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Buying an investment property can be a great way to put extra cash in your pocket, but you may need a mortgage to pull it off. (Technically, a property is considered an investment property if the owner does not make their primary residence there.) Because there’s more risk involved for lenders, mortgage rates for “non-owner-occupied” property tend to be higher. This article will discuss types of investment property loans, typical rates, and more.

Why You Might Need an Investment Property Mortgage

Purchasing a rental property or buying a fixer-upper could be a rewarding way to invest your money, but if you don’t have the cash to pay out of pocket, you’ll need another way to fund the deal. For many, that means taking out an investment property loan.

Recommended: How to Shop for a Mortgage

Types of Investment Property Loans

The type of mortgage loan you choose can affect your interest rate and required down payment. How you plan to use the investment property and the number of units it contains also will affect your loan choices.

Conventional and Government Loans

If you live in one unit of a multiunit property and rent out the others, a conventional loan may be an option when buying two- to four-unit properties. Buildings with four or fewer units are considered residential and eligible for the same loans as a single-family home when owner-occupied.

Those with five or more units require a commercial loan, which usually has a higher rate, higher down payment requirement, and shorter term. Note: SoFi does not offer this type of loan.

Federal Housing Administration (FHA) and U.S. Department of Veterans Affairs (VA) loans are government-backed home loans, can be used to buy a two- to four-unit property with a low down payment or none at all, respectively, if you live in one of the units.

Is the sky the limit? Not exactly. The Federal Housing Finance Agency sets conventional conforming loan limits each year that depend on the number of units (one, two, three, or four) and the cost of the area. Staying under a loan limit means you’ll most likely obtain a lower-cost mortgage.

But jumbo loans, which exceed those limits, have their place. Lenders set their own limits and other criteria.

FHA loan limits for one to four units are set at 65% of the new year’s conforming loan limits. There are no VA loan limits for active-duty military members, veterans, and others who have full VA loan entitlement.

Home Equity Loan or HELOC

If you have enough equity in your primary residence, you may be able to take out a home equity loan or home equity line of credit (HELOC) to fund your investment.

Other Kinds of Financing

Finally, if you’re serious about getting an investment property, you can think about and read up on these options:

•   personal loan

•   cash-out refinance

•   hard money loan

•   owner financing

•   assumable mortgage

Understanding Investment Property Mortgage Rates

However much inflation affected mortgage rates, the rates are even higher for investment properties. Though rental property mortgage rates can vary, they are often at least 0.50% to 1.00% higher than rates for a primary residence.

Why are investment mortgage rates higher? Lending to an investor is inherently riskier. While someone who purchases a primary residence is likely to prioritize the mortgage payments for their own home, an investor who has a primary residence elsewhere will likely prioritize making payments on their own home above paying the mortgage for the investment property if cash runs short.

If the investment property is a flip but doesn’t sell as quickly as expected, the investor must keep making mortgage payments on the home after investing money to renovate — and may struggle to do so. And if the investment property is a rental, a vacancy results in no rental income to put toward the mortgage.

Recommended: Home Loan Help Center

What Determines the Rate?

So what determines investment property mortgage rates? Fannie Mae and Freddie Mac set rules regarding conventional investment property mortgages, including rate increases for single-unit and multiunit properties. Beyond that, mortgage rates for rental properties depend on a few additional factors:

Credit Score

As with any loan, a higher credit score typically results in a lower interest rate for an investment property mortgage.

Recommended: 18 Mortgage Questions for Your Lender

Debt-to-Income Ratio (DTI)

The lower your debt-to-income ratio, the better your chances of loan approval — and at a better rate. To calculate your DTI, add all your monthly debt payments, divide them by your gross monthly income, and multiply the result by 100.

Generally, 43% is the highest DTI you can have and still qualify for a mortgage, but many lenders prefer to see a 36% DTI or lower.

The lender may factor in 75% of your projected rental income when calculating your DTI, which works in your favor.

Cash Reserves

Because you may not immediately make money from an investment property — you typically need time to find renters or to rehab and list — lenders often like to see that you have adequate cash reserves.

Cash reserves refer to liquid (i.e., accessible) money that you have set aside for use in an emergency; in this case, it’s to cover the mortgage until your investment starts showing some ROI.

Though it can vary by lender, having six months’ worth of mortgage payments is often a good start. Having even more could improve your chances of approval and a lower rate.

