How to Buy a Duplex as a Rental Property

Thinking about getting into real estate investing but not sold on a single-family home? A duplex could be the perfect fit. Buying a duplex as a rental property offers steady rental income, manageable upkeep, and strong long-term potential. It’s a smart option for both first-time buyers and experienced investors. 

In this guide, we’ll cover the essentials—from selecting the right loan program to assessing rental income potential—and how to maximize your investment, whether you live in one unit or rent out both. 

What is a duplex? 

A duplex is a type of multifamily property that contains two separate living units within the same building. Each unit typically has its own entrance, kitchen, bathroom, and living space. Some duplexes are side-by-side; others are stacked one above the other. 

Because they’re smaller and often less expensive than larger apartment complexes, duplexes are a popular choice among real estate investors looking for manageable rental properties that can generate steady income. 

Why invest in a duplex? 

Before diving into how to invest in a duplex, it helps to understand why this type of property is so appealing.  

Two units = double the income potential: Even though you’re buying a single building, you’re getting two opportunities for rental income—often at a lower price than buying two separate single-family homes. 

• Built-in risk management: If one unit becomes vacant, income from the second unit can help cover the mortgage payment and reduce your financial stress. 
• Owner-occupied benefits: If you live in one unit and rent out the other, you may qualify for more favorable loan programs and interest rates. Plus, tenants may treat the property with more respect knowing their landlord lives next door. 
• Tax benefits: As with other investment properties, owning a duplex can offer tax deductions for mortgage interest, property taxes, repairs, depreciation, and more. 

With a mix of income potential, cost efficiency, and financial perks, a duplex can be a strategic and versatile addition to any real estate portfolio. 

Step 1: Understand the Financial Commitment 

Just like buying any piece of real estate, purchasing a duplex comes with upfront and ongoing costs. Before you begin, it’s essential to evaluate your financial readiness. 

Ask yourself: 

• What’s my credit score? A higher score can help you qualify for a loan with better interest rates. 
• How much can I afford for a down payment? 
• Am I planning to live in one unit or rent out both? 
• What will my monthly mortgage payment be, and can rental income cover it? 

Make sure to account for property taxes, insurance, maintenance costs, and property management, if you’re not planning to manage it yourself. A duplex might cost more than a single-family home upfront, but it may pay off with long-term equity and cash flow. 

Step 2: Explore Your Financing Options 

One of the most important steps in learning how to buy a duplex is choosing the right financing strategy. The loan programs you qualify for—and the terms you receive—may depend on whether you plan to live in the property or treat it purely as an investment.  

Here are some common options: 

FHA Loan 

FHA loans are government-backed mortgages that allow for low down payments—typically as little as 3.5%—making them a great option for first-time homebuyers. The catch? You must live in one of the units for at least one year. That said, many real estate investors start this way: live in one unit, rent the other, then move out later and rent both units. 

VA Loan 

If you’re a U.S. military service member or veteran, a VA loan might be your best option. VA loans allow you to purchase a multifamily property (up to four units) with no down payment, and you can use rental income to qualify. Like FHA loans, you must live in one of the units. 

Conventional Loan 

If you don’t qualify for FHA or VA loans, a conventional loan is another option. These typically require higher credit scores and a down payment of 15–25%, especially if the duplex is strictly an investment property. But they also give you more flexibility and fewer restrictions about occupancy. 

203(k) Loan 

Also backed by the FHA, a 203(k) loan rolls the cost of home improvements into your mortgage. This is ideal for buying a duplex that needs renovations, especially if you’re looking to boost rental value early on. 

Keep in mind: if you’re not living in the property, lenders may treat it as a commercial loan, which can come with higher interest rates, shorter terms, and balloon payments. Always talk to a lender about your goals and qualifications early in the application process. 

Step 3: Find the Right Duplex 

Finding a good duplex to invest in may require more strategy than buying a single-family home.  

Start with these tips: 

• Work with experienced real estate agents: Not all agents specialize in investment properties, so look for someone who understands the local rental market and can guide you through the nuances of buying a multifamily property. 
• Research neighborhoods: Look for areas with low vacancy rates, good schools, job growth, and access to amenities— factors that attract reliable tenants. 
• Estimate rental income: Use online tools, local rental listings, or your agent’s expertise to determine what you can realistically charge per unit. You can also talk to a lender about using rental income to qualify for a loan. 
• Run the numbers: Real estate investing is all about the math. Add up your estimated mortgage payment, property taxes, insurance, and maintenance costs. Then compare that to your expected rental income. A good rule of thumb is the “1% rule”—aim for monthly rent to be at least 1% of the purchase price. 

Step 4: Do Your Due Diligence 

Before you finalize your purchase, inspect the property thoroughly. Hiring a professional home inspector is critical—they’ll catch issues you might miss, from faulty wiring to foundation cracks. 

If the inspection reveals major issues, you can either renegotiate the sale price or ask the seller to make repairs before closing. A lender will also conduct their own appraisal during the loan process to ensure the property’s value supports the loan amount. 

Step 5: Prepare for Property Management 

Once you’ve closed on the property, you officially become a landlord. If you’re new to property management, living in one unit can be a helpful way to stay close to the action and quickly address any maintenance issues or tenant concerns. 

If you’re renting out both units and prefer not to manage them yourself, consider hiring a property management company. They’ll handle everything from tenant screening to repairs to rent collection, though this does cut into your rental income. 

Regardless of your approach, make sure to: 

• Stay on top of maintenance to keep tenants happy and protect your investment. 
• Understand local landlord-tenant laws. 
• Keep accurate financial records for tax time. 
• Set clear policies for rent payments and lease agreements. 

Is a duplex right for you? 

Learning how to invest in a duplex can open the door to financial independence, rental income, and long-term wealth. While it’s not without challenges, it offers a practical, scalable entry point into real estate investing—especially for buyers who want to live in one unit while using the other to offset their mortgage. 

Whether you’re exploring duplexes as your first investment property or adding to your growing portfolio, the right financing, planning, and property can help you build equity, earn passive income, and create long-term financial stability. 

If you’re ready to take the next step in real estate investing, reach out to local lenders or real estate agents who understand investment properties and can guide you through the purchasing process. With the right team and the right mindset, buying a duplex could be your smartest move yet. 

This article was first published on December 23, 2020.