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How to Win a Bidding War

In housing markets teeming with buyer demand, it’s not uncommon to put an offer on a home only to be outdone by a competing offer. If two or more potential buyers want a property badly enough, they may find themselves locked in a bidding war.

Some market watchers think that pent-up demand from homebuyers and increasing seller activity will make for a busy homebuying market in 2025. And let’s face it: Some markets are always competitive, and new “hot” markets are born regularly.

Here’s how to increase your chances of winning a bidding war so you don’t have to bid adieu to a home you really want.

Key Points

•   Bidding wars arise in seller’s markets with high demand and limited supply.

•   Prequalify and get preapproved for a mortgage to demonstrate serious buying intent.

•   Reduce contingencies to make offers more appealing to sellers.

•   Use an escalation clause to automatically increase offers against competing bids.

•   Accommodate seller’s needs, like flexible closing dates, to gain an advantage.

1. Know How a Bidding War Works

Bidding wars usually take place in a seller’s market, when demand outpaces housing inventory. They also typically occur when there are multiple interested parties and when there is some sort of constraint, like timing.

When a seller’s agent receives offers for a property that has attracted a lot of buzz, the agent may set a date by which would-be buyers should make their “highest and best” offer. Sellers can accept the best offer, counter one offer while putting the others to the side while awaiting a decision, or counter one offer and reject the others.

This brings up a salient point: It’s true that you can buy a house without a Realtor® or real estate agent, but an experienced agent can guide you through offers and counteroffers, contingency snags, and more.

2. Line Up Your Financing

One of the best things you can do to be prepared for a potential bidding war — or really any time — is to get your finances, and financing, in order.

Be sure to know how much house you can afford, including a down payment and monthly payments.

Determine if you qualify for a mortgage by going through the prequalification with several lenders. Familiarize yourself with the types of mortgage loans that are available: government-backed loan or conventional loan, fixed rate or adjustable rate.

Taking the next step beyond prequalification and go through the mortgage preapproval process. Getting preapproved for a mortgage will give you a specific amount that a lender is tentatively willing to let you borrow. A preapproval letter shows sellers that you are a serious candidate to buy a home. Many experts recommend getting at least three preapproval letters from three lenders.

And a preapproval letter shows sellers that you are a serious candidate to buy a home. Many experts recommend getting at least three preapproval letters from three lenders.

3. Lessen or Drop Contingencies

Contingencies are certain conditions that must be met before a real estate deal becomes binding. Potential buyers can back out of a deal without penalty if the contingencies aren’t met.

A clean offer, one with as few contingencies as possible, is attractive to sellers in a competitive market.

In a typical real estate market, a common contingency is the mortgage contingency, or financing contingency, which allows homebuyers to exit the deal and have their earnest money returned if they cannot secure financing by the agreed-upon deadline.

Another is the inspection contingency. Based on the findings of a professional inspection, the buyer may be able to negotiate repairs or the price, which are known as seller concessions if the sellers are agreeable, or cancel the contract.

Waiving contingencies shows your eagerness to triumph, but it comes with risk. The biggest is losing your earnest money deposit if you hit a snag.

4. Be Quick About Any Remaining Contingencies

Sellers want to avoid spending a lot of time with a potential buyer only to have the deal fall through. If you’re including appraisal and inspection contingencies, do what you can to expedite them.

The real estate purchase contract includes any contingencies, the sales price, the closing date, and the date of the title transfer and possession. The contract is considered a working document until both parties agree on the terms.

5. Use an Escalation Clause

Unsurprisingly, one of the best ways to win a bidding war is by offering more money.

You may want to include an escalation clause in the contract if you assume there will be multiple offers. The clause asserts that if another buyer makes a competing offer, your bid will automatically increase by a certain amount, up to a limit, to exceed the offer.

Say you put a $400,000 offer on a home, with an escalation amount of $10,000 and a ceiling of $430,000. If someone else bids $410,000, you will automatically bid $420,000, up to your ceiling.

6. Stay Flexible

A willingness to be flexible can give you a leg up in the eyes of a seller.

For example, a seller might be moving across the country for work and need to close by a specific date. So if you can get the appraisal and inspection done swiftly, that could be a huge plus.

Alternatively, sellers may need to stay in the house for a while. Working with them on their specific needs could give you an edge.

First-time homebuyers can
prequalify for a SoFi mortgage loan,
with as little as 3% down.


7. Pay With Cash

If you are able to do it, buying a house with cash can be very attractive to sellers. The process is typically much faster than going through a lender, and sellers don’t want to worry about financing issues that might hold up the deal or cause it to fall through.

It’s even possible that a seller would choose a cash offer over a slightly higher offer backed by a mortgage.

8. Increase Your Deposit

There are timeless standards for how to make an offer on a house. One is determining the size of your earnest money deposit.

The deposit, held in escrow by the title company, secures the real estate contract. It tells the seller that you are serious about buying the house.

Earnest money is typically 1% to 3% of the purchase price but can be more in a competitive market. If you close on the home, the deposit will be applied to your closing costs.

9. Write a Personal Letter

When sellers are choosing a buyer during a bidding war, they’re often just looking at numbers on a page. Consider writing a offer letter, aka a love letter, to humanize the transaction.