Loan-to-Value Ratio (LTV) on the Investment Property

As with a traditional mortgage, lenders consider the loan-to-value ratio on the investment property. LTV expresses the ratio between how much money you’re borrowing and the appraised value of the property.

The closer those two numbers are, the higher the LTV ratio (expressed as a percentage) will be. By making a larger down payment and financing less, you can lower the LTV and potentially increase your chance for approval at a lower rate.

Making a Larger Down Payment

On a related note, you might benefit from offering a larger down payment. Although you may get approval with only 15% down — and some people even manage to buy a multifamily property with no money down — a larger down payment may yield a lower rate.

Not sure where to start? You can use a mortgage calculator to see how different down payment amounts may affect monthly payment and interest paid.

Getting a Lower Investment Property Mortgage Rate

Now that you know what determines a rental property mortgage rate, let’s see how you can use that info to potentially earn a lower one.

Coming in With a Good Credit Score

Other than an FHA loan, which is more lenient about credit scores, lenders usually require a minimum credit score of 640 for investment property loans; some set the barrier for entry at 680.

Regardless, catapulting your number into the high FICO® score range can improve your chances of a lower rate.

Paying Off Debt

A lower DTI ratio may also improve your chances of approval and a lower interest rate. But repaying debt is easier said than done; you may need to wait on an investment property if you’re working toward paying down a lot of credit card debt.

Increasing Your Cash Reserves

Showing a lender that you can cover the mortgage and other expenses like renovations or maintenance increases the odds of approval. The more liquid money you have, the lower your interest rate could be.

The Takeaway

Investment property loans are a good way for investors to purchase real estate for a rental property or a house flip, but the rates tend to be higher than rates for mortgages for a primary residence. A lender may offer a lower rate depending on a potential borrower’s credit score, down payment, debt load, and cash reserves.

Find more advice on setting yourself up for mortgage success in a home loan help center.

FAQ

Can I get a mortgage for an investment property?

You can if you qualify, but keep in mind that investment property mortgage rates are typically higher, and lenders may have stricter requirements for approval.

Do investment properties have higher mortgage rates?

In general, yes, because lenders take on more risk when lending to an investor than to a person or family shopping for a primary dwelling.

What’s the minimum down payment for an investment property mortgage?

The minimum down payment for an investment property depends on the type of loan you’re using. For a conventional loan, you usually need to put down at least 15%. An FHA loan for an owner-occupied one- to four-unit property calls for a down payment as low as 3.5%; a similar VA loan, no down payment.

Photo credit: iStock/Drazen Zigic

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.

SOHL-Q125-014

Building a home could take an average of 10 months, but a contractor- or owner-built house could stretch the timeline beyond a year.

It’s not as simple as buying a plot of land and heading to the hardware store. Construction permits, financing, and even the weather can lengthen your timeline.

Average Time to Build a House

Despite the extra time it takes to build a home from scratch rather than buy an existing home, it’s no surprise that many Americans are opting to build a home.

Why? To customize a home to their tastes, for one thing. And the narrowing gap between the average cost to build a house and the cost of buying an existing home.

The average cost to build a house, including the land, was just over $500,000 in 2022, the National Association of Home Builders reported.

So how long does it take to build a house?

According to the U.S. Census Bureau’s 2023 home building statistics, the average time to build a one-unit residential building is 10.1 months. This breaks down to 1.5 months for authorization to start construction (the permitting process) and another 8.6 months to finish construction. Below is the average construction time based on the type of construction.

This time frame encompasses the entire home building process, from obtaining building permits to picking out the design.

Factors That Affect How Long It Takes to Build a House

As with everything, the devil is in the details, so let’s look at factors that influence how long it takes to build a home.

Type of House

The type of home and design will have a significant impact on the construction timeline.

If you’re buying new construction, it will fall into one of these categories:

•   Tract homes. These go up in a new development. The buyer chooses the design features and lot.

•   Spec homes. With these move-in-ready homes, the buyer still might be able to choose some of the finishings.

•   Custom homes. A builder customizes a house to the buyers’ land.

Predesigned home packages likely accelerate the construction timeline, while custom homes are likely to extend it. After all, custom designs require more coordination between architects, engineers, and contractors.

House Size

Naturally, larger homes take longer to build than smaller homes.

If you’re planning on a particularly ornate design, make sure you budget extra time (and money) for the project.

