Important Things to Know Before You Buy a Duplex
Posted on: 2019-10-15
Is owning a rental property a dream come true? It seems that owning and occupying a duplex is the perfect homeowner’s situation: rental income, tax breaks, easy financing.
While there are innumerable benefits to buying a duplex, there are some aspects that need to be taken into consideration as well.
What is a duplex?
A duplex is a housing plan that has two living units attached to each other. They can be either side-by-side or one above the other.
They differ from what is known as a “semi-detached”. A semi-detached building involves two attached dwellings on separate properties.
The term “duplex” refers specifically to two units. For example, a building with three attached units is called a “triplex”.
Why do people buy duplexes?
Most people are attracted to buying duplexes because they can collect a rental income without owning multiple properties. Oftentimes, duplex owners live in one unit and rent out the other.
The benefit of this is that the rental income offsets the cost of the mortgage and property taxes.
Things to consider before buying a duplex:
While the benefits of owning a duplex offer financial security in the property, there are some aspects you should consider before purchasing a duplex:
Having a rental income is a great way to offset property costs, but you have to consider the possibility of having an empty unit.
Finding and keeping good tenants is never a guarantee. Each time a tenant moves out, you are looking at potentially having an empty unit for at least one month as you seek someone else to rent it.
If you are fortunate to have long-term tenants who pay their rent on time then owning a duplex is a good financial opportunity.
There are a different set of tax rules when it comes to owning a rental property.
First of all, any rental income you receive has to be claimed as regular income when you file your taxes.
Secondly, there are some amazing tax benefits you can claim and an owner/occupier of a duplex. For instance, you can deduct your mortgage interest as well as your landlord liability insurance premiums.
If you purchase a duplex and choose to live in one of the units, you will be living in close quarters with your tenants.
While this gives you the opportunity to frequently check on the property’s condition and deal with tenant issues immediately, the tenants may use this convenience to bring every minor issue to your attention.
They may also expect these minor issues to be resolved right away.
Repairs and responsibilities
If you are the owner of a duplex and rent any of the units, you are considered to be a landlord and therefore are responsible for property management and repairs.
As a landlord, you may be required by law to provide services such as garbage and snow removal. You are also responsible for carrying out necessary repairs as well as cleaning and repairing units between tenants.
One of the major benefits to buying a duplex, apart from the rental income, is the ease in which you can secure financing for the property.
If the duplex is owner-occupied, meaning that you will reside in one of the units, you can use potential rental income to help qualify for a mortgage.
However, you have to be careful about what is deemed a “duplex”. If the building is not properly classified, such as a building that has a granny-suite and is not a legitimate duplex, lenders may not take rental income into consideration.
Looking to buy a duplex?
We can make your new home your dream home. Contact the professional contractors at Parabola Developments to learn how you can design your new space!