A duples is a 2-unit income producing residential property. Unlike a single family residence, a duplex contains three completely separated living units under one roof:
Accordingly, duplexes are considered to be multifamily investment properties.
Duplexes are more attractive than SFRs and duplexes to many rental property investors because they qualify for residential (non-commercial) mortgage loans and allow an investor to diversify tenants while being one common housing structure to maintain and manage. Many investors would prefer owning and managing a duplex instead of 2 small single family houses.
Duplexes are fantastic for house hacking as you can live in one unit and rent out the other two units. If you buy at the right price using a conventional loan or a DSCR loan, you can expect to live rent free or even get paid to live in the property.
Let's say you buy a duplex for $200,000 with 20% down. You live in one unit and you rent out the other unit for $1,250 (market rent in your area). If you assume a 7% interest rate, $3,000 annual property tax, $1,500 annual insurance, a $1,000 annual maintenance expense, you're spending $289 per month to live in the house -- your tenants covering nearly all of your costs to finance and maintain the house. That's not a bad deal! Now when it's time to buy your next house, you rent out the side you were living in and you've got an incredible cash flowing rental property. Analyze this deal with our favorite rental property calculator.
Duplexes are in high demand among rental property investors. Depending on your target market, finding a duplex for sale may not be easy. The availability of duplexes varies based on investor demand and zoning in your local market. Here is where you can find duplexes:
Here are duplexes for sale on our investment property marketplace in cities that are popular among rental property investors:
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Browse duplexes for sale among the states that are most highly sought after by rental investors on our platform:
Duplex sales data can be obtained on major listing portals such as Zillow and Redfin, or by subscribing to a premium real estate data provider such as PropStream.
The cost to build a Duplex depends on geographic market, local zoning, lot size and floor plan. Depending on your location and floor plan, cost effective ground up construction would be anywhere from $120 on the low end to $250 per sq ft on the high end. The nation's largest homebuilders are able to build at $120 per sq foot.
How much does it cost to build a duplex? It depends!
At the right price and in the right market, investors who want to buy duplexes generally also want to buy triplexes. Rental property investors typically prefer triplexes over duplexes because there are more units, higher gross rents, and centralized maintenance and management -- one structure, one location. Controlling for market, location and condition, triplexes cost more than duplexes. Investors who can afford the higher cost to purchase and rehab a triplex will often prefer to acquire a triplex instead of a duplex.
Don't feel bad for duplexes! Duplexes make great investments as well. Duplexes may be preferred by investors who are concerned about managing conflicts among tenants. Two households instead of three households means less interactions between tenants and less risk of issues small and large. You can always hire a property management firm which can save you time, stress and even money -- as long as you select the right property manager.
Many rental property investors would agree that a duplex is a good investment.
A good cap rate for a duplex depends on the current interest rate environment and the expected rent and price appreciation in the local market. Cap rate is calculated by dividing net operating income by current fair market value. As interest rates rise, investors demand a higher cap rate since risk free assets such as the 5 year US Treasury bond may be appealing investment alternatives. In other words, it's hard to justify acquiring a property at a 4% cap rate when you can buy a 5 Year US Treasury at 4.3%.
Taking this one step further, the cap rate should ideally be higher than the interest rate on the debt used to purchase the property. So, for example, if the current interest rate is 8%, then the cap rate should be at least 8%.
Therefore, a good cap rate for a duplex should represent a significant spread over the current interest rate and the risk free rate. So, if the current interest rate is 8% and the risk free rate is 4.3%, then a cap rate of 10% would be quite attractive. In a low interest rate environment where the interest rate is 3% and the risk free rate is 1.5%, investors may find a cap rate of 5% to be attractive.
What we haven't yet mentioned is that many skilled investors buy properties in highly desirable, competitive markets at low cap rates with the strategy of increasing rents and operating more efficiently.
Owning a duplex certainly comes with benefits. As long as the local market is healthy, duplexes make great long term investments. They're almost as easy to manage as a single family rental property but they generate materially higher rents. Duplexes are also rare in many markets so investor demand implies healthy liquidity and pricing when it's time to sell.
A duplex apartment is an apartment unit in a 3-unit apartment building, otherwise known as a duplex. if you live in a duplex apartment, you rent one of the 3 units at the property.
A duplex is a residential income producing property, it is not typically referred to as a house, except in cases where the owner lives in the property. Many people consider duplexes to be an apartment building because they are considered a small multifamily asset.