Duplex House – Everything You Need To Know
Nowadays, more people are finding investment options, and real estate is the typical choice. The COVID-19 pandemic caused house prices to drop, allowing many people to buy. You might be one of these folks, or you’re probably looking for a way to earn passive income.
A duplex house could be a property that might be your next real estate investment. After all, can serve other purposes besides providing a flow of passive income. Fortunately, this article will cover all you need to learn about this type of property.
First, we will define what a duplex house is and compare it to other types of real estate properties. After that, we will explore the benefits and risks of living and renting out a duplex house. Later, you’ll learn how to start a rental property and see the other ways you can earn.
What is a duplex house?
A duplex home is a type of building that connects two residential properties into one. Those could link to each other horizontally or vertically.
This means a duplex house can seem like two houses side-by-side that share the same wall. If not, it may look like one home with two floors. However, it has two front doors.
The top floor has a separate stairway outside for its tenants. Note that this definition may change depending on your location. For example, it’s different in major cities.
Those locations define a duplex home as a two-floor apartment inside a larger building. You might be familiar with this if you live somewhere like Chicago or New York.
Why do more people want to learn about duplex houses?
At the time of writing, the novel coronavirus continues to threaten the world. While there are countries that are opening up, others like China tightened their restrictions.
Yet, COVID-19 opened unlikely opportunities, specifically in the real estate market. It increased the number of houses for sale and prompted the Federal Reserve to reduce interest rates.
As mentioned in the intro, people responded by purchasing these homes. Eventually, this sparked wider interest in real estate investments such as duplex homes.
That might be why you’re looking up what a duplex house is on the internet. If you’re planning to use a property as an investment, you should consider several aspects of it.
Should I live in a duplex house?
Before you try making money from a property, you should know why people would buy or rent one. In other words, you should learn why people are looking for duplex home listings.
This will help you understand just how this investment could make your money. That’s why we will explore the benefits and risks of living in such a house.
Read More: What is The Appraised Value Of A Home?
Upsides of duplex home living
You can split the mortgage.
A duplex house could serve two groups of people, but it still counts as one property. This means you and your neighbor could split the monthly mortgage payments.
This makes duplex housing more affordable than renting an apartment or condominium unit. As inflation rages on, it becomes a more attractive alternative for home buyers.
Their initial price is usually low.
You can find duplex houses in areas with relatively low home prices. You may even find someone who can share the property and split the bills.
A duplex home could be your fast track to homeownership if you manage to find one. Again, this is a reason why there is a growing demand for this type of property.
You can share the place with family members.
Let’s say you started a family, but you want the kids to live close to their grandparents. However, it can be tough to share the same place with them because you and your spouse are busy.
In that case, you might want to share a duplex home with them. Your folks could live next door, so you can easily check on them while living in a separate area.
The one downside to duplex home living
One problem with sharing property is that you’ll have to deal with your neighbors. Some of them may turn out to be rowdy, so they may bring problems.
Others might reach out to you for every little thing. You can prevent these issues by including house rules in the lease agreement.
Still, this can be a hassle as you will have to take time planning and writing guidelines. Select your tenants carefully, or you may enter into a contract with someone who will bring problems to your place.
Should I rent out a duplex house?
Now that you know why people like duplex homes, it’s time to talk about renting them out. This will let you earn passive income in two ways.
Duplex home as a long-term rental.
You could use the other half of your duplex as an apartment. You may invite tenants and serve as a landlord. This could provide a long-term and steady source of income. Also, their rent payments could help cover personal expenses.
Duplex home as a short-term rental.
If you live near a tourist attraction, that other place could make money as a short-term rental. You may invite visitors to stay there while they’re on vacation. You may even charge a higher fee since they’ll only be there for a short period.
Still, this type of rental property can pose a few risks to the owner. Check the following list to figure out if renting out a duplex home is still worthwhile:
It’s not easy to find tenants.
Many people thought of renting out homes lately, so you’ll have to compete with those people for renters. Depending on your location, you may have to compete with numerous properties.
This is even worse if you want to rent out your duplex home for vacation-goers. Some people may only be there for a certain period. In that case, your property isn’t likely to make money during the off-season.
There’s no guarantee that you’ll get paid.
Do you remember how hard it is to get approved for loans or credit cards? Most borrowers hate the stringent requirements, but you may understand them once you become a landlord.
Choose your tenants poorly, and you may enter into a contract with people who can’t pay rent in the long run. If that happens, you have two choices.
You could wait for them to pay. If they take too long, you may have to evict them. Unfortunately, this means you’ll have to invite new tenants while handling the unpaid balances yourself.
You’ll have to deal with repairs.
Do you recall how your neighbors could reach out incessantly for even the smallest issues? As the owner, you’re responsible for fixing stuff in the duplex house.
For example, you’ll have to repair leaky pipes should your tenants encounter them. Some might be reckless and break things regularly. As a result, you may lose a lot of money just for repairs.
You may find it difficult to resell the property.
Let’s say those damages continue to occur over an extended period. You may have gotten tired of renting out the duplex home, so you want to place a listing for it.
Homebuyers demand to see a property’s interior before finalizing a purchase. Unfortunately, you may turn them off if you show broken appliances and fixtures inside.
This means you’ll have to fix everything before you put a listing. You might even have to refurbish the place if it’s particularly old. Overall, you may find it hard to sell that property.
How can I start renting out my home?
The previous overview should give you an idea of how investing in a duplex home works. Now, let’s talk about how you can start renting it out.