Larger properties with complex layouts are also more likely to encounter greater engineering challenges than simpler layouts. It’s also likely that unanticipated issues will arise during the build.

Location

While scenic, remote areas are attractive to many people seeking to build a primary or vacation home, the locale will heavily affect the ease of transporting materials, workers, and equipment.

Rocky terrain will also be more expensive and difficult to excavate and prep for construction. Installing common utilities will be more difficult.

Weather

Unless you’re looking into a modular home vs. a stick-built home, inclement weather can severely delay construction, as many parts of the process cannot be completed in rain or snow.

Your worksite may get flooded due to lack of completed drainage, and building materials may be damaged if not properly protected.

Financing

Homeowners with sufficient equity in their current home could apply for a home equity line of credit to fund their new home. If that isn’t an option, you could consider a personal loan, although it may have a higher interest rate than a HELOC. But many people will seek a construction loan. Obtaining a construction loan comes with its own complications.
xpect underwriting to take longer than it does for a typical mortgage, as the lender will want a detailed plan, budget, and schedule for the construction. The lender may also need to approve your builder. Generally, the lower your debt-to-income ratio and the better your credit score, the more favorable loan terms you’ll be offered.

Permits

Construction permits and zoning approval for home building can be significant time drains and are often beyond your control. A good contingency is to find a contractor who is familiar with the local application process.

Materials and Labor

Volatility in material prices and availability can make it hard for contractors to plan projects. Many construction materials are globally traded and geopolitical tensions, trade disputes, and changes in trade policy can add to costs, according to the National Association of Home Builders (NAHB).

Average hourly wages in the construction industry have increased 4.3% in the year ending October 2024, and there is an urgent need for more workers in the industry, according to NAHB. In general, contractors are particularly busy during the spring and summer, so contracting with a builder before those seasons could be a good idea.

Recommended: Personal Line of Credit vs. HELOC

The Process of Building a House

Here’s the typical home construction timeline:

•   Buy land and obtain financing

•   Obtain building permits and approvals

•   Excavate the land and prep the foundation

•   Build the framework and install utilities

•   Put in walls, floors, and roof

•   Install fixtures, appliances, and finish the exterior/interior

•   Landscape, pave driveways, and prepare the grounds

•   Get a final inspection from authorities

Shortening the Time It Takes to Build a House

While much of the home building process is outside your control unless you’re actually building the house yourself, there are ways you can mitigate the chance of complications.

Here are a few ways you can shorten the average time it takes to build a house.

Avoid Deviating From the Plan

One of the best ways to avoid lengthening a construction timeline is to ensure that you have building plans finalized well before you break ground, and that you stick to them.

Making last-minute changes is anathema to construction timelines.

Communicate

Avoid being the bottleneck when it comes to decision-making. The construction team will likely take their cues from you. So if you’re late answering an email, design query, or request for approval, your contractor will often be unable to proceed without your input.

Reduce Complexity

Keeping things simple will probably lead to a faster build, if that’s a priority. More complex plans clearly lead to lengthier construction times and introduce a greater likelihood that unforeseen problems will arise.

Craft the Contract With Care

The construction contract should contain a deadline for completion and spell out what will happen in the event of a delay.

It’s common for a contract to specify that “substantial completion” must occur by a certain date, and to define that. A clause can express that extensions can be given for unforeseen delays.

When a change is made after a contract is signed, it’s referred to as a “change order.” The change order might specify a deadline extension or new completion date.

Builders who breach the contract may be responsible for damages.

The Takeaway

How long does it take to build a house? It could take 10 months — and longer if you are doing the project yourself. A construction contract will typically contain a deadline and what will happen if a delay occurs. Allowing for a reasonable schedule can help ensure that your project finishes on time.

One important part of the construction process is financing your new home. If you have equity in an existing home, a home equity line of credit (HELOC) is one possible financing solution, and may offer a lower interest rate than a personal loan.

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

FAQ

How long does it take to build a house by yourself?

For the ambitious home builders among us, it takes around 10 months for a basic build, on average. The timeline can easily stretch out to two years or longer, depending on your experience and whether or not you choose to employ any assistance.

What causes delays when building a house?

Plenty of factors can delay a build. They include:

•   Owner-caused delays

•   Contractor-caused delays

•   Weather

•   Logistics

•   Obtaining permits and approvals

•   Size and scale of the project

•   Communication failures

Can I get a loan to build a house?

