Purchasing a home for yourself can be overwhelming, so how do you go about buying an investment property? We’ve created a guide on how to start building wealth through real estate. This series will feature a list of the four most attainable ways to get started as a new investor, the advantages and challenges of each, financial aspects, what our local market looks like, and how to set yourself up for financial success. Let’s dive into the first achievable way: Buying a duplex.

We’ve gone over the benefits of real estate investing. But what’s the best way for you to start your portfolio? How do you go about buying your first investment property? Buying a duplex and living on one half while renting out the other may be the right move for you. It may not be what comes to mind when you think about owning your first home, but it could set you up for a lifetime of financial freedom.

Why you want to start investing in real estate with a duplex

A duplex is one of the best investment strategies for beginners. You can decide to live on one side to start and then fill both units with residents and have two streams of income when you’re ready to move. Buying a duplex is a really great way to learn about the work that needs to be put into investment properties with little risk. 

Let’s dive into the advantages of buying a duplex:

Become an investor through buying a duplex

Your budget holds the key to the kind of duplex you purchase as a young investor. Being able and willing to make improvements is important. This could be the first home you buy to live in. Take that into consideration when you are searching for your first duplex.


Living on one side of the duplex and renting out the other has its perks. You will be able to check on the property as needed and respond to maintenance requests quickly. “Marketing and showing the property will be easier due to your proximity,” Ben Flurey, General Manager at RPM Iowa said. “It’s definitely less challenging to offer extra amenities like snow removal and lawn care.”

Anything you replace, repair, or improve on your property is considered a tax deduction. You may make updates before your tenants move in, or need to replace a set of light bulbs – these can all be tax deductions! You’ll want to be sure to check with the IRS on what can be written off if you are occupying the other half of the duplex. 

One of the main reasons new investors look into buying a duplex is because they can get a conventional mortgage.

“You can get a normal loan with a 30 year fixed rate at 3.5% with a small down payment, but if it’s over four units, you have to get a commercial loan.” said Flurey. “Commercial loans have a bigger down payment, at 20-25%, whereas conventional loans are between 3-5%.”

Another benefit? Your neighbors will be helping you pay for your investment! Take the time to crunch the numbers and come up with a rental rate that will cover your mortgage. There’s also the potential to pay it off early, and put extra cash in your pockets.


Leave room in your budget for updates and improvements because there may not be a ton of options in your market area. You will need to follow market trends in order to get your home ready to hit the market and attract the right tenants.

Keep in mind that your tenants will be right next door – so screen them thoroughly. Establishing a professional and healthy relationship with your tenant can alleviate potential issues in the future. Do your research beforehand and learn how to lease your house to quality tenants.

Every month the other half of your duplex sits vacant, you are paying for your own mortgage and missing out on extra cash flow. Post your listing on the right sites, like Zillow, Facebook Marketplace, and Apartments.com to find tenants.


You probably have more questions. Let’s consider some of the most common ones we hear when a beginner investor is looking into buying a duplex:

Do I include utilities in rent or will my tenants need to set that up themselves?

Most duplexes have separate meters for utilities. If you’d like, you could charge a flat fee for garbage and sewer, and Homeowner Association (HOA) fees, if applicable.

Remember, if your tenant does not take care of their utility bills, then it is your responsibility to cover them. Be sure to have yourself protected in the lease agreement in case something goes awry.

Do I need landlord insurance or homeowners insurance?

According to American Family Insurance, if you are occupying the duplex, you could insure both sides through a homeowner’s policy. Getting both forms of insurance would cover all your bases. Landlord insurance can cover the more unique problems, like loss of rent if a tenant can’t pay, legal expenses if you have to evict the tenant, and much more.

If you decide to move out and lease both sides of the duplex, you may even want to consider business insurance.

How long do I need to live there in order to qualify for a conventional loan?

The general rule is a minimum of 12 months for most conventional loans. You’ll have to talk to your lender to figure out the specific timeline to be sure that you qualify. A conventional loan is generally cheaper with a less expensive downpayment than a commercial loan.

How much should I have set aside for emergencies?

There’s a few different ways to estimate the cost of repairs. You can follow:

  • 1% Rule: One percent of your home’s overall value (i.e. $300,000 would amount to $3,000 in emergency maintenance)
  • Square Footage Formula: Adding $1.00 to every square foot of your property
  • 5x Rule: Maintenance will cost 1.5 times the monthly rent (i.e. if your rent is $1,000, then you set aside $500 of that for emergencies)

A good rule of thumb is between 1-3% of the duplex’s value. On the bright side, maintenance issues won’t pop up all at once, so you can add the 1-3% in the rental rate and accumulate it gradually. This will also help you set a budget for maintenance in case you need to outsource the issue.

In the happenstance that the other half of your duplex sits vacant, you’ll need to have at least 3-6 months worth of your mortgage set aside.

How do I calculate a fair rental rate?

There’s quite a bit that you’ll have to take into consideration. The location, amount of bedrooms and bathrooms, how much other duplexes charge or the value of the homes in the neighborhood, how much your mortgage is, etc. If there’s a high demand for rentals in your area, this could help you earn a reasonable amount of cash flow.

You can always consult a Real Estate Investment Advisor (REIA) or a property management company. We’ve written a guide on how to lease your house – with property analysis being the first step.

Buying a duplex in our local market

With all this new information in your back pocket, is it even possible to find one in our current market? Yes, it is! We’ve done a little research across multiple platforms and found the average costs, square footage, and age of the duplexes available.

There are quite a few conversion homes on the market that are not true duplexes. “A converted home was previously a single-family house that has been separated into independent apartments or in half, similar to a duplex.” said Flurey. Some converted homes have more than two units, so you’ll have to take that into account while you’re searching. You could have to fill more than one unit in order to maintain full occupancy.

If you’re looking on your own and want a true duplex, you may not find one that fits all your credentials. Speaking to a local REIA is your best bet because they can access internal Multiple Listing Service (MLS) database.

Through searching online platforms accessible to the general public like Zillow and Realtor.com, this is what the current market has to offer:

Sale price: $143,000 – $225,000

Square footage: 2,500 – 3,300 SF

Year Built: 1950 – 2000

Buying a duplex is one of the easiest ways to reach financial freedom, even if it’s not what you imagined your first home to be. View this as an opportunity rather than a sacrifice. You could prospectively afford the home of your dreams, and then some if you buy a duplex to start your portfolio. 

Check back in to read the next part of the series: Renting instead of selling your first home. Haven’t read about the six benefits to real estate investing yet? You can find it here!