SoFi

If you’re in the market to buy, the choice could boil down to a condo or a duplex. Someone who would enjoy condo living — communal, with amenities — wouldn’t necessarily savor duplex living, and vice versa.

The financing can be different. Fees differ.

Let’s look at the main differences between these different types of houses.

What Is a Condo?

First, let’s focus on what a condo is. Short for condominium, a condo is a single, privately owned unit that’s part of a community of these units. They can be combined in a building or built as detached structures.

A condo is often a good starter home.

It also can be a good choice for a first-time homebuyer, who technically is someone who hasn’t owned a primary home in three years.

Overseen by a homeowners association (HOA), condo owners have an interest in common areas, from lobbies and hallways to gyms and pools. A purchaser of a unit owns the condo’s interior.

Recommended: Buying a Condo: 8 Things To Do

Pros and Cons of Living in a Condo

When considering a condo, here are pros and cons to ponder.

Pros	Cons
Condos are usually more affordable than single-family homes.	You’ll need to pay HOA fees and follow the community’s rules. Over time, HOA fees can increase, and special assessments can occur.
You can enjoy community amenities with costs shared by all owners; the community may also host social events.	Privacy can be at a premium. Shared spaces can be noisy and you may see more of your neighbors than you’d like. Some of them might entertain frequently, have work hours opposite yours, and so forth.
The outdoor maintenance is handled by the HOA.	Green space is often limited. So, if you enjoy spending time outdoors by your home, this may not work well for you.
Security, from gates to security staff, may be provided.	If another owner in the condo community sells at a lower price or is foreclosed on, this can affect the value of your unit.

What Is a Duplex?

A duplex is a multifamily home with two units, each with its own entrance. Sometimes a duplex has two units that are side by side, Sometimes one unit is downstairs and the other upstairs. In that case, outside stairs can lead to the second-story unit.

You may decide to buy a duplex, live in half, and rent out the other half for income — or rent both halves.

Pros and Cons of Living in a Duplex

When considering a duplex, here are pros and cons to consider.

Pros	Cons
A duplex tends to be more affordable than a single-family structure.	A duplex isn’t as private as a single-family home and you may hear noise. You’ll also share the driveway and yard.
Buying a duplex allows you to buy a home and get help paying for the mortgage.	You are now a landlord with all of the responsibilities that entails.
Tax write-offs may exist.	If you don’t have a tenant or the tenant falls behind on rent, you still owe your mortgage payment.

What Is the Difference Between a Condo and a Duplex?

If you found a sweet condo and a duplex with potential, it might pose a dilemma. Here’s more info to inform a decision.

Financing

Homes with up to four units are considered residential, so if you plan to occupy one of the units of a duplex, you’re looking at the same types of mortgage loans you would with a single-family home.

A condo buyer will enjoy the same kind of financing that is available to buyers of single-family homes but will face extra steps and slightly higher interest rates. Financing a condo vs. townhouse, for example, involves a lender review of the condo community or inclusion on a list of approved condominium communities.

Cost

A condo may cost less than a duplex, but it will come with HOA fees. Prices can vary considerably based on the location, size, and condition of a property.

Insurance rates can be higher for a duplex because the entire structure needs to be covered. Rates can be more affordable for a condo owner, who is responsible for the interior of their unit only.

Ownership

With a condo, you’d own the interior of your unit, with common areas owned by the HOA. With a duplex, you’d own the entire structure, which includes the lot it’s built on.

Responsibilities

Duplex owners take on all of the typical homeowner responsibilities.The HOA handles maintenance and repairs for condo owners.

Common Areas

Condo owners can use common areas and amenities, which can include a clubhouse, pool, park, and gym.

If you buy a duplex, people living in both units share the yard, with the owner responsible for its maintenance.

The Exterior

As the owner of a duplex, you’re responsible for the entire property.

At a condo complex, the HOA takes care of common areas, including the building exteriors.

Resale Value

Condos tend to appreciate in value, although not as quickly as single-family homes do.

Duplexes also tend to because of the rent received and the lack of HOA fees.

Condo vs Duplex: The Verdict

If you like the idea of less maintenance and think that HOA fees are worth what you get in return, you would enjoy the community’s amenities, and you’re fine with less green space, then a condo may make sense for you.