You can apply for a construction loan or if you already have a home, a home equity line of credit, home equity loan, or cash-out refinance to fund the new home. A personal loan could be used for at least part of the build.

Photo credit: iStock/acilo

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.

SOHL-Q125-012

Whether shopping for a home or an investment property, buyers may come across multifamily homes.The first need-to-know, especially for financing’s sake, is that multifamily properties with two to four units are generally considered residential buildings, and those with five or more units, commercial.

Let’s look at whether multifamily homes are a good idea for homebuyers or investors.

What Is a Multifamily Home?

Put simply, a multifamily home is in a building that can accommodate more than one family in separate living spaces. Each unit usually has its own bathroom, kitchen, utility meter, entrance, and legal address.

Of the more than 100 million Americans who rent, around two-thirds live in multifamily homes.

Among the different house types are duplexes, which contain two dwelling units, while a triplex and quadruplex consist of three and four units, respectively. A high-rise apartment building is considered a multifamily property.

What about ADUs? A home with an accessory dwelling unit — a private living space within the home or on the same property — might be classified as a one-unit property with an accessory unit, not a two-family property, if the ADU does not have its own utilities and provides living space to a family member.

Multifamily Homes vs Single-Family Homes

On the surface, the differences in property types may seem as straightforward as the number of residential units. But there are other considerations to factor in when comparing single-family vs. multifamily homes as a homebuyer or investor.

Unless you plan to hire a manager, owning a property requires considerable time and work. With either type of property, it’s important to think about how much time you’re able to commit to handling repairs and dealing with tenants.

If you’re weighing your options, here’s what you need to know about single-family and multifamily homes.

Pros and Cons of Multifamily Homes

There are a number of reasons to buy a multifamily home: Rental income and portfolio expansion are two.

Buying real estate is one ticket to building generational wealth. But there are also downsides to be aware of, especially if you plan to purchase a multifamily home as your own residence.

So what are multifamily homes’ pros and cons? The benefits and drawbacks can depend on whether it’s an investment property or a personal residence.

As Investment

Investing in multifamily homes can come with challenges. Take financing.

A mortgage loan for an investment property tends to have a slightly higher interest rate, the qualification hurdles are higher, and a down payment of 20% or more is usually required, though there are ways to buy a multifamily property with no money down.

Government-backed residential loans don’t apply to non-owner-occupied property, but there is a commercial FHA (Federal Housing Administration) loan for the purchase or refinancing of apartment buildings with at least five units that do not need substantial rehabilitation. Another FHA loan program is for new construction or substantial rehabilitation of rental or cooperative housing of at least five units for moderate-income families, elderly people, and people with disabilities. Yet another FHA loan pertains to residential care facilities. Upfront and annual mortgage insurance premiums (MIP) apply.

Before adding a multifamily home to your real estate portfolio, take note of the pros and cons of this investment strategy.

As Residence

Buyers can choose to purchase a multifamily home as their own residence. They will live in one of the units in an owner-occupied multifamily home, while renting out the others.

Owners can use rental income to offset the cost of the mortgage, property taxes, and homeowners insurance while building wealth.

Another advantage is financing. With a multifamily home of two to four units, an owner-occupant may qualify for an FHA, VA (U.S. Department of Veterans Affairs), or conventional loan and put nothing down for a VA loan or little down for a conventional or FHA loan. (It isn’t all hearts and flowers, though. Most VA loans require a one-time funding fee. FHA loans always come with MIP. And putting less than 20% down on a conventional loan for an owner-occupied property, short of a piggyback loan or lender-paid mortgage insurance, means paying private mortgage insurance).

What are multifamily homes’ pros and cons as residences?

It’s worth noting that an owner-occupant can move to a new residence later on and keep the multifamily home as an investment property. This strategy can help lower the barrier to entry for real estate investing, but keep in mind that loan terms may require at least one year of continued occupancy.

Recommended: Tips to Qualify for a Mortgage

Who Are Multifamily Homes Right For?

There are a variety of reasons homebuyers and investors might want a multifamily home.

Multifamily homes can be helpful for entering the real estate investment business or diversifying a larger portfolio. It’s important to either have the time commitment to be a landlord or to pay for a property manager.

For homebuyers in high-priced urban locations, multifamily homes may be more affordable than single-family homes, given the potential for rental income. It might be helpful to crunch some numbers with a mortgage payment calculator.