You might want to make a case for why you’re the ideal candidate to buy the home, and note commonalities: You’re a ceramicist and noticed an artist’s studio in the backyard. You have dogs; they have a dog. That big elm reminds you of the one at your childhood home.

Be complimentary about the things you like about the house and how it has been maintained. And be concise.

The Takeaway

Whether you’re buying in a time of burgeoning bidding wars or not, it’s good to know how they work. The tactics help homebuyers understand the lay of the real estate land — contingencies, earnest money, escalation clauses, love letters — and use them to best effect.

Looking for an affordable option for a home mortgage loan? SoFi can help: We offer low down payments (as little as 3% - 5%*) with our competitive and flexible home mortgage loans. Plus, applying is extra convenient: It's online, with access to one-on-one help.

SoFi Mortgages: simple, smart, and so affordable.

FAQ

Can a homeowner refuse to sell a house to a particular buyer?

Yes, a seller can refuse to sell a home to a buyer without penalty as long as there is no purchase agreement in place, and as long as the refusal is not a violation of the Fair Housing Act. The act prohibits housing discrimination based on sex, race, color, familial status, or national origin.

When should you walk away from a bidding war?

You’ll know you should walk away from a bidding war when you run the numbers on a home mortgage calculator and determine that the monthly payments just aren’t feasible (or are doable but will keep you awake nights). Other reasons to walk away include: The home was pricey for the market or a stretch for your budget at its initial asking price; there are multiple bidders; or the house wasn’t your dream home to begin with.


SoFi Loan Products
SoFi loans are originated by SoFi Bank, N.A., NMLS #696891 (Member FDIC). For additional product-specific legal and licensing information, see SoFi.com/legal. Equal Housing Lender.


SoFi Mortgages
Terms, conditions, and state restrictions apply. Not all products are available in all states. See SoFi.com/eligibility-criteria for more information.


*SoFi requires Private Mortgage Insurance (PMI) for conforming home loans with a loan-to-value (LTV) ratio greater than 80%. As little as 3% down payments are for qualifying first-time homebuyers only. 5% minimum applies to other borrowers. Other loan types may require different fees or insurance (e.g., VA funding fee, FHA Mortgage Insurance Premiums, etc.). Loan requirements may vary depending on your down payment amount, and minimum down payment varies by loan type.

Financial Tips & Strategies: The tips provided on this website are of a general nature and do not take into account your specific objectives, financial situation, and needs. You should always consider their appropriateness given your own circumstances.

This article is not intended to be legal advice. Please consult an attorney for advice.

This content is provided for informational and educational purposes only and should not be construed as financial advice.

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How Timeshare Financing Works for Vacation Property

Many of us would love to own a vacation home, but the added expense is not always doable. Because we can’t all own multiple properties, vacation timeshares continue to be a popular choice for solo travelers, couples, and families who want more space, amenities, and “a place to call home” at their locale of choice.

We’ll give you an honest rundown of how timeshares work, their pros and cons, and a few financing options.

Key Points

•   Timeshares offer a shared vacation property, providing a cost-effective alternative to owning a vacation home.

•   Various types of timeshare ownership exist, including deeded and non-deeded, with different use periods.

•   High-interest rates often accompany timeshare financing, but alternatives like home equity and personal loans may offer better terms.

•   Timeshares can be transferred to heirs or gifted, but selling them may result in financial loss.

•   Renting out a timeshare depends on the agreement, requiring a check of specific terms.

What Is a Timeshare?

A timeshare is a way for multiple unrelated purchasers to acquire a fractional share of a vacation property, which they take turns using. They share costs, which can make timeshares far cheaper than buying a vacation home of one’s own.

Timeshares are a popular way to vacation. In fact, nearly 10 million U.S. households own at least one timeshare, according to the American Resort Development Association (ARDA). The average price of a timeshare transaction is $23,940. This figure can vary widely depending on the location, size, and quality of the property, the length of stay,

How Do Timeshares Work?

If you’ve ever been lured to a sales presentation by the promise of a free hotel stay, spa treatment, or gift card, it was probably for a vacation timeshare. As long as you sit through the sales pitch, you get your freebie. Some invitees go on to make a purchase. You can also buy a timeshare on the secondary market, taking over from a previous owner.

What you’re getting is access to a property for a set amount of time per year (usually one to two weeks) in a desirable resort location. Timeshares may be located near the beach, ski resorts, or amusement parks. You can trade weeks with other owners and sometimes even try out other properties around the country — or around the world — in a trade.

In addition to the upfront cost of the timeshare, owners pay annual maintenance fees based on the size of the property — about $1,120 on average — whether or not you use your timeshare that year. These fees, which cover the cost of upkeep and cleaning, often increase over time with the cost of living. Timeshare owners may also have to pay service charges, such as fees due at booking.

Recommended: Loans With No Credit Check

Types of Timeshares

There are two broad categories of timeshare ownership: deeded and non-deeded. In addition, you’ll find four types of timeshare use periods: fixed week, floating week, fractional ownership, and points system.

It’s important to understand all of these terms before you commit.

Deeded Timeshare

With a deeded structure, each party owns a piece of the property, which is tied to the amount of time they can spend there. The partial owner receives a deed for the property that tells them when they are allowed to use it. For example, a property that sells timeshares in one-week increments will have 52 deeds, one for each week of the year.