If you don’t want to pay HOA fees (and may not use amenities anyway) and believe that having a yard and more control over what you do with your property is a real plus, a duplex may be a better choice.

The Takeaway

When house hunting, two options may include a condo and a duplex. Each has benefits as well as challenges, which should be explored before you make a financial investment in a property.

3 Home Loan Tips

1. To see a house in person, particularly in a tight or expensive market, you may need to show proof of pre-qualification to the real estate agent. With SoFi’s online application, it can take just minutes to get pre-qualified.
2. Not to be confused with pre-qualification, pre-approval involves a longer application, documentation, and hard credit pulls. Ideally, you want to keep your applications for pre-approval to within the same 14- to 45-day period, since many hard credit pulls outside the given time period can adversely affect your credit score, which in turn affects the mortgage terms you’ll be offered.
3. Thinking of using a mortgage broker? That person will try to help you save money by finding the best loan offers you are eligible for. But if you deal directly with a mortgage lender, you won’t have to pay a mortgage broker’s commission, which is usually based on the mortgage amount.

FAQ

Is a condo the same as a duplex?

No. A duplex is a detached home that’s divided in half (side by side or up and down) for two sets of residents, while a condo is a single unit within a condominium community.

Which is better: a duplex or a condo?

It depends upon your preferences and lifestyle.

Is living in a duplex noisy?

It could be! You’ll either have a shared wall or a shared ceiling/floor with someone else. So if the residents in the other half have a rambunctious lifestyle, it could get noisy.

Are duplexes cheaper than condos?

In general, a condo may be cheaper than a duplex, but location, size, and condition affect the values.

---

Photo credit: iStock/william87
SoFi Mortgages
Terms, conditions, and state restrictions apply. Not all products are available in all states. See SoFi.com/eligibility for more information.

SoFi Loan Products
SoFi loans are originated by SoFi Bank, N.A., NMLS #696891 (Member FDIC). For additional product-specific legal and licensing information, see SoFi.com/legal. Equal Housing Lender.

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.

SOHL0222010

Read more

When looking for a property to buy, you might consider a single-family detached home, a townhouse, a condo, a co-op apartment, or something else.

Let’s look at the pros and cons of buying a townhouse vs. a condo.

What Is a Townhouse?

At first glance, a townhouse might look like a detached multifloor home, but a closer look will show that it’s attached to at least one similar unit.

Townhouses are often found in urban areas where space is at a premium. They often come with a front or back yard. Owners own the inside and outside of their unit and the land it sits on.

The townhome community may have a homeowners association and maintenance fees.

Benefits of Buying a Townhouse

There are at least three upsides to purchasing a townhouse.

Owner Rights

Because people who buy a townhouse own the land it’s on, they have more freedom in how to use the yard. A yard or patio can open possibilities for a grilling spot or dog or child play area.

They also have at least some freedom of choice about the appearance of the inside and outside of the structure.

Price

In communities with high home prices, townhouses may be an affordable alternative for first-time homebuyers.

House hunters from millennial homebuyers to empty-nesters may also find a townhouse a sweet spot between a condo and a traditional detached home with yard.

Plus, because lots tend to be smaller than ones with detached homes on them, property taxes are usually lower as well.

Low Maintenance

Smaller yards mean less yardwork, ideal for busy people and those who are downsizing their home and responsibilities.

The townhouse complex may be gated and have security, and some have pools, gyms, and other shared recreational spaces whose maintenance is covered by homeowner fees.

Disadvantages of Buying a Townhouse

When you think of townhouse living, keep in mind the close quarters with neighbors and possible HOA fees and rules.

HOA

Townhouse communities are less likely to have an HOA than condominiums are, but if they do, the resident-led board will collect ongoing fees to cover common areas and any community perks such as a pool. The HOA will also enforce community rules.

Lack of Privacy

Because of the shared walls, a townhouse provides less privacy than a detached home (although more than many condo buildings, where you may have a unit above and below yours. Townhouse living may therefore create some challenges for families with young children.

What Is an Apartment?

An apartment is a room or set of rooms within a building. In major cities, some people refer to buying a condo or co-op shares as buying an apartment.

Condo owners own everything within their unit and have an interest in the common elements. “Buying a co-op apartment” really means holding shares in the housing cooperative that owns the property.