Multigenerational families who want to live together but maintain some privacy may favor buying a duplex or other type of multifamily home.

What to Look for When Buying a Multifamily Home

There are certain characteristics to factor in when shopping for a multifamily home.

First off, assess what you can realistically earn in rental income from each unit in comparison to your estimated mortgage payment, taxes, and maintenance costs. Besides what the current owner reports in rent, you can look at comparable rental listings in the neighborhood.

When looking at properties, location matters. Proximity to amenities, school rankings, and transportation access can affect a multifamily home’s rental value.

The rental market saturation is another important consideration. Buying a multifamily home in a fast-growing rental market means there are plenty of renters to keep prices up and units filled.

The vacancy rate — the percentage of time units are unoccupied during a given year — at a property or neighborhood is an effective way to estimate rental housing demand.

Depending on your financing, the condition of a multifamily home may be critical. With a VA or FHA loan, for instance, chipped paint or a faulty roof could be a dealbreaker.

Read up on mortgage basics to learn about what home loans you might use for a multifamily home and their terms.

Finding Multifamily Homes

Like single-family homes, multifamily homes are featured on multiple listing services and real estate websites. Browsing rental listings during your multifamily home search can help gauge the market in terms of vacancy rates and rental pricing.

Working with a buyer’s agent who specializes in multifamily homes can help narrow your search and home in on in-demand neighborhoods.

Alternatively, you can look into buying a foreclosed home. This may help get a deal, but it’s not uncommon for foreclosed properties to require renovations and investment.

The Takeaway

Buying a multifamily home as a residence or investment property can provide rental income and build wealth. It’s also a major financial decision. Whether you’re planning to be an owner-occupant or not will affect your financing, so seriously consider this option and run the numbers to see if you stand to recoup your costs — and ideally make a profit — from the building’s rental income.

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.

FAQ

What is the difference between residential and multifamily?

Some multifamily homes — those with fewer than five units — are considered residential real estate. Larger properties with more than five units are commercial real estate.

Photo credit: iStock/krzysiek73

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.

SOHL-Q224-1903424-V1

Investing in a duplex can be a good idea if you can pony up the cost and don’t mind being a hands-on landlord. A key advantage is the ability to live in one of the units or rent both out.

If the purchase will be strictly a rental, duplexes offer the capacity to double your cash flow for less than the cost of two single-family homes. You also have the freedom to make half your home.

Buying a duplex for investment is a popular investment strategy used for breaking into real estate, and they’re in demand in every major city.

What Is a Duplex?

A duplex consists of two living units on top of each other or side by side, along with the land they are built upon.

Each unit has its own entrance and exit, kitchen, bedrooms, and bathrooms. The two units are conjoined by a wall or a floor/ceiling.

Regardless of their layout, the units share the same plot and deed, and are sold as a single property. Unlike a twin home (in which each housing unit sits on its own plot of land) a duplex has one owner.

A duplex is technically a multifamily property but qualifies — as does any building with up to four units — for the same kind of favorable financing that a single-family home does if you make the property your address.

The units may share the same utilities but otherwise operate as separate residences. This allows you to avoid doubling expenses over time when you need to replace a water heater, for instance.

Advantages of Investing in Duplexes

The advantage of buying a duplex, with the freedom to live in half and rent out the other (or not), speaks for itself.

There are other pros. Here are the major ones.

Cash Flow

Whether you’re trying to build or buy a duplex, a key advantage is the cash flow potential that comes from renting out both units.

Alternatively, you can live in one of the units, which will ultimately reduce the risk if the other half sits vacant for an extended period.

The rent from the other unit may cover part or all of your mortgage costs, depending on how much you put down on the property.

Financing If Owner-Occupied

Eligible duplex owner-occupants have financing choices:

•   FHA loans, backed by the Federal Housing Administration

•   VA loans, from the U.S. Department of Veteran Affairs

•   Conventional home mortgage loans

Each of those calls for a low down payment or none at all.

The government-insured loans can be used for properties with up to four units as long as the buyer plans to live in one of the units. FHA loans are favored by first-time homebuyers — those who have not owned a principal residence in the past three years — and buyers with lower credit scores.

For an FHA or VA loan, the owner is to live onsite for at least a year.

Investors who plan to rent out both units must use conventional mortgage loans. They should expect to put down at least 20%. The mortgage rate will likely run a bit higher than for a loan for an owner-occupied property.

