners who decide to live in one of the units can rent out or Airbnb the other, making income to help offset the monthly mortgage payments and upkeep.

•  Potential tax benefits. Mortgage interest is tax-deductible for a primary or secondary home if the home acquisition debt is $750,000 or less ($375,000 for a married couple filing separately) through 2025.

Resident duplex owners can write off only mortgage interest and property tax on the half of the property they live in, but if they have a renter they can write off repairs to that unit, any utility bills paid for the rental, and management fees. The IRS even allows the owner to depreciate the rented half of the property.

•  Flexibility in the future. Having two homes on one lot opens up options for owners. They can rent out a unit or use it as an office or studio space. In the future, the unit could become an apartment for aging parents or a guest suite for visiting family members.

•  Landlord proximity. If a duplex owner is getting into the landlord business for the first time, it might be beneficial to live close to the tenant. In the event of a repair or emergency, the tenant is just steps away.

Additionally, because of landlord proximity, duplex owners might find that renters keep the home in better condition. If the landlord is living on the property, a tenant might be less likely to abuse features or leave problems unreported.

A duplex could also be a good opportunity to live next to a family member or close friend. It means both parties live on the same property but not with each other. For some arrangements, it’s a good balance between living together while also apart.

•  Affordability. Because it’s two properties with a single price, duplexes can be more affordable than two single-family homes. Plus, duplexes are often located in more affordable neighborhoods.

Drawbacks of a Duplex

Double the property doesn’t always mean double the fun. Here’s why a duplex might not be the right fit for all buyers:

•  Affordability. When numbers are crunched, two properties in one sounds like a deal, but the price of a duplex may be higher than that of a single-family home nearby. And if a duplex buyer does not plan to occupy the property, the down payment will typically be at least 20% of the purchase price, and homeowners insurance, known as landlord insurance, will usually be more expensive for an investment property.

•  Tax season could be complicated. Yes, a homeowner can offset costs with a tenant in a duplex, but they’ve just signed themselves up for a more complicated tax scenario than with an owner-occupied single-family home.

•  Landlord responsibilities. Many homebuyers are drawn to the idea of a duplex because they can generate income while living there. However, being a landlord isn’t just about collecting rent checks each month. Duplex owners are responsible for their renter’s unit, meaning fixing issues and being available for general repairs.

No one wants to address an overflowing toilet at 2 a.m., but as a landlord, that might well be a reality. It’s a 24/7 job, and not only will a duplex owner be responsible for fixing the issues, but the cost of repairs will have to come out of their pocket.

•  Finding good tenants. Finding renters can be challenging. Owning a duplex doesn’t automatically guarantee extra income, and the process of finding reliable renters can be time consuming. Plus, duplex owners will have to start the process anew each time a tenant moves out.

Remember, if the second dwelling is unoccupied, the duplex owner still owes the same amount each month. Before buying a duplex, it’s worth considering how much time owners can put into searching for the right tenant, and if they want to have that responsibility long term.

•  Bad tenants. Let’s face it, not all tenants will be perfect. In reality, they could be loud, rude, or late on rent. There’s a multitude of things that could go wrong with a renter, and duplex owners should be comfortable bringing issues to the table. Owners who decide to live onsite could get stuck with a less-than- considerate neighbor.

Estimate a Mortgage Payment for a Duplex

Now that you know about the pros and cons of owning a duplex, if you’re still interested in the idea of purchasing one, use the mortgage calculator below to get an estimate of what future mortgage payments would be.

Obtaining a Mortgage

Still interested? A potential duplex buyer who plans to occupy one of the units can apply for an FHA loan, VA loan, or conventional financing. (Investors are limited to conventional mortgage loans.) FHA loans can be a good choice for first-time home buyers, those with less-than-perfect credit, and buyers who do not have a large down payment.Check out our first-time home buyers guide for additional information on mortgages, loans, and closing costs.

Applicants may be able to use projected rental income to qualify for a loan. For rental income to be taken into account, though, renters usually must have already signed a lease. And not all of the projected income applies; a percentage is usually subtracted to account for maintenance and vacancies.

It makes sense for would-be buyers to have a good feel for their budget, as well as the potential costs associated with buying a property.

Knowing whether you plan to live at the address or rent out both units is a big consideration. Investors usually need a higher down payment than owner-occupants do. (Investment properties don’t qualify for private mortgage insurance, so typically a down payment of at least 20% is needed to get traditional financing.)

SoFi offers mortgage loans with competitive rates and no hidden fees. Put as little as 10% down.

It takes just two minutes to get pre-qualified online.

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External Websites: The information and analysis provided through hyperlinks to third-party websites, while believed to be accurate, cannot be guaranteed by SoFi. Links are provided for informational purposes and should not be viewed as an endorsement.
Financial Tips & Strategies: The tips provided on this website are of a general nature and do not take into account your specific objectives, financial situation, and needs. You should always consider their appropriateness given your own circumstances.


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