Then there are people and companies that buy a multifamily property like an apartment building and rent out the units. An owner could decide to live in one of the units and serve as an on-site landlord.

Benefits of Living in an Apartment

Let’s look at some benefits of buying a condo.

Low Maintenance

You won’t typically need to make many repairs, mow the grass, or paint. That’s covered by the monthly or quarterly fees you’ll pay.

Low Utilities

First, condos tend to be smaller than single-family homes, which can reduce the cost of heating and cooling the space, and take less electricity to keep it well lit.

HOA

If the building has an HOA, the association will take care of property maintenance and enforcement of rules.

Disadvantages of Living in an Apartment

Apartment life can come with disadvantages, too. Here are a few.

Parking

You may or may not have a parking space set aside for you, and street parking isn’t always a given in busy locales. Even if you have a parking spot, if people come to visit, they may not easily find anywhere to park.

Noisy or Nosy Neighbors

If you appreciate quiet calmness, you may not find all you’d like in condo living. Neighbors are nearby and they may appreciate louder and more frequent interactions than you’d prefer. If you’re in a crowded city, surrounding events can contribute to the jostling and noise.

Limited Space

If you’re used to living in a house, you could find a more compact apartment to be challenging as you try to fit in your belongings. Plus, it isn’t unusual not to have yard space or a patio, which further limits the amount of space you have to use and enjoy.

Differences Between a Townhouse and an Apartment

When comparing apartment or condo vs. townhouse, keep in mind these differences.

Townhouse	Apartment/Condo
Single-family unit that shares one or more walls with another home	Room or rooms within a building
May have a small yard or patio	If an HOA is in place, it will collect fees to cover most maintenance.
Gives owner some control over how to change the exterior and use yard	Typically comes with lower utility bills than a traditional home
Can be more affordable than traditional detached homes in markets with high prices	May not come with convenient parking
If there’s an HOA, fees are usually lower because owners are responsible for much of their own upkeep	Means you may have noisy or nosy neighbors
May not provide as much privacy as desired	Often has less space than some other types of homes
Thanks to the land ownership, financing is similar to a traditional mortgage	It can be harder to finance a condo than a townhouse

3 Home Loan Tips

1.    Traditionally, mortgage lenders like to see a 20% down payment. But some lenders, such as SoFi, allow home mortgage loans with as little as 3% down for qualifying first-time homebuyers.

2.    Your parents or grandparents probably got mortgages for 30 years. But these days, you can get them for 20, 15, or 10 years — and pay less interest over the life of the loan.

3.    Generally, the lower your debt-to-income ratio, the better loan terms you’ll be offered. One way to improve your ratio is to increase your income (hello, side hustle!). Another way is to consolidate your debt and lower your monthly debt payments.

FAQ

Do townhomes appreciate as much as houses?

In general, townhomes do not appreciate as quickly as single-family detached homes, thanks to the amount of land that comes with traditional stand-alone homes.

Are townhouses a bad investment?

In some circumstances, a townhouse may be a good investment. The price, current market conditions, and location are factors.

Are fees higher for a townhouse or condo?

Condo HOA dues are typically a lot higher than townhouse fees (if the townhouse community even has an HOA). Condo communities usually have many more amenities to maintain.

---

Photo credit: iStock/Auseklis

SoFi Mortgages
Terms, conditions, and state restrictions apply. Not all products are available in all states. See SoFi.com/eligibility for more information.

SoFi Loan Products
SoFi loans are originated by SoFi Bank, N.A., NMLS #696891 (Member FDIC). For additional product-specific legal and licensing information, see SoFi.com/legal. Equal Housing Lender.

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.

SOHL0222009

Read more

Investing in single-family homes is often a good way to build wealth and generate monthly cash flow.

Real estate has proven to be an economic bellwether even when stocks and bonds experience downturns. Of course 2020 and 2021 saw a housing boom unlike any in decades, and Redfin reported that home prices were up nearly 8% year-over-year in late 2022, despite rising interest rates.

Single-family rental homes have lots of upsides for an investor, but there are also a few reasons to look before you leap.

What Is a Single-Family Home?

The popular image of a single-family home is a stand-alone, one-dwelling structure with its own utilities, entrance, exit, and access to the street. The owners own both the building and land it sits on, so condos do not count.

Some government agencies expand this definition to include properties of up to four units, such as duplexes and townhouses.