A duplex buyer can often use both current passive income and projected rental income to qualify for an FHA or VA loan and conventional mortgage loan but not a VA-backed loan.

Faster Portfolio Building

Unlike starting with a detached single-family home and working your way up, buying a duplex lets you double the number of rentable units you own upfront for less than the cost of two single-family rental homes in most markets.

This cuts down on the amount of time you need to find suitable properties to purchase and the closing costs you need to pay.

Buying a duplex also will also contribute to your real estate portfolio diversification.

Tax Breaks

Owner-occupants may be able to deduct mortgage interest and property tax on their half.

If they have a renter, they may also be able to write off expenses for that half: repairs, insurance, any utility bills, advertising, management fees, and so on. And they can depreciate the rented half of the property. A tax advisor can help determine whether an owner qualifies for deductions.

Risk Mitigation

If you’re living in one of the units, you’re still getting some use out of the property if the other remains vacant. You can even bide your time if you need to make home improvements to the other unit.

Comparatively, if you own a single-family property that sits vacant, that’s cash every month out of your pocket that the home remains empty.

Additionally, lenders view the risk to be more diffused for duplexes, particularly if the owner’s living in one unit. From their perspective, it’s much less likely that borrowers would default on a duplex that serves as their primary residence than they would default on a comparable investment property.

Lower Overhead Cost

The same furnace, AC unit, and hot water heater may serve both units in a duplex. If that’s the case, you may only need to worry about maintaining a single set of utilities for both dwellings.

Disadvantages of Investing in Duplexes

Like all rental properties, the primary disadvantage of duplex is the risk that it remains vacant for an extended period of time, although the risk is mitigated if you’re living in the other unit.

Here are other possible downsides when investing in a duplex.

Possibly Cost Intensive

While it may be more efficient than buying two detached single-family homes, a duplex still might cost more than if you had bought a single stand-alone property.

You’ll have twice the number of kitchens and bathrooms to contend with, which will increase costs if you intend to renovate both units.

The cost of building a duplex may exceed the cost of building a house.

Finally, property insurance for a duplex is usually higher than for a single-family home.

Risk of Vacancies

If one or both of the units in your duplex remain vacant, the opportunity cost and negative impact on your bottom line as property manager could be enormous.

If the average person is spending a lot on rent, that’s either a great sum to put in your pocket or a terrible one to lose.

Make sure you properly research your target market. Just because you stumble on a duplex that looks great doesn’t necessarily mean it’ll rent from day one.

Proximity to Tenants

If you intend to live in one unit and rent the other out, the coziness with your tenants is a double-edged sword. On one hand, you’ll be able to monitor the coming and goings of your neighbor, but on the other, you’ll be right next door if any issues arise.

Where to Find Duplexes and How to Buy One

If a stream of rental income and capital appreciation sound good, it’s smart to start scoping out what’s on the market.

You also can seek prequalification and preapproval for financing.

Don’t expect an easy hunt, as serviceable duplexes in great locations are in demand. When you find one, expect competition, true of any good investment property.

Start by browsing online listings for duplex owners and filtering for properties with two units. It’s also a good idea to find a reputable real estate agent and specifically request to view duplex properties.

Time is of the essence when making offers. A preapproval letter can carry a lot of weight.

The Takeaway

Buying a duplex can be a smart move: You’re getting two potential rental streams under one roof, typically for less than the cost of two single-family homes. Financing is especially attractive if you plan to live onsite.

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.

FAQ

What should I look for when investing in a duplex?

Make sure it’s legally zoned as a duplex. Know the neighborhood. See if the numbers would make sense by researching comparable rents and factoring in any repairs. Gauge noise transfer and privacy if you plan to live there and rent the other unit out.

How do I buy a duplex?

Know whether you plan to live at the property, which will affect your financing. Getting preapproved for a mortgage is a good idea. Look at prices in your area, scour online listings, and consider hiring a good buyer’s agent. In most markets, expect competition.

Is it profitable to own a duplex?

Because a duplex usually does not come with HOA fees and consists of two rentable units, it can be profitable. A duplex also might be more appealing to renters than apartments are. And maintaining a duplex costs less than managing two individual rental units.

Do duplexes increase in value?

They often do, but appreciation tends to be lower for duplexes than stand-alone single-family homes.

Photo credit: iStock/aluxum

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.

SOHL-Q125-021