Non-deeded Timeshare

Non-deeded timeshares work on a leasing system, where the developer remains the owner of the property. You can lease a property for a set period during the year, or a floating period that allows you greater flexibility. Your lease expires after a predetermined period.

Fixed-Week

Timeshares offer one of a handful of options for use periods. Fixed-week means you can use the property during the same set week each year.

Floating-Week

Floating-week agreements allow you to choose when you use the property depending on availability.

Fractional Ownership

Most timeshare owners have access to the property for one or two weeks a year. Fractional timeshares are available for five weeks per year or more. In this ownership structure, there are fewer buyers involved, usually six to 12. Each party holds an equal share of the title, and the cost of maintenance and taxes are split.

Points System

Finally, you may be able to purchase “points” that you can use in different timeshare locations at various times of the year.

Is a Timeshare a Good Investment?

Getting out of a timeshare can be difficult. Selling sometimes involves a financial loss, which means they are not necessarily a good investment. However, if you purchase a timeshare in a place that your family will want to return to for a long time — and can easily get to — you may end up spending less than you would if you were to purchase a vacation home.

Benefits of Timeshare Loans

The timeshare developer will likely offer you financing as part of their sales pitch. The main benefit of a timeshare loan is convenience. And if you’re happy to return to the same vacation spot year after year, you may save money compared to staying in hotels. Plus, for many people, it may be the only way they can afford getting a vacation home.

Drawbacks of Timeshare Loans

Developer financing offers often come with very high interest rates, especially for buyers with lower credit scores: up to 20%. And if you eventually decide to sell, you will probably lose money. That’s because timeshares tend not to gain value over time. Finally, if you’re not careful about running the numbers before you commit, you can end up paying more in annual fees than you expect.

Recommended: What Is Revolving Credit?

Financing a Timeshare

Developer financing is often proposed as the only timeshare financing option, especially if you buy while you’re on vacation. However, with a little advance planning, there are alternative options for financing timeshares. If developer financing is taken as an initial timeshare financing option, some timeshare owners may want to consider timeshare refinance in the future.

Home Equity Loan

If you have equity built up in your primary home, it may be possible for you to obtain a home equity loan from a private lender to purchase a timeshare. Home equity loans are typically used for expenses or investments that will improve the resale value of your primary residence, but they can be used for timeshare financing as well.

Home equity loans are “secured” loans, meaning they use your house as collateral. As a result, lenders will give you a lower interest rate compared to the rate on an unsecured timeshare loan offered at a developer pitch. You can learn more about the differences in our guide to secured vs. unsecured loans.

Additionally, the interest you pay on a home equity loan for a timeshare purchase may be tax-deductible as long as the timeshare meets IRS requirements, in addition to other factors. Before using a home equity loan as timeshare financing, or even to refinance timeshares, be aware of the risk you are taking on. If you fail to pay back your loan, your lender may seize your house to recoup their losses.

Personal Loan

Another option to consider for timeshare financing is obtaining a personal loan from a bank or an online lender. While interest rates for personal loans can be higher than rates for home equity loans, you’ll likely find a loan with a lower rate than those offered by the timeshare sales agent.

Additionally, with an unsecured personal loan as an option for timeshare financing, your primary residence is not at risk in the event of default.

Getting approved for a personal loan is generally a simpler process than qualifying for a home equity loan. Online lenders, in particular, offer competitive rates for personal loans and are streamlining the process as much as possible.

Awarded Best Online Personal Loan by NerdWallet.
Apply Online, Same Day Funding


The Takeaway

Timeshares offer one way to secure a place to stay in your favorite vacation destination each year — without having to buy a second home. And timeshares may save you money over time compared to the cost of a high-end hotel. However, beware of timeshare financing offered by developers. Interest rates can be as high as 20%. There are other ways to finance a timeshare that can be more affordable, including home equity loans and personal loans.

Think twice before turning to high-interest credit cards. Consider a SoFi personal loan instead. SoFi offers competitive fixed rates and same-day funding. Checking your rate takes just a minute.


SoFi’s Personal Loan was named NerdWallet’s 2024 winner for Best Personal Loan overall.

FAQ

Can I rent my timeshare to someone else?

Whether or not you can rent your timeshare out to others will depend on your timeshare agreement. But in many cases, your timeshare resort will allow you to rent out your allotted time at the property.

Can I sell my timeshare?

Your timeshare agreement will give you details about when and how you can sell your timeshare. In most cases, you should be able to sell, but it may be hard to do so, and you may take a financial loss.

Can I transfer ownership of my timeshare or leave it to my heirs?

You can leave ownership of a timeshare to your heirs when you die and even transfer ownership as a gift while you’re living. Once again, refer to your timeshare agreement for rules about what is possible and how to carry out a transfer.


SoFi Loan Products
SoFi loans are originated by SoFi Bank, N.A., NMLS #696891 (Member FDIC). For additional product-specific legal and licensing information, see SoFi.com/legal. Equal Housing Lender.


Tax Information: This article provides general background information only and is not intended to serve as legal or tax advice or as a substitute for legal counsel. You should consult your own attorney and/or tax advisor if you have a question requiring legal or tax advice.