Why Invest in Single-Family Homes?

Buying investment property offers two key benefits to long-term investors:

•   the potential for capital appreciation

•   immediate cash flow

Let’s walk through some of the key motivators for investing in single-family homes.

Financing

Single-family homes are typically easier to obtain financing for than multifamily homes of five or more units.

A multifamily property meeting that criterion requires a commercial loan, which usually has a higher interest rate and shorter term than a residential mortgage.

Lenders often require at least 20% down for an investment property. It could be higher, depending on the borrower’s credit score and savings. Then again, there are creative ways to buy a multifamily property with no money down.

Less Volatility

The market for single-family homes is relatively stable and tends to grow more smoothly over the long run compared with other types of homes.

Unlike commercial real estate and apartments, the demand for single-family homes tends to remain relatively strong at all stages of the economic cycle.

Steady Income

Single-family homes may be rented out for longer terms than apartments and usually sit vacant for less time thanks to the steady demand for single-family housing.

Some contend that single-family rentals feel more like proper homes for tenants and therefore are better cared for than apartments.

You’re also more likely to find more families renting single-family homes than individuals. Families may be more likely to extend the lease if they end up loving the neighborhood and schools, as in a coveted suburb.

Tangible Asset

Many people seek to diversify portfolios with different types of investments. Unlike stocks and bonds, which represent shares of ownership and rights to debt payments from a company, real estate is a tangible asset.

The tangible factor gives you something physical to hold on to that’s unlikely to disintegrate over the long term. Stocks, bonds, and other intangible investments require the underlying company to remain a going concern.

Inflation Hedge

Inflation is the creeping impact of price increases, and when there are concentrated bouts of it over a short period of time, it can rapidly erode the purchasing power of your assets.

Housing has often been touted as an inflation hedge because it has historically held its real value during inflationary markets. This could be because of the following reasons:

1.    Most homebuyers lock in their purchase price through a mortgage.

2.    Rental agreements typically last one or two years, which allows homeowners to gradually raise rents to keep pace with inflation.

3.    Home values typically appreciate over the long run thanks to the intrinsic value of the house and land.

Return on Investment

Thanks to steady demand, single-family homes can match or even exceed the return on investment (ROI) of bigger multifamily properties, with lower volatility than stocks or bonds.

Potential ROI across different real estate properties can be compared using a capitalization rate (cap rate) calculation: net operating income divided by current market value.

Net operating income is your gross annual income from the property minus operating expenses (like repair costs, groundskeeping, property taxes, insurance, utilities not paid by tenants, and any property management fees). Home mortgage loan payments are not included in the net operating income formula.

Diversification

Single-family homes could be a good addition to a portfolio of stocks and bonds, but why does portfolio diversification matter anyway? Because by diversifying assets, you may offset a certain amount of risk and improve returns.

When stocks or bonds fall, real estate prices can take much longer to follow.

Things to Know Before Investing in Single-Family Rentals

Because of the high acquisition cost of single-family homes, you’ll want to conduct proper due diligence on your local housing market and target property before you buy.

As with all investments, be cautious when investing a significant portion of your cash in one place.

Your Numbers

While the projected rental income on a property looks attractive at a glance, bear in mind that maintenance costs and surprises should be factored in.

Vacancy rates, legal issues with tenants, and unexpected repairs can sap your returns over time.

It’s smart to factor in a cash buffer to ensure that money is available on short notice.

Your Target Rental and Housing Market

While the rental income streams of New York and California offer much higher revenue potential, keep in mind that the costs of owning real estate in those areas is enormous as well.

Income is only one side of the rate of return calculation, so make sure you have a good handle on the expenses as well. You can only do that by thoroughly investigating your target housing market and relying on the home appraisal.

The local job market, its dominant industries, and the dependability and growth of local businesses also will shed light on how stable a given market will be over time.

Good schools, safe cities, and proximity to workplaces and attractions matter to many renters.

If you’re looking to use the property as a short-term rental, check out the local ordinances, which may prohibit you from doing so.

The 1% and 50% Rules

The 1% rule is a back-of-the-envelope calculation to estimate whether your rental income strategy will be profitable. If the estimated rental income on the property is at least 1% of its purchase price, you should theoretically be able to generate cash flow.

If your purchase price was $300,000, for example, the monthly rent should be at least $3,000, according to the rule.

