Considerations when buying a duplex

On Behalf of | May 3, 2021 | Commercial Real Estate Leases | 0 comments

Have you considered purchasing a duplex to live in one side and rent the other side? Some investors find this strategy provides a stream of passive income as well as a low-cost living arrangement.

Review the benefits and potential drawbacks of buying a duplex as both a home and a rental.

Limited location options

It can be difficult to find a duplex in an area where you want to live that is also desirable for potential renters. When considering a transaction of this type, make sure to get a thorough analysis of the projected income and demand for a rental in that area before moving forward.

Tax benefits

As a landlord, you can write off the costs associated with maintaining your rental unit. For example, if you have to install a new HVAC system to make the duplex habitable, all or part of that cost could constitute a business expense. An experienced accountant can help you understand and adhere to the tax regulations for property investors.

Reduced capital requirements

When purchasing a property purely for investment purposes, you need to have at least 20% down to secure a mortgage. If you plan to live in part of the property full-time, however, you can likely get a mortgage with a lower down payment. For example, an FHA mortgage requires just a 3.5% down payment on the purchase price.

Understanding your responsibilities as a landlord and thoroughly calculating the financial implication of buying a duplex can help you decide if this choice makes sense for your lifestyle and business objectives.