Financial Tips & Strategies: The tips provided on this website are of a general nature and do not take into account your specific objectives, financial situation, and needs. You should always consider their appropriateness given your own circumstances.

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Are Kit Homes Worth the Investment: You can order anything on the internet these days—even a house.

What Is a Modular Home? Should You Consider Owning One?

Modular homes are often misunderstood, but these homes are built to the standards of their site-built brethren, are typically more affordable, and go up faster.

Just like other homes, they may appreciate in value.

Read on to learn whether or not a modular home might tick all your boxes.

Characteristics of a Modular Home

Remember the Sears mail-order kit homes? The catalog, debuting in 1908, offered all the materials and blueprints to build a house. Sears had sold an estimated 75,000 kit houses by the time the catalog was discontinued in 1940.

They were prefabricated homes, meaning some or all of the home was built in a factory. The term still applies to modular, panelized, and manufactured homes. (Kit homes are still sold, and appeal to DIYers who don’t need a general contractor to handle everything.)

Modular homes are born almost entirely in a factory. Boxlike modules — complete with walls, floor, ceiling, wiring, light fixtures, cabinets, and HVAC system — are trucked to the homesite, lifted by crane, and put together.

Manufactured homes, formerly called mobile homes, also are built in a factory and meet a federal code, but modular homes must meet the same state and local building codes as stick-built homes. They’re permanently attached to a standard foundation and are real property.

Modular houses come in a huge variety of designs and styles, from accessory dwelling units, or ADUs, to three-bedroom homes with sleek, contemporary designs. Many companies offer a menu of layout options, and buyers may be able to customize features.

Recommended: Guide to Buying, Selling, and Updating Your Home

Pros and Cons of a Modular Home

Here are some upsides and downsides of modular construction.

Pros

Speed: A modular home or apartment building can go up in as little as half the time of similar site-built residential buildings, whose construction averages around 10 months, according to the U.S. Census Bureau’s most recent data. Or even faster: Some modular home factories can finish a house in a few months. The modules are built offsite while the foundation is being prepared. Weather delays are far less of a concern.

Cost: Modular homes are typically cheaper than stick-built homes. The climate-controlled factories are specialized, and production processes are streamlined.

Greener: Modular construction results in fewer carbon emissions than traditional building methods: It requires less transport of workers and materials and fewer carbon-intensive products like concrete and steel. Producing buildings in a factory setting promotes recycling and reuse. In addition, modular buildings can be designed to achieve LEED certification.

Homes may appreciate: A well-built modular home, like any stick-built home, will tend to appreciate. The value holds up better in communities where modular homes are not uncommon.

A way to ease the housing crisis: Urban cities are looking at prefab housing to mitigate the U.S. housing shortage, and prefab-housing startups have sprouted nationwide. MiTek, a startup owned by Warren Buffett’s Berkshire Hathaway is, it says, “making modular mainstream.” It plans to ship kits of manufactured building parts to be assembled by general contractors. President Joe Biden and Vice President Kamala Harris updated a plan to increase the housing supply in August 2023, pledging the construction of more than 2 million new homes. That plan included modular housing.

And a smarter way of doing business: PulteGroup, the country’s third-largest home construction company, is investing in offsite manufacturing of parts for a percentage of the homes the company builds each year. A lack of labor has been contractors’ biggest challenge. Modular construction can help a company do more with fewer workers.

Recommended: Home Affordability Calculator

Now for the not-so-great news.

Cons

Zoning hurdles: Modular builders face pushback from many cities, as offsite construction isn’t mainstream and each city has its own zoning laws.

Financing: If modular homebuyers can’t pay cash, many will have to finance the build with a construction-only or construction-to-permanent loan (aka one-time-close loan). The down payment on land and the home for a construction loan will often be up to 30%, unless it’s one of the government-backed loans described below. A modular-home buyer who already owns the land can use the land as equity and may be able to borrow all of the construction cost if they meet the criteria for the loan.

You and the contractor usually need to be approved for the loan. Money is disbursed based on a draw schedule. Payments are typically interest only and start out small.

With the construction-to-permanent loan, some lenders, for a fee, will let you lock in a fixed rate with a “float down” option if rates have fallen. If you choose a variable rate, you’ll pay the current rate when the mortgage converts.

A two-time-close loan is composed of a short-term loan for the construction phase and a permanent mortgage for the completed home. You’re essentially refinancing when your home is complete; you’ll need to be approved and pay closing costs again, but the rate could be better. In most cases you can compare other lenders’ offers to get the best rate and terms on the permanent mortgage.

An FHA One-Time Close Loan is a government-backed home loan program that applies for modular homes and the land. The minimum down payment is 3.5%.

A VA One-Time Close Loan allows eligible service members to finance modular construction, lot purchase, and permanent mortgage with no money down.

A personal loan, sometimes for up to $100,000, could fund part of the modular construction or the purchase of the land. Keep in mind that unsecured loan rates are higher than rates on secured loans.

Qualified homeowners may be able to use a home equity line of credit (HELOC), home equity loan, or cash-out refinance to give rise to their modular aspirations.

HOA blockage: Some homeowners associations may not allow modular construction in the neighborhood.

