Is Buying a Duplex as a First Home in Florida a Good Idea?

A duplex could be the perfect compromise—it's a single-family property that allows you to grow your assets and build up some equity, but it also has some built-in ways of helping you pay for it.

But while that sounds like it could save you money in the end, there's more to consider before delving into this investment. Luckily, this post has got you covered. Here is everything on buying a duplex and why it's a good idea.

Key Takeaways for Florida Duplex Ownership

• In Florida, leasing one side of a duplex can offset your mortgage costs but may also introduce additional expenses.

• Florida duplex owners can benefit from specific federal tax deductions for renting out part of their property.

• When living in one unit and renting out the other in Florida, you'll need homeowner and landlord insurance policies.

• Duplexes in Florida can be financed with conventional mortgages or loans backed by government programs, like FHA or VA loans.

What Is A Duplex?

It is a single building comprising two separate living spaces, usually two apartments within the same structure.

It's a great option if you're looking to become a homeowner for the first time because, in addition to getting your place, you'll have rental income from the second unit to help with the mortgage and other ownership costs.

Note - The individual units in most standard duplexes usually range between 1,000 and 2,000 square ft. in size. Ideally, the standard duplexes are usually condo-like, traditional multifamily houses split into two, comprising identical units.

Comparing Buying a Single-Family Home vs. a Duplex

When purchasing property in Florida, the processes for acquiring a single-family home and a duplex are largely similar, especially in credit requirements and down payments.

For both types of properties, whether single-family homes or duplexes, buyers typically need a minimum credit score of 620 for conventional and 500 for FHA loans.

It's important to note that while the VA doesn't specify a minimum credit score, most lenders tend to require one. The minimum down payment also aligns closely, ranging from 3% to 15% for conventional loans, 3.5% for FHA loans, and potentially 0% for VA loans, applicable to both property types.

The significant divergence appears in the insurance domain: a single-family home generally requires a standard homeowners insurance policy, whereas owning a duplex in Florida necessitates both a homeowners policy and a rental property policy, reflecting the dual nature of residing in one unit and renting out the other.

Why Should You Buy A Duplex As Your First Home?

You've got your sights set on a duplex or a multifamily home, so you're saving and preparing for your first home purchase.

That's great, but before you start house hunting, here are some things you should know about buying a duplex as a first home and why it is worth considering.

By purchasing a duplex, you'll get something as close to a turnkey investment property as you're likely to find without buying one. A duplex offers the chance to live in one part of the property while renting out the other.

It's a great way to build equity without taking on the risks and hassles of being a landlord. You can also build your real estate portfolio by using the cash flow from your tenant to cover down payment costs on your next investment property.

Duplexes and other multi-family homes can be great investments, primarily if they are located in areas with good rental demand or high property appreciation rates.

Some people buy duplexes because they are cheaper than single-family homes in the area, while others prefer living in half of the building and collecting rent from tenants who live in the other unit.

But if you're buying a duplex for the first time, you should consider some potential pitfalls before your final decision.

It's more accessible to qualify for a mortgage on a duplex than on a single-family home because lenders consider future rental income when determining your debt-to-income ratio.

That means you can use the rent from the second unit to help qualify for more significant loan limits. This can be a massive advantage in high-cost areas with relatively higher conforming loan limits.

Top Factors to Consider Before Buying a Duplex

If you're looking for a first home, you've probably come across house-hunting advice recommending buying a duplex—a property with two units—and living in one while renting the other. You're paying your mortgage instead of your landlord's.

And when you think of it like that, it makes financial sense. But there's much more to consider before signing on the dotted line.

Here are some common factors to keep in mind.

Are you ready for the investment?

First, buying property is a considerable commitment—the biggest many people will ever make. The process is fraught with responsibility and risk, so proceed with caution.

It's important to know what kind of neighbor you are and what kind of landlord you'll be. Are you someone who likes your privacy & space?

Can you handle a tenant who has loud parties while you're trying to sleep? Do you want to allow pets or smokers? Can you deal with having an apartment turned over every year?

If not, maybe consider buying a duplex and renting one side for now or buying a single-family home because it will likely have fewer responsibilities and distractions.

Did you check Florida duplex mortgage limits?

