Advantages of Investing in a Duplex or Triplex

If you’ve been toying with the idea of getting into real estate investing, you’ve likely heard recommendations urging you to purchase a duplex, triplex, quadplex, or other -plex property. They’re a strategy used by real estate investors that can help you begin your rental investment business—or simply grow your portfolio by a few doors!

But what is a triplex apartment? Why do people love the duplex and triplex investing strategy, and how should you go about financing and investing in them? In this article, we’ll answer all of these questions and more to help you begin your duplex or triplex home journey like a pro.

Duplexes vs Triplexes

So, what is a duplex building? What is a triplex? What’s the difference between the two?

A duplex is a residential building that is split into two completely separate rental units. While duplex units often share common walls, they are completely independent entities with their own entrances, bathrooms, kitchens, living spaces, and addresses.

As you may have guessed, a triplex is essentially the same as a duplex, but with three separate living units instead of two. Triplexes are usually larger than duplexes, and therefore more expensive, but can also bring in higher profits. There is even such a things as fourplex properties, but for the purposes of this article, we’ll focus on 2- and 3-unit properties.

Tenants may be drawn to duplexes and triplexes for the similarities to a single-family home and the limited number of neighbors compared to an apartment building, while buyers and investors may have an interest in duplexes and triplexes

What to Expect from Duplexes and Triplexes

While duplexes and triplexes share many similarities with other types of rental housing, there are a few things to expect or consider before making an investment. Here are some things you should know about multi-unit properties:

1. Fewer neighbors: Tenants are often drawn to duplexes and triplexes because the number of neighbors around them is limited compared to a large apartment building where they may have neighbors above, below, and next to them.
2. Spacious units: Duplex and triplex units are often larger than average rental units and feel more like a single-family home. This is a great way to market to potential tenants since you can offer a rental that feels less like an apartment and more like a spacious home.
3. Savings on maintenance: Because a duplex or triplex contains multiple units in one structure, you may be able to save on general maintenance for the property in comparison to the cost of maintenance and repairs for multiple buildings and properties in your portfolio.
4. Shared amenities: Though each unit will have its own private space, some amenities must be shared due to the property being one building, like a driveway, porch, or backyard. This can be a downside for tenants who value privacy.
5. Living next to tenants: If you choose to live in one of the units of your duplex or triplex, you’re always nearby if your tenants need help or have concerns—but remember that this also means you’re right next door if you have disagreements, just like being a tenant in a typical apartment building.
6. Higher rental income: Though duplexes and triplexes can be more expensive, the income from the unit(s) can be used to offset the price of the building, and can even cover your mortgage payments or other rental expenses each month. This is known as house hacking, which we’ll cover later in this article.

Financing Options

If you’re shopping for a duplex or triplex, you may find yourself worrying about your financing options as multi-family homes tend to come with a higher price tag. But there’s no reason to worry—buying a duplex or triplex comes with many financing options to meet your needs, including cash, FHA or VA loans, conventional loans, and 203k loans.

Generally, financing a duplex or triplex also comes without the worry of needing a commercial loan. With apartment buildings that have five or more units, a commercial loan is required, but with multi-family homes that have only two or three units, buyers can apply for a residential loan, which is more attractive to buyers because it often comes with lower interest rates and longer borrowing periods.

There are many options for financing duplexes and triplexes that depend on your financial situation, but we want to highlight a couple below that can be helpful for first-time buyers and investors.

FHA Loans

FHA loans aren’t only meant for single-family homes used as primary residences. If you decide to live in your duplex or triplex as your primary residence, you could be eligible for FHA loans with as little as 3.5% down for a 1-4 unit building, granted that you live there for at least 12 months. This is a lesser-known but great financing option that offers flexibility for buyers and investors.

203(k) Loans

203(k) loans are a part of the FHA loan program, but they offer extra help to buyers who are anticipating repairs needed on the home. There are different 203(k) loan types and limitations, but they generally allow you to take out a loan for the cost of the property as well as costs for any repairs you’ll need to do on the home, allowing you to do more without having thousands of dollars saved to fund repairs and renovations.

Duplex and Triplex Taxes

Taxes for duplexes and triplexes can be confusing and depend widely on your specific situation and whether you’re living in one of the available units. Generally, though, if you decide to live in your “-plex” building and use it for both your personal home and your business, you can take advantage of several deductions on the property, such as expenses for mortgage interest, general maintenance, and property taxes and insurance.

Why Buy a Duplex or Triplex?

One of the most common reasons people give for purchasing duplexes and triplexes is for house hacking, a practice in which investors live in part of their home and rent out the rest to cover the cost of a mortgage or other rental expenses. This is a great way to try your hand at real estate investing if you’re just starting out, but can also be a method of generating passive income if you’re already building your rental portfolio.

Living in half of your duplex and renting to someone else is a common housing situation for landlords and investors, but it’s not the only scenario for duplexes and triplexes. Let’s take a quick look at a few ways you could use your duplex or triplex to generate income:

1. Living in the building and renting out other units: As mentioned above, this is a common house hacking strategy for real estate investors and can help many first-time investors get their feet wet in the rental industry.
2. Living in the building and renting to family members: Some investors may use a duplex or triplex to care for family members, such as aging parents who value independence but still need assistance or even a parent’s young adult child who wants to live on their own but isn’t ready to move far from family yet.
3. Using the building as a true investment property: Once you’ve paid off your mortgage (or if you already have enough funds to not need to live in the property in the first place), many landlords will rent their duplexes and triplexes with tenants in each unit to not only cover costs of maintaining the rentals, but to turn a profit as well.

Conclusion

Investing in duplex apartments and triplexes is a popular investment strategy in the modern real estate world, and has many opportunities to offer for both first time real estate owners and seasoned professionals. With this new understanding of duplexes and triplexes, you’ll be better prepared to weigh the pros and cons of each and make an investment decision that’s right for your real estate business.

FAQs

What is the difference between a duplex and a triplex?

A duplex has two separate living units within one building, while a triplex has three. Each unit typically has its own entrance, kitchen, bathroom, and living space.

What is house hacking?

House hacking involves living in one unit of a multi-unit property (like a duplex or triplex) and renting out the other units to help cover mortgage payments or generate income.

Why are duplexes and triplexes good investment options?

They offer higher rental income potential, lower maintenance costs per unit, and a chance to house hack—living in one unit while renting out the others to offset your mortgage.

Can I convert a single-family home into a duplex or triplex?

Possibly, but it depends on local zoning laws and building codes. You’ll need to check with your municipality to see if conversion is legal and feasible.

Can I deduct expenses on my taxes if I live in one unit?

Yes. If you live in one unit and rent the others, you may be able to deduct a portion of mortgage interest, maintenance, insurance, and property taxes.