Contractor expertise: Unless you have construction chops yourself, you still have to find a contractor. You’ll also need to secure a piece of land if you don’t own the land already.

All the extras: Among the disadvantages of modular homes is the difficulty of determining the total price. Buyers pay not only for the home but also the land, foundation prep, and transportation.

Possibly a big upfront payment: A builder may want payment in full before construction begins.

First-time homebuyers can
prequalify for a SoFi Mortgage Loan,
with as little as 3% down.


Finding a Modular Home

You may want to search for “modular home companies by state” or “prefab homes by state.” Of course there are Facebook and Reddit modular discussions. Word of mouth is another avenue to find a modular home builder.

Some modular home manufacturers sell directly to homeowners, and others work through a network of retailers.

At least one modular company has developed factory relationships across the United States.

Keep in mind that this style of construction is still pretty rare, in this country at least. In 2022, only 26,000 U.S. homes were built offsite. That’s about 2% of all homes completed that year.

Who Should Get a Modular Home?

People who want a new home up and ready more quickly and less expensively than a stick-built home might be smart to think modular.

Environmentally conscious buyers might find modular construction a breath of fresh air. Folks who want a modern ADU or primary or vacation home might want to go modular.

People who appreciate efficiency and innovation might be drawn to modular construction.

It helps to already own the land. If you don’t, and this will not be a cash deal, it’s important to understand the pros and cons of construction loans and other financing options.

The Takeaway

Modular homes are faster to complete and less expensive than site-built homes, but perceptions and financing can be challenges. If you do plan to build even an ADU out back, check your local zoning, compare modular vs. stick-built construction, and know your terms (manufactured vs. modular, real property vs. personal property). It all can be confusing.

SoFi can lend a hand. Do you plan to use a construction-only loan and need a permanent mortgage after the build is done? SoFi offers mortgages with competitive rates and a variety of repayment terms.

SoFi also offers personal loans of $5,000 to $100,000, which could fund the land or more, and brokers a HELOC that may allow you to access up to 95% of your home equity to fund your modular vision.

SoFi now offers flexible HELOCs. Our HELOC options allow you to access up to 90% of your home’s value, or $500,000, at competitively low rates. And the application process is quick and convenient.


SoFi Mortgages: simple, smart, and so affordable.


SoFi Mortgages
Terms, conditions, and state restrictions apply. Not all products are available in all states. See SoFi.com/eligibility-criteria for more information.


SoFi Loan Products
SoFi loans are originated by SoFi Bank, N.A., NMLS #696891 (Member FDIC). For additional product-specific legal and licensing information, see SoFi.com/legal. Equal Housing Lender.


Third-Party Brand Mentions: No brands, products, or companies mentioned are affiliated with SoFi, nor do they endorse or sponsor this article. Third-party trademarks referenced herein are property of their respective owners.

Financial Tips & Strategies: The tips provided on this website are of a general nature and do not take into account your specific objectives, financial situation, and needs. You should always consider their appropriateness given your own circumstances.

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Guide to Buying a Duplex

If you’re home shopping, you may be looking at duplexes. These properties are typically a single structure with two separate units. At face value, buying a duplex might seem like a BOGO (buy one, get one free) deal, but it isn’t as simple as purchasing two homes for the price of one.

It’s important to analyze the pros and cons of buying a duplex before you start bidding or sign a contract. In this guide, you’ll learn about the following topics:

Key Points

•   Assessing financial concerns and creating a budget is crucial before purchasing a duplex.

•   Researching the real estate market will help a buyer understand duplex pricing and availability.

•   Thorough property inspections are necessary to identify any required repairs or renovations.

•   Evaluating potential rental income is important to find a leasing scenario that can offset mortgage costs.

•   Understanding legal and zoning requirements is essential for anyone considering duplex ownership.

Defining ‘Duplex’

A duplex is composed of two living units on top of each other or side by side.

Duplexes have separate entrances for each occupant. That means single-family homes that have been subdivided typically do not count as duplexes.

For a side-by-side duplex, both entrances are likely on the street. If a duplex is stacked, the second-floor occupant might share an exterior entrance with the first-floor occupant, and then have an entrance to themselves upstairs.

In addition to private entrances, the units have their own bathrooms, kitchens, and other living features. In terms of the exterior, occupants may share a backyard, garden, or driveway.

Every duplex has one thing in common: a shared wall. If the duplex units are side by side, the occupants will share a wall. One on top of the other? Occupants share a ceiling/floor.

Just because properties share a wall doesn’t inherently make them a duplex. Sometimes duplexes are confused with twin homes.

A twin home may look like a duplex, but the shared wall is in reality the lot line between the two homes. So it’s two connected properties, each on its own lot. A duplex is two properties, owned by the same person, on a single lot.

The square footage of each duplex half is typically quite similar to the other. In many, occupants will find that the layouts mirror each other (if they’re side by side), or duplicate exactly (if they’re on top of each other).

Properties with carriage houses or guesthouses are not considered duplexes: They usually do not share walls, and the smaller residence is considered an accessory dwelling unit or ADU.

Duplexes fall in the category of multifamily dwellings, which also includes triplexes and quads (aka fourplexes). According to the National Multifamily Housing Council, more than 17 million renters (or about 17% of all renters) live in two- or four-unit dwellings.