The 50% rule states that you should expect the expenses on your real estate investment to make up approximately 50% of the gross income generated. That’ll give you a quick and dirty estimate to help you start ballparking your net returns.

Obviously, the exact numbers are more complicated. When you have time, you’ll want to run a full comparison of revenues vs. potential costs of your venture.

Your Strategy

This one’s a little more nuanced, as it depends on your goal amount, the time horizon, and your risk tolerance.

Are you looking to build a rental home empire or are you just looking for a little extra income to supplement your retirement?

Do you intend to tap home equity to buy one or more investment properties? Do you plan to flip or hold the home?

How to Invest in Single-Family Homes

If you’re confident that buying a single-family home is the right choice for you, there are a few ways you can invest:

Buy It Yourself

This is the most capital intensive and least liquid route. Buying a single-family home in the neighborhood of your choice will net you reward as well as the risk that comes with any property.

If you’re handy, you can buy a fixer-upper or a HUD home (bidding opens to investors after owner-occupants are given a chance) and renovate it into turnkey condition.

The expense of any contractors or property managers will need to be factored in.

Invest Through a Crowdfunding Platform

If you don’t have copious amounts of capital, you can still fund real estate investment projects through online crowdfunding platforms like Fundrise.

These allow you to diffuse risk while taking part in more aggressive investments than you might have been willing to by yourself.

Keep in mind that you’ll need to share the benefits with all investors who partake in the process. Another shortcoming is that your funds may be tied up for an extended period of time, which varies by project.

Invest in a Real Estate Investment Trust

REITs are corporate entities that specialize in purchasing and financing pools of real estate investments on behalf of their clients. They sell shares that are publicly traded and can specialize in any number of sectors or strategies.

The big benefit of REITs is that they’re one of the most liquid real estate investments out there, as you can buy or sell your shares at almost any time on the open market. However, the market value of each share will fluctuate daily.

In the realm of investment opportunities, REITs often provide better returns than fixed-income assets like bonds, but REITs carry higher risk.

There are REITs that specialize in buying and operating single-family rentals. These REITs pay out a major portion of their cash earnings to shareholders.

Explore SoFi’s Home Financing Options

When done right, your single-family home investment can offer growth and income and diversify your portfolio. You can start with lower levels of capital by investing in REITs or crowdfunding platforms, but the gains will be diluted.

Looking at single-family home rentals or other investment property? SoFi offers financing for one- to four-unit owner-occupied residences, second homes, and investment properties.

Rates are competitive.

FAQ

Is renting out a single-family home worth it?

It can be. Appreciation and rental income have made single-family homes attractive to investors. Multifamily properties provide more rental income streams but also require more property and tenant management.

How do you value a single-family home rental?

There are a few ways. One is to look at recent comparable sales. Another is to calculate the capitalization rate (net operating income divided by property price or value). A third is to use the gross rent multiplier approach (property price divided by gross rental income).

How fast does the value of single-family homes appreciate?

It depends on the market. Lately, appreciation has decelerated. But the national median single-family existing-home price had risen 8.6% in a year, the National Association of Realtors® reported in late 2022.

---

Photo credit: iStock/Phynart Studio

SoFi Mortgages
Terms, conditions, and state restrictions apply. Not all products are available in all states. See SoFi.com/eligibility for more information.

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.

Third-Party Brand Mentions: No brands, products, or companies mentioned are affiliated with SoFi, nor do they endorse or sponsor this article. Third-party trademarks referenced herein are property of their respective owners.

SOHL0122006

Read more

Investing in a duplex can be a good idea if you can pony up the cost and don’t mind being a hands-on landlord. A key advantage is the ability to live in one of the units or rent both out.

If the purchase will be strictly a rental, duplexes offer the capacity to double your cash flow for less than the cost of two single-family homes. You also have the freedom to make half your home.

Buying a duplex for investment is a popular investment strategy used for breaking into real estate, and they’re in demand in every major city.

What Is a Duplex?

A duplex consists of two living units on top of each other or side by side, along with the land.

Each unit has its own entrance and exit, kitchen, bedrooms, and bathrooms. The two units are conjoined by a wall or a floor/ceiling.

Regardless of their layout, the units share the same plot and deed, and are sold as a single property. Unlike a twin home, a duplex has one owner.

