A duplex is a type of housing consisting of two separate units built on one parcel of land.
The two units that make up a duplex may be either attached or detached. Attached units share at least one wall or are constructed with all or part of one unit built on top of all or part of the other unit.
In essence, a duplex is a two-for-one deal: one property, two homes.
Pros and cons of duplexes
Pros
Rental income. The primary appeal of a duplex is the opportunity for the owner to generate rental income, either by occupying one unit and renting the other or renting both units to tenants.
If the owner occupies one of the units, the duplex is considered the owner’s residence. If both units are rented, it’s considered an investment property. Either way, the rental income can be applied toward the mortgage payment or other costs of owning this type of property.
Proximity. Duplexes are also a popular choice for people who want or need to live close to other family members while also living in separate homes.
More space. Duplexes (and other types of small multi-unit housing) may offer residents more square footage in each unit compared with rental apartments since fewer units are built on the property.
Cons
Duplexes may have some disadvantages, including:
How to finance a duplex
For purposes of mortgage financing, a duplex is typically categorized as “single-family housing,” along with properties consisting of one, two, three, or four dwelling units. Properties with five or more units are categorized as “multifamily housing.”
If that sounds confusing, well, it is. Rather than making literal sense, the one-to-four-unit “single-family” category serves as a way to separate smaller residential properties from bigger, company-owned properties.
If you plan to buy a duplex and live in one of the units, you should be able to apply for owner-occupied financing, even if you intend to rent the second unit to a tenant.
If your plan is to rent both of the units to tenants, you won’t be able to qualify for owner-occupied financing. Instead, you’ll be looking for investment property financing. This type of financing typically requires a larger and normally comes with a higher interest rate than owner-occupied financing.
Depending on the you choose, you may be able to use a portion of your expected rental income from either or both of the units in your duplex to help you qualify for financing to buy it.
Duplex, triplex, or quadplex?
As a one-to-four-unit dwelling, a duplex falls into a category that also includes single-family (or single-person) homes, triplexes, and quadplexes. Triplexes have three homes on one property; quadplexes have four.
Duplex vs. townhouse
Duplexes are sometimes confused with townhomes, but there’s an important difference between these two housing types. Duplexes have more than one housing unit but only one owner. Townhomes also have at least two units, but each unit is separately owned. Townhome owners don’t have the right to rent the other home or homes to tenants, even if the homes are attached or located on the same parcel of land.
Half duplex vs. full duplex
Duplexes can be confused with a type of housing known as a “twin home.” These homes share a common wall and may look like duplexes or townhomes, but they’re actually built on separate parcels with the shared wall on the property line. Like a townhome, a twin home has two homes, two properties, and two owners. People who want to buy “half a duplex” should consider this type of housing.