The appeal of multi-family structures, including duplexes, has increased in recent years, with mortgages becoming more easily available and with down payments as low as 5%.

First-time homebuyers can
prequalify for a SoFi mortgage loan,
with as little as 3% down.


Benefits of a Duplex

Duplexes have the exciting “two for one” energy, which can make buying them enticing. The style of living comes with benefits for the buyer, including:

•   Income to help with mortgage. Duplex owners who decide to live in one of the units can rent out or Airbnb the other, making income to help offset the monthly mortgage payments and upkeep.

•   Potential tax benefits. Mortgage interest is tax-deductible for a primary or secondary home if the home acquisition debt is $750,000 or less ($375,000 for a married couple filing separately).

   Resident duplex owners can write off mortgage interest and property tax only on the half of the property they live in. However, if they have a renter, they can write off repairs to that unit, any utility bills paid for the rental, and management fees. The IRS even allows the owner to depreciate the rented half of the property.

•   Flexibility in the future. Having two homes on one lot opens up options for owners. They can rent out a unit or use it as an office or studio space. In the future, the unit could become an apartment for aging parents or a guest suite for visiting family members.

•   Landlord proximity. If a duplex owner is getting into the landlord business for the first time, it might be beneficial to live close to the tenant. In the event of a repair or emergency, the tenant is just steps away.

   Additionally, because of landlord proximity, duplex owners might find that renters keep the home in better condition. If the landlord is living on the property, a tenant might be less likely to abuse features or leave problems unreported.

   A duplex could also be a good opportunity to live next to a family member or close friend. It means both parties live on the same property but not with each other. For some arrangements, it’s a good balance between living together while also apart.

•   Affordability. If you’re wondering how much duplexes cost, know this: A duplex by definition is two properties with a single price, and can be more affordable than two single-family homes. The appeal of multi-family structures has increased in recent years as mortgages have become more easily available, and down payments can be as low as 5%.

Recommended: Factors That Affect Property Value

Drawbacks of a Duplex

Double the property doesn’t always mean double the fun. Here’s why a duplex might not be the right fit for all buyers:

•   Affordability. Duplexes may often be located in more affordable neighborhoods, and two properties in one sounds like a deal — but when the numbers are crunched, the duplex price may be higher than that of a single-family home nearby.

•   Acquisition costs. If a duplex buyer does not plan to occupy the property, the down payment will typically be at least 15% of the purchase price.

•   Insurance. Multifamily homeowners coverage, known as landlord insurance, will usually be more expensive (often as much as 25% more) for an investment property. This can be a key concern when thinking about how to buy a duplex.

•   Tax season could be complicated. Yes, a homeowner can offset costs with a tenant in a duplex, but they’ve just signed themselves up for a more complicated tax scenario than with an owner-occupied single-family home.

•   Landlord responsibilities. Many homebuyers are drawn to the idea of a duplex because they can generate income while living there. However, being a landlord isn’t just about collecting rent checks each month. Duplex owners are responsible for their renter’s unit, meaning fixing issues and being available for general repairs.

   No one wants to address an overflowing toilet at 2 am, but as a landlord, that might well be a reality. It’s a 24/7 job, and not only will a duplex owner be responsible for fixing the issues, but the cost of repairs will have to come out of their pocket.

•   Finding good tenants. Finding renters can be challenging. Owning a duplex doesn’t automatically guarantee extra income, and the process of finding reliable renters can be time-consuming. Plus, duplex owners will have to start the process anew each time a tenant moves out.

   Remember, if the second dwelling is unoccupied, the duplex owner still owes the same amount each month. Before buying a duplex, it’s worth considering how much time owners can put into searching for the right tenant, and if they want to have that responsibility long term.

•   Bad tenants. Let’s face it, not all tenants will be perfect. In reality, they could be loud, rude, messy, and/or late on rent. There are a multitude of things that could go wrong with a renter, and duplex owners should be comfortable bringing issues to the table. Owners who decide to live onsite could get stuck with a less-than-considerate neighbor.

Recommended: 31 Ways to Save for a Home

Estimate a Mortgage Payment for a Duplex

Now that you know about the pros and cons of owning a duplex, if you’re still interested in the idea of purchasing one, use the mortgage calculator below to get an estimate of what future mortgage payments would be.

Recommended: 25 Things to Know When Renting Out an Airbnb

Obtaining a Mortgage

If, now that you know the pros, the cons, and the costs, you are still ready to move ahead, the next step in how to buy a duplex would be financing your purchase. A potential duplex buyer can apply for a Fannie Mae loan with 5% down if they plan to live in the multifamily home themselves.

Other options for a buyer who plans to occupy one of the units is a 2-, 3-, and 4-unit (multifamily) home FHA loan, a VA loan, or conventional financing. (Investors are limited to conventional mortgage loans.) FHA loans can be a good choice for first-time home buyers, or those with less-than-perfect credit.

Check out our first-time home buyers guide for additional information on mortgages, loans, and closing costs.

Applicants may be able to use projected rental income to qualify for a loan. For rental income to be taken into account, though, renters usually must have already signed a lease. And not all of the projected income applies; a percentage is usually subtracted to account for maintenance and vacancies.