A duplex is technically a multifamily property but qualifies — as does any building with up to four units — for the same kind of favorable financing that a single-family home does if you make the property your address.

The units may share the same utilities but otherwise operate as separate residences. This allows you to avoid doubling expenses over time when you need to replace a water heater, for instance.

Advantages of Investing in Duplexes

The advantage of buying a duplex, with the freedom to live in half and rent out the other (or not), speaks for itself.

There are other pros. Here are the major ones.

Cash Flow

Whether you’re trying to build or buy a duplex, a key advantage is the cash flow potential by renting out both units.

Alternatively, you can live in one of the units, which will ultimately reduce the risk if the other half sits vacant for an extended period.

The rent from the other unit may cover part or all of your mortgage costs, depending on how much you put down on the property.

Financing If Owner-Occupied

Eligible duplex owner-occupants have financing choices:

•   FHA loans

•   VA loans

•   Conventional mortgages

Each of those calls for a low down payment or none at all.

The government-insured loans can be used for properties with up to four units as long as the buyer plans to live in one of the units. FHA loans are favored by first-time homebuyers — those who have not owned a principal residence in the past three years — and buyers with lower credit scores.

For an FHA or VA multifamily loan, the owner is to live onsite for at least a year.

Investors who plan to rent out both units must use conventional mortgage loans. They should expect to put down at least 20%. The mortgage rate will likely run a bit higher than for a loan for an owner-occupied property.

A duplex buyer can use both current passive income and projected rental income to qualify for an FHA loan and conventional mortgage loan but not a VA-backed loan.

Faster Portfolio Building

Unlike starting with a detached single-family home and working your way up, buying a duplex lets you double the number of rentable units you own upfront for less than the cost of two single-family rental homes in most markets.

This cuts down on the amount of time you need to find suitable properties to purchase and the closing costs you need to pay.

Buying a duplex also will give you a chance to enhance your real estate portfolio diversification.

Tax Breaks

Owner-occupants can deduct mortgage interest and property tax on their half.

If they have a renter, they can write off expenses for that half: repairs, insurance, any utility bills, advertising, management fees, and so on. And they can depreciate the rented half of the property.

Risk Mitigation

If you’re living in one of the units, you’re still getting some use out of the property if the other remains vacant. You can even bide your time if you need to make home improvements to the other unit.

Comparatively, if you own a single-family property that sits vacant, that’s cash every month out of your pocket that it remains empty.

Additionally, lenders view the risk to be more diffused for duplexes, particularly if the owner’s living in one unit. From their perspective, it’s much less likely that borrowers would default on a duplex that serves as their primary residence than the owner of a comparable investment property.

Lower Overhead Cost

The same furnace, AC unit, and hot water heater may serve both units in a duplex. If that’s the case, you may only need to worry about maintaining a single set of utilities for both dwellings.

Disadvantages of Investing in Duplexes

Like all rental properties, the primary disadvantage of duplex is the risk that it remains vacant for an extended period of time, although the risk is mitigated if you’re living in the other unit.

Here are other possible downsides when investing in a duplex.

Possibly Cost Intensive

While it may be more efficient than buying two detached single-family homes, a duplex still might cost more than if you had bought a single stand-alone property.

You’ll have twice the number of kitchens and bathrooms to contend with, which will increase costs if you intend to renovate both units.

The cost of building a duplex may exceed the cost of building a house.

Finally, property insurance for a duplex is usually higher than for a single-family home.

Risk of Vacancies

If one or both of the units in your duplex remain vacant, the opportunity cost and negative impact on your bottom line as property manager could be enormous.

If the average person is spending a lot on rent, that’s either a great sum to put in your pocket or a terrible one to lose.

Make sure you properly research your target market. Just because you stumble on a duplex that looks great doesn’t necessarily mean it’ll rent from day one.

Proximity to Tenants

If you intend to live in one unit and rent the other out, the coziness with your tenants is a double-edged sword. On the other hand, you’ll be able to monitor the coming and goings of your neighbor, but on the other, you’ll be right next door if any issues arise.

Where to Find Duplexes and How to Buy One

If a stream of rental income and capital appreciation sound good, it’s smart to start scoping out what’s on the market.

You also can seek prequalification and preapproval for financing.

