Do Duplexes Make a Good Long-Term Rental Investment?
5 minute read
July 12, 2023


The allure of real estate investment often brings to mind images of luxury estates or towering apartment complexes. However, there’s a smaller, equally important player in the property market that’s worth your attention—the humble duplex.

When establishing a solid long-term rental investment, duplexes can offer surprising advantages and exciting opportunities.

In this article, we will dive into duplex investing, discussing its benefits, challenges, and what it takes to make a duplex a successful addition to your investment portfolio.

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What is a duplex?

Simply put, a duplex is a single building that houses two separate living units. These units can be side-by-side or stacked on each other, but each has its own separate entrance, living spaces, and essential amenities like kitchens and bathrooms.

Unlike apartments in a complex, duplex units are typically larger, more akin to a single-family house, offering residents more space and privacy.

A crucial characteristic of duplexes that sets them apart from other real estate property types is that they straddle the line between residential and multi-family housing. This unique position allows for certain benefits in terms of financing and rental opportunities.

For one, they can qualify for residential financing, which generally has better terms than commercial loans. Additionally, they offer the income potential of a small multi-family property but with two streams of rental income.

The advantages of investing in duplexes

  • Income potential: One of the key perks of a duplex is that it’s essentially a two-for-one deal. You own a single property but have two units you can rent out. This setup often translates into higher rental income than a single-family home, increasing your cash flow and making a sizeable dent in your mortgage.
  • Easier financing: Duplexes typically qualify for residential financing, even if you plan to rent out the property. These loans often have lower interest rates and more favorable terms than commercial loans.
  • Lower vacancy risk: With two units at your disposal, even if one is temporarily vacant, you still have rental income from the other. This dual income stream can provide a safety net during tenant turnover periods.

The challenges of investing in duplexes

  • Tenant management: With a duplex, you’ll likely be dealing with two tenants. This scenario can mean twice the tenant-related issues, whether late-night repair requests or dealing with disputes.
  • Higher maintenance costs: Two units mean two of everything—two kitchens, two bathrooms, two heating systems, and the list goes on. While rental income may help cover these costs, remember that ongoing maintenance and occasionally major repairs can add up.
  • Insurance and taxes: Depending on your location, you might face higher property taxes for a duplex than a single-family home. Also, insurance costs can be higher due to the increased potential for claims with more tenants.

Financing a duplex investment

There are a few different financing options for this kind of investment.

Debt Service Coverage Ratio (DSCR) loan

DSCR loans are designed for investors to obtain financing for their rental properties. This is a 30-year fixed-rate mortgage that makes financing accessible by basing approval on the property’s expected cash flow rather than the investor’s individual finances.

Fix and flip loans

As the name suggests, fix and flip loans help investors finance the purchase of a property and its renovations. Though it’s a common loan for flippers intending to sell, the loan is flexible allowing for various property types (such as duplexes) and investing situations. Many flippers will change their exit strategy towards the end of a project and decide to refinance to a DSCR loan instead of selling, now that the property can warrant a higher rental rate.

Tips for successful duplex investment

Success isn’t guaranteed when you’re investing in a duplex for rental income. New or first-time investors should remember the following when planning their investment.

Location, location, location

Yes, it’s a cliché, but it’s a cliché for a reason. A duplex in a desirable area can command higher rent, attract quality tenants, and appreciate more over time. Consider factors like proximity to amenities, school district, and future development plans.

Conduct thorough due diligence

Never buy a property sight unseen. Inspect the duplex personally, and consider hiring a professional to check for issues you might miss. Research the area’s rental rates and property values. Understand the local landlord-tenant laws. The more you know, the fewer unpleasant surprises down the road.

Plan for expenses

Ensure you’re financially prepared to cover the down payment, mortgage, insurance, taxes, and maintenance costs. It’s also wise to have a contingency fund for unexpected expenses.

Consider property management

If dealing with tenants and maintenance issues isn’t your strong suit, working with a property management company can be a worthy investment. They’ll handle the day-to-day issues, freeing up your time and potentially increasing your property’s profitability.

Investing in your future with a long-term duplex rental

Investing in a duplex can be a savvy move toward financial growth and independence.

While it comes with its unique challenges, the potential benefits, from higher income to easier financing, can make it a valuable addition to your investment portfolio.

Whether you’re a seasoned investor or just stepping into the real estate world, Park Place Finance is here to guide you.

Our experienced team can help you navigate the complexities of real estate financing, ensuring you make decisions that align with your goals and aspirations. Call us today at (866) 407-1599.

Contact Park Place Finance today to make your duplex investment dream a reality.

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