It makes sense for would-be buyers to have a good feel for their budget, as well as the potential costs associated with buying a property.

Knowing whether you plan to live at the address or rent out both units is a big consideration. Investors sometimes need a higher down payment than owner-occupants do. And if your down payment is less than 20%, you’ll need to have private mortgage insurance as well.

The Takeaway

Buying a duplex can be a great opportunity to own two properties, perhaps occupying one and earning rental income on the other. But there are pros and cons to be considered, as well as implications for your finances.

Looking for an affordable option for a home mortgage loan? SoFi can help: We offer low down payments (as little as 3% - 5%*) with our competitive and flexible home mortgage loans. Plus, applying is extra convenient: It's online, with access to one-on-one help.


SoFi Mortgages: simple, smart, and so affordable.


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Terms, conditions, and state restrictions apply. Not all products are available in all states. See SoFi.com/eligibility-criteria for more information.


SoFi Loan Products
SoFi loans are originated by SoFi Bank, N.A., NMLS #696891 (Member FDIC). For additional product-specific legal and licensing information, see SoFi.com/legal. Equal Housing Lender.


*SoFi requires Private Mortgage Insurance (PMI) for conforming home loans with a loan-to-value (LTV) ratio greater than 80%. As little as 3% down payments are for qualifying first-time homebuyers only. 5% minimum applies to other borrowers. Other loan types may require different fees or insurance (e.g., VA funding fee, FHA Mortgage Insurance Premiums, etc.). Loan requirements may vary depending on your down payment amount, and minimum down payment varies by loan type.

Financial Tips & Strategies: The tips provided on this website are of a general nature and do not take into account your specific objectives, financial situation, and needs. You should always consider their appropriateness given your own circumstances.

Tax Information: This article provides general background information only and is not intended to serve as legal or tax advice or as a substitute for legal counsel. You should consult your own attorney and/or tax advisor if you have a question requiring legal or tax advice.

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outlet wires

What Is the Cost to Rewire a House?

Updating the wiring in a house could cost between $6 and $10 per square foot, but keeping old wiring could have disastrous consequences. Electrical issues are the third most common cause of house fires in the United States.

Modern technology also may demand rewiring a house. Powering multiple electronic devices, having adequate interior and exterior lighting, and heating and cooling a home to today’s standards are difficult if a home’s electrical system is not up to the task.

Key Points

•   Rewiring costs for a house typically range from $6 to $10 per square foot.

•   A 1,300-square-foot house may cost between $7,800 and $13,000 to rewire.

•   Rewiring a 2,500-square-foot home could range from $15,000 to $25,000.

•   Factors influencing rewiring costs include house size, age, work extent, materials used, and wiring access.

•   Older and larger homes often require more extensive rewiring, increasing the overall cost.

Factors That Affect the Cost to Rewire a House

Rewiring a home involves removing the outdated wiring inside a home’s walls and installing new, modern wiring that can safely meet today’s electrical needs.

Rewiring is typically done by a licensed electrician who strips out the old wiring and runs new wiring throughout the entire house, installs a new circuit breaker panel to handle the load of the new wiring system, and ensures that building codes are met.

It can be a big job — and an expensive one, too. Let’s look at some common factors that can impact the total cost.

Size of the House

The bigger the home, the more materials and labor the job will likely require. And that can drive up the price. Rewiring a 1,300-square-foot house, for instance, runs around $7,800 to $13,000. For a 2,500-square-foot home, you can expect to pay between $15,000 to $25,000.

House’s Age

Older homes weren’t constructed with 21st century living in mind, so a rewiring project will likely cost more. Common necessities like opening a wall to reach out-of-the-way wiring ($4-$8 per square foot), upgrading outdated wiring ($200-$2,300), and replacing an electrical outlet ($125-$200) can all add to the price tag.

Extent of Work Needed

Small-scale projects are typically cheaper than larger, more complex ones. If you’re planning to set up a new alarm system, run wiring to a backyard shed, or upgrade the electric panel, you’ll likely need to adjust your budget accordingly.

Recommended: How to Find a Contractor for Home Remodeling

Signs You Need to Rewire a Home

Flickering lights, outlets making a popping sound, or tripped breakers indicate that a home might need to be rewired. When buying an older home, a home inspection typically reveals if rewiring is recommended or necessary.

Even before a professional inspection, prospective homebuyers may be able to get a good idea of how the home is wired by peeking into the attic, basement, or crawl space.

Vintage charm does not extend to knob and tube wiring, which was common through the mid-1900s. The lack of a ground wire is seen as a significant fire hazard, and most carriers will deny homeowners insurance for a home that has knob and tube electrical wiring.

Another way to check for outdated wiring is to find the electrical panel and see if it has modern breaker switches or round fuses. The fuses indicate that the system is outdated, and rewiring the house might be recommended.

In almost every state, home sellers must disclose defects, but cautious buyers may still want to include the inspection contingency in the purchase contract.

If you’re living in a home with older wiring and notice that your circuit breakers trip often, lights flicker, the light switches feel warm to the touch, or there is a burning smell coming from an outlet, it’s time to schedule an appointment with an electrician.