Don’t expect an easy hunt, as serviceable duplexes in great locations are in demand. When you find one, expect competition, true of any good investment property.

Like all real estate investments, asking prices for prime duplexes have spiked over the past few years due to low supply and record demand.

Start by browsing online listings for duplex owners and filtering for properties with two units. It’s also a good idea to find a reputable real estate agent and specifically request to view duplex properties.

Time is of the essence when making offers. A preapproval letter can carry a lot of weight.

Explore SoFi’s Home Financing Options

Buying a duplex can be a smart move: You’re getting two potential rental streams under one roof typically for less than two single-family homes. Financing is especially attractive if you plan to live onsite.

If you’re shopping for a duplex, keep SoFi in mind. SoFi offers home mortgage loans for owner-occupied primary residences, second homes, and investment properties.

Get a personal rate quote today.

FAQ

What should I look for when investing in a duplex?

Make sure it’s legally zoned as a duplex. Know the neighborhood. See if the numbers would make sense by researching comparable rents and factoring in any repairs. Gauge noise transfer and privacy if you plan to live there and rent the other unit out.

How do I buy a duplex?

Know whether you plan to live at the property, which will affect your financing. Getting preapproved for a mortgage is a good idea. Look at prices in your area, scour online listings, and consider hiring a good buyer’s agent. In most markets, expect competition.

Is it profitable to own a duplex?

Because a duplex usually does not come with HOA fees and consists of two rentable units, it can be profitable. A duplex also might be more appealing to renters than apartments are. And maintaining a duplex costs less than managing two individual rental units.

Do duplexes increase in value?

They often do, but appreciation tends to be lower for duplexes than stand-alone single-family homes.

---

Photo credit: iStock/aluxum

SoFi Mortgages
Terms, conditions, and state restrictions apply. Not all products are available in all states. See SoFi.com/eligibility for more information.

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.

SOHL0122004

Read more

A duplex or townhouse can be a more affordable alternative to a detached single-family home, yet offer a taste of that residential lifestyle. These medium-density housing choices are sandwiched between suburban and high-density development.

When deciding on a duplex vs. townhouse, consider the amount of space you need, the amount of maintenance you want to do, your budget, and whether the rental component of a duplex — or Aunt Jill, Cousin Joe, or Mom next door — appeals to you.

Let’s take a deep dive into the differences between a duplex and townhouse.

What Is a Duplex?

A duplex is a single structure with two conjoined units on one plot of land. Each unit has its own entrance, kitchen, beds and baths. The two units often share the yard, laundry area, and garage space, but that isn’t always the case.

A duplex shouldn’t be confused with a “twin home,” which is two homes that share a wall, but each unit and the land it sits on is individually owned. The lot line actually runs through the common wall.

Buying a duplex is often touted as a good investment because owners can rent out one side while living in the other.

Types of Duplexes

There are two common configurations when it comes to duplex living:

•   Side by side. The shared wall is in the middle.

•   Up and down. When the units are in an upstairs and downstairs arrangement, the dividing wall is the floor/ceiling.

What Are the Pros and Cons of Duplex Living?

Duplexes are in demand, often by first-time homebuyers.

Owner-occupants have a big financing advantage: If you buy a multifamily property of four or fewer units and plan to live onsite, you can use an FHA loan with a low down payment or a VA loan, if you’re eligible, with no down payment at all.

There are other upsides, and potential downsides, you may want to consider before deciding on a townhouse vs. duplex.

Duplex Pros	Duplex Cons
May be more affordable than a traditional single-family home	Shared wall and yard means limited privacy
Usually less maintenance than a single- family home	Owners still have some maintenance responsibilities
More residential feel than an apartment	Usually more expensive than a condo
Half or all can be rented out	The neighbor sharing your wall may be loud, or a relative next door could be intrusive
Usually has a washer and dryer	If both units will be rented out, an investment property loan typically calls for 25% down and has a higher mortgage rate

What Is a Townhouse?

You get the idea about duplexes, but what is a townhouse? A townhouse is an individually owned home with two or more stories and at least one shared wall.

You own the inside and outside of your unit and the land it rests on, whereas a condo owner owns the interior of the condo. A townhouse has a separate entrance but may share communal spaces.

Townhouses are often found where land is in short supply. This is particularly true in areas that transition from dense, urban cities to the suburbs. They make good use of the space with their vertical nature and shared walls.

