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The Pros and Cons of Buying a Single Family House vs a Duplex

Is there a significant difference between buying a single family house versus a duplex?  I was just asked this by a friendly consumer ( a real live actual person) so I thought I would share the response.  The answer, as you might have come to expect from reading these posts, is yes and no.  The contracts are very similar with perhaps a few additional pages. But let’s look at some areas of confusion.

The term duplex means different things to different people in different parts of the country.  In NYC, it can mean a two story apartment (or a two story co-op or a condo).  In most parts of the United States, it means a side by side, semi-attached house where you might own one half.  For the purposes of this post in 716 land, we will use the term duplex to be interchangeable with a double or a two family house.  In Buffalo, it is usually a top and bottom as opposed to a side by side.

If you are going to be living in one of the units, you will get the same favorable mortgage rates as owner occupancy on a single family dwelling and this will be true up to the purchase of a 4 family house, as well. Owner occupancy is the biggest inclusion here because if you are not going to live in the building you will be treated as an investor and you will be required to have a significantly heftier, minimum, downpayment.  Your insurance rates will be higher too, naturally.  Qualifying for a mortgage might also be easier than for a single family since you can use up to 75% of the income on the rental unit as part of your income requirements.

When you purchase a double (or a duplex as we have originally referred to the house in this post), you will note an additional Rental Agreement Rider to the contract.  This will clearly outline the units that are occupied and what their leasing terms are (i.e. deposits, expiration dates, etc.)  Other than this and the fact that you now have to consider yourself as an actual or potential landlord and you will have to conform to those guidelines (i.e. fair housing, safe occupancy, etc.) there will be very little difference in how the transaction goes from contract to closing.  You might elect to insert additional terms into your agreement, like subject to a certain unit being delivered vacant, etc., otherwise, there isn’t a heck of a lot of difference in the actual paperwork.  One thing that does come up in conversation often with the most experienced agents is the fact they all agree.  An owner occupied double should be everyone’s first purchase after they leave the nest. It is the smartest way to build wealth in America. From there, you go on to repeat the process (refinancing and keeping the properties) after you let market appreciation build your equity. After several purchases, you might consider looking for the actual dream house you thought you should purchase initially. This is the master plan, and if well executed, it is your passport to successful Real Estate portfolio building.

“Hey, I wrote the book on Real Estate, literally.”

Author Brendan J. Cunningham is a New York Licensed Associate Real Estate Broker, lead of the Platinum Team at HusVar Real Estate, as well as an accomplished writer, Shakespearean trained professional actor, and podcaster.
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