Cost to Rewire a House Per Square Foot

Cost to Rewire a House Per Material

The cost of rewiring a house depends on square footage and how easy or difficult it is to access the space. But the wiring and cable materials can also have an impact. Let’s take a look:

•   Used in most homes, nonmetallic (NM) cables are easy to install, flexible, and cost-effective. If you’re rewiring these cables, expect to pay between $0.40 and $0.80 per linear foot, according to Angi.

•   Underground feeder (UF) cables are similar to NM cables, except that they’re designed to go underground or in damp areas. Rewiring UF cables costs around $0.50 to $0.75 per linear foot.

•   Durable and able to handle high temperatures, THHN and THWN wires are often used in an unfinished space, like a basement, or for hot water heaters and garbage disposals. They cost $0.80 to $1.60 per linear foot to rewire.

•   Coaxial cables have high bandwidth support and are easy to install, which once made them a go-to choice for televisions and video equipment. Today, they’re more commonly used to connect cable or satellite TV signals or for internet connectivity. These cables cost around $0.25 to $0.35 per linear foot to rewire.

Updating a doorbell or thermostat? You’ll likely be working with low-voltage wires, which are used for circuits less than 50 volts. Rewiring typically costs between $0.25 and $0.35.

Recommended: How Much Is My House Worth?

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How to Cover Your House Rewiring Costs

Rewiring a home is not a small expense. Fortunately, there are various ways to pay for it. Here’s a look at some options.

Home Equity Loans

If you’ve built up equity in your home and are facing a major rewiring project, a home equity loan may be the right choice. There are three main types to consider: a fixed-rate home equity loan, a home equity line of credit (HELOC), and cash-out refinancing.

Each has its pros and cons. For instance, with a fixed-rate home equity loan, you receive a lump sum payment, which you’ll pay back over a period of time with a set interest rate.

A HELOC, on the other hand, is revolving debt. As the balance borrowed is paid down, it can be borrowed again during the draw period, which typically lasts 10 years.

With a cash-out refinance, you can refinance your mortgage for more than what you currently owe, and then take the difference in cash.

Home Improvement Loans

A home improvement loan is a type of personal loan used to fund renovations and upgrades, including rewiring a house. Once your loan application is approved, you’ll receive a lump sum of cash, which you can use to pay for home improvements. You’ll repay the loan, with interest, in regular installments over the life of the loan — typically five to seven years.

These loans are unsecured, which means your home isn’t used as collateral. As a result, they often come with a higher interest rate.

Credit Cards

A credit card is a fast, easy way to fund a rewiring project, and it can be a good option if you’re able to pay off the balance on the card that month. Or look for a card with an introductory 0% annual percentage rate (APR), as this allows you anywhere from six to 18 months to pay back the balance with zero interest. But keep in mind that any balance left after the promotional period ends will start accruing the card’s regular APR.

Cash

Depending on the scope of the project and your budget, you may decide to dip into your savings account or withdraw money from your emergency fund, if you have one.

As you create a budget and weigh your financing options, look for opportunities to save money. Research how much rewiring a house costs in your area, and include a cushion in your budget for unexpected expenses. If you’re not planning to tackle the job yourself, gather quotes from reputable licensed electricians in your area and see which one can offer you the best deal.

Finally, factor in the long-term costs and benefits. Although rewiring might seem cost-prohibitive when buying a single-family home, owners may find that the cost of rewiring a house — and the peace of mind the upgrade provides — can be money well spent.

The Takeaway

At $6 to $10 per square foot, the cost of rewiring a house may seem high. But adequate electrical panels and modern wiring can amp up your home value and prevent fires. Wondering how you’re going to pay for it all? Home equity loans, savings, credit cards, and home improvement loans are all ways to pay for the average cost to rewire a house.

Think twice before turning to high-interest credit cards. Consider a SoFi personal loan instead. SoFi offers competitive fixed rates and same-day funding. Checking your rate takes just a minute.


SoFi’s Personal Loan was named NerdWallet’s 2024 winner for Best Personal Loan overall.

FAQ

Is it worth rewiring an old house?

Yes, it’s worth rewiring an old house. Replacing outdated wiring can help prevent a house fire and add value to the property. Plus, updated, energy-efficient fixtures are sometimes included in a remodeling job of this scope, which can potentially lower utility costs.

How much does it cost to replace all the electrical wiring in a house?

According to the home services website Angi, home owners can expect to pay anywhere from $601 to $2,590 to rewire a house. However, if you have an older, larger home, you’ll likely pay closer to $6,000.

Can a house be rewired without removing drywall?

In many cases, at least some drywall will need to be removed during a rewiring project. But talk to your electrician to see if the work can be done without disrupting your walls.


SoFi Loan Products
SoFi loans are originated by SoFi Bank, N.A., NMLS #696891 (Member FDIC). For additional product-specific legal and licensing information, see SoFi.com/legal. Equal Housing Lender.


Third-Party Brand Mentions: No brands, products, or companies mentioned are affiliated with SoFi, nor do they endorse or sponsor this article. Third-party trademarks referenced herein are property of their respective owners.

Financial Tips & Strategies: The tips provided on this website are of a general nature and do not take into account your specific objectives, financial situation, and needs. You should always consider their appropriateness given your own circumstances.

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