They are typically lower priced than detached single-family homes. By the way, the U.S. Census Bureau, which tracks residential construction, considers townhouses and duplexes single-family homes.

Townhome ownership has been rising, and the National Association of Home Builders (NAHB) says the long-term prospects for townhouse construction remain positive as homebuyers seek medium-density residential neighborhoods such as urban villages.

The NAHB expects townhouses to comprise more than 15% of all single-family homes in the coming years.

What Are the Pros and Cons of Townhouse Living?

As the prices of traditional single-family homes have gone through the roof in most markets, townhomes have become popular as starter homes.

And downsizers may be attracted to townhouses, whose cost may be lower than their detached counterparts.

Townhouses make great use of space, but they also have less privacy, and you may need to follow the rules of a homeowners association, if one exists. (In the condo vs. townhouse comparison, condos come with an HOA, but not all townhouse communities do.)

Financing a townhouse works just like financing any single-family home. Here are pros and cons of buying a townhouse compared with a detached single-family home.

Townhouse Pros	Townhouse Cons
Typically more affordable	May not appreciate as much
May share cost of maintenance in the development	Less privacy
Townhomes may have amenities attractive to residents	Owners may need to pay dues each month as well as special assessments
Full ownership of a property	Neighbors are closer together
Small yard or patio requires less maintenance	Yard or patio tends to be small

Recommended: Visit the Home Loan Help Center

Weighing the Differences Between Duplexes and Townhouse

Taking a look at living in a duplex vs. a townhouse side by side, they have commonalities but also differences. Here are some.

Structure and Design

A townhome typically is in a planned unit development where the homes share walls and community spaces. A duplex is structured to share a yard and a wall with only one neighbor.

Purchase Price

Cost will vary based on square footage, neighborhood, amenities, lot size, and other factors. A duplex will usually cost more than buying a townhouse, but the tradeoff is that you can rent out one side.

Maintenance Cost

A townhouse may have HOA dues, though they might not be ample because owners are responsible for much of their own maintenance. A duplex owner will need to maintain both units and the yard. A comparison will depend on the size and age of the properties and more.

Rental Income

If you plan to rent out a townhouse you buy, it’s a single unit. A duplex has two units, so it may be easier to make the financials work.

Privacy

With a townhome, you’ll be living in a community. Compare that with a duplex, where you’re sharing space with one neighbor.

Then again, having a single neighbor might feel less private than if you had many.

Investment Value

The ability to rent at least one side of a duplex holds more investment value than a townhome. The townhome may also have HOA rules about renting that may not jibe with your idea of how to use your property.

The Takeaway

The difference between a townhouse and a duplex is what fits your lifestyle. A duplex can offer a larger yard and rental potential, but a townhouse may bring that single-family home vibe at a lower price point than a duplex.

3 Home Loan Tips

1. Traditionally, mortgage lenders like to see a 20% down payment. But some lenders, such as SoFi, allow home mortgage loans with as little as 3% down for qualifying first-time homebuyers.
2. Not to be confused with prequalification, preapproval involves a longer application, documentation, and hard credit pulls. Ideally, you want to keep your applications for preapproval to within the same 14- to 45-day period, since many hard credit pulls outside the given time period can adversely affect your credit score, which in turn affects the mortgage terms you’ll be offered.
3. Your parents or grandparents probably got mortgages for 30 years. But these days, you can get them for 20, 15, or 10 years — and pay less interest over the life of the loan.

FAQ

Are townhomes becoming more popular?

The market share of townhomes is rising. According to the National Association of Home Builders, more townhomes were built in 2022 (152,000) than the previous year (122,000), representing 13.4% of all new single-family starts.

Which is a better investment: a duplex or a townhouse?

A duplex may be the better investment because you have the potential to rent out both units or live in one and collect rent from the other.

Is it faster to build a duplex or a townhouse?

A lot of factors affect how long it takes to build your new home: size, location, materials, weather, subcontractors, the city or county building department, and the complexity of your building plans. Many townhomes are built at once and may become available more quickly. Construction of a duplex is more like a house.

---

Photo credit: iStock/peterspiro

SoFi Mortgages
Terms, conditions, and state restrictions apply. Not all products are available in all states. See SoFi.com/eligibility for more information.

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.

SOHL0122016

Read more