That’s the only way to turn it into a steady flow of income. However, you’ll have to spend a lot of time and money at the start. Here are the steps you must follow:
#1. Learn about your state laws.
Most states have landlord-tenant laws, so you can’t just place a listing whenever you want. Otherwise, you may face legal repercussions.
For example, you might visit your renter’s place without warning. Some laws require landlords to give notice and a certain period before they may check their tenants.
You may also need to register with your local government before renting out a duplex home. Reach out to your state government office, so you can follow the proper procedures.
#2. Look into your situation.
Check your budget and your location. How much can you spend on a duplex home? Make sure that you have enough money to cover its payments for the first few months.
As mentioned above, you will probably have difficulty inviting tenants. This means you’ll have to cover all its costs while you’re waiting for applicants.
The extra money could also help you cover any emergencies that may arise. Your home may require major repairs for some reason, so you must have enough cash to cover those.
Check your location.
If you have a tourist attraction nearby, that might be your cue to turn the duplex house into a short-term rental. Just make sure you have another way of compensating for it during the off-season.
You may also turn it into a sort of condo or apartment. This is when you’ll have to be selective in finding tenants. Otherwise, you may encounter delays in payments.
#3. Estimate the expenses and profits.
You’ll have to confirm that you’ll earn from renting out a duplex house. It’s not a guaranteed money-maker as the costs may outweigh the potential profits.
That’s why you should crunch the numbers first. You won’t be able to consider all the potential profits and losses as you’ll only notice them once you’ve started renting out.
For example, you might find that inviting new tenants takes longer than expected. As a result, you may incur more costs than what you initially anticipated.
Computing all this data is not easy, so you may want to pay an accountant to assist you. Alternatively, accounting software programs can also help you.
#4. Speak with your insurance agent.
Your home has insurance, but you’ll have to get another one as a landlord. Otherwise, you may get into legal trouble if something happens to your tenants.
What’s more, it protects you from damage that those renters could bring you. The average landlord insurance is worth between 15% and 20% more than your home owner’s insurance.
Its coverage typically includes the following aspects:
- Property damage – As the name suggests, this helps you pay for fixes due to damage from a fire or a natural disaster. This may also cover personal property such as your furniture and appliances.
- Liability – Your insurance can protect you from any medical injuries that tenants may sustain while on your property.
- Loss of rental income – Your insurance may come into effect when a certain event damages your property, preventing you from inviting renters. If your policy includes that event, your insurance agent will cover your lost rental income.
#5. Hire an attorney and a property manager.
Renting out a duplex house can be tricky as you’ll have to be careful about your every move. For example, you have to choose your tenants wisely and read the laws carefully.
It’s near impossible to handle all that by yourself, so you’ll have to hire professionals. We’ve talked about getting an accountant who could crunch the numbers for you.
Besides that person, you also need a lawyer to handle the legal issues. An attorney can help you understand your local real estate regulations and handle disputes with tenants.
What’s more, you’ll need a property manager. This is a person who will handle the day-to-day tasks for your rental property, such as handling repairs, screening tenants, and collecting rent.
Paying these experts may greatly increase your costs, but you’ll need them to ensure your duplex home rental goes without a hitch.
Other ways to earn from real estate
A rental duplex home isn’t your only way to make money from real estate. For example, you could try and sell a duplex house. You might make a lot of money while bearing no responsibilities as a landlord.
You may even pull this off without an initial investment. You can purchase a duplex house using a loan, and then you could flip it as soon as possible.
Just make sure you’re aware of the risks before flipping houses. What’s more, you should know these alternatives to making money with real estate:
Try house hacking.
This sounds like a fancy modern term, doesn’t it? Yet, it simply refers to renting out small vacant spaces in your home. You may have thought of Airbnb the first time you read that.
That’s one way you can earn from a property, especially if you’re not willing to own a duplex house. You might have a spare room that could allow Airbnb users.
You don’t have to deal with them for too long nor spend millions on a separate home. Alternatively, you may want to convert a part of your home into an accessory dwelling unit.
You could do this if you have a detached basement or garage. Similar to Airbnb, you could earn rent money from this, except that the room’s outside your primary residence.
Participate in real estate crowdfunding.
Property developers may allow people to pitch in as low as $500 for their project. That money will go to a building’s renovation or construction, so people can also earn money from its rent.
It’s called real estate crowdfunding, and it’s becoming more prevalent nowadays. This might be a great alternative if you don’t have enough money for a duplex house.
Note that this investment option still has risks even though your initial deposit is arguably small. It might take long before it gets tenants, so you may have to wait longer for your profits.
Invest in a REIT.
That acronym stands for real estate investment trust, and it’s a collection of various real estate assets. They may include mortgages or companies like malls that earn from rent.
This can be a great investment for various reasons. A REIT contains various assets, so some of them can compensate for the others that are incurring losses.
It will also let you earn dividends, an amount of money that publicly-traded companies may choose to give their investors. You can still earn in case your REIT isn’t performing well.
Some of them work like stocks, so you can easily buy and sell them on exchanges. We’ve covered the benefits of a REIT, but don’t forget that it also poses risks.
It’s best to speak to a financial advisor before adding this to your portfolio. Such an expert can guide you in acquiring and handling a real estate investment trust.
The same goes for investing in a duplex house. You will need to plan this before you purchase one. Note that this article doesn’t provide investment advice.
It just informs readers on how a duplex home investment functions. For these options, you should speak with a real estate agent who can guide you through them.
If you’d like to learn more about assets, then check out the other articles of Inquirer USA. It has information on stocks, exchange-traded funds, and even cryptocurrencies.