If you're considering buying a duplex, your lender's loan limits are worth looking into. A loan limit is the maximum amount of money you can borrow with a mortgage or home equity loan, and the Federal Housing Finance Agency (FHFA) sets them.

These limits are based on the county in which you live and its corresponding median home price. Because these limits apply to both primary residences and second homes, many first-time homebuyers use them as a tool for affordability.

In Miami-Dade County, Florida, the 2024 FHA loan limit for a single-family home is $621,000. But if you're looking for a duplex, you can secure a loan of up to $795,000 – that's 28% more borrowing power compared to a single-family home in the same area!

Remember, these are just examples – the difference in loan limits for single-family and multi-unit properties can vary significantly depending on the specific county you're interested in within Florida.

Do you have the skills and knowledge to invest in real estate?

Even if you rent out the other unit, plenty of work will likely be required on your end to maintain your investment. You must determine reasonable rents, manage tenant expectations and complaints, and more.

What is your financial state?

Before you buy a duplex to make extra money, consider whether you'll have sufficient funds to cover the mortgage and other expenses while also taking care of your living expenses.

If the other unit is vacant for some time or your renters pay late or not, you may need extra cash to cover your mortgage payments until everything is sorted out. How much do you have in savings?

You'll also need money for down payments and closing costs. Remember that there are tax implications when you do this. Buying a duplex can be an excellent way to build wealth if all is well and your finances are in order.

Of course, if things don't go as planned and nobody rents out the other half of your property for several months (or worse—you find yourself with problem tenants), this can be pretty expensive for you.

Can you handle being a landlord?

It's essential to think about what responsibilities you're ready to take on at this point in your life.

Owning an investment property is one thing; it's another when those tenants share walls with you. You'll want to ensure the two sides of the duplex are well-separated.

If you feel like you can manage the maintenance of two homes, that's great! But if not, this may not be the right time for you.

Talk with friends, family members, and professionals about all aspects of homeownership and determine whether it will suit your lifestyle at this time.

Occupancy - who will live in the Duplex?

And then there are questions about who will live in the other unit: Will it be a family member or a friend? A tenant who pays the rent?

An Airbnb customer who needs a place for just a few nights at a time? What kind of income can you expect from each of these options?

Space

If you have decided to invest and move into your duplex apartment, it's vital to consider the space you need. Also, consider whether your lifestyle is likely affected by residing above or below your tenants.

Finally, you'll also have to identify whether the apartment has sufficient space for your unit and a separate duplex unit.

Consult a professional realtor

Ultimately, it's easy to feel overwhelmed by all these variables—that's why it helps to have an experienced real estate agent on your team.

A good realtor can answer all these questions as well as others.

Pros of Buying a Duplex

Finding the ideal affordable house might be tricky if you're a prospective homebuyer on a tight budget. You might wonder if buying a duplex is an excellent first home choice as you look at properties.

Consider these pros before buying a duplex as your first home.

You can live in one unit & rent out the other

Living in one unit and renting out the other is the most significant benefit.

As long as you don't pay more than 80 percent of market value for your Duplex, you should be able to cover your mortgage payment with rental income from the other unit, making this a rare opportunity for renters to turn their housing expense into an investment.

You can use the rental income to help pay for the home

A duplex can be an excellent investment, especially if you look toward future rental income. One of the biggest is that renting out part of it can help pay the mortgage, property taxes, and other expenses.

It can also be an affordable way to enter a neighborhood housing market that may otherwise be beyond your means.

If you're having trouble qualifying for a conventional loan—a common issue for first-time home buyers—rental income could be the key to crossing the threshold.

And it's not just lower mortgage payments that make duplexes an attractive option for those who want to keep their housing costs low. There's also the potential to offset your monthly costs by renting out one side of your Duplex while you live on the other.

This strategy is particularly effective in expensive markets, where rents and incomes are disproportionately large. All you need is to find someone looking for a nearby place willing to pay rent and get along with your neighbors.

Cheaper than conventional (equivalent) single-family homes

Duplexes are typically cheaper than equivalent single-family homes.

Because they're essentially two units under one roof, you can purchase at a lower price per square foot than two separate apartments or houses.

Qualification of mortgage

With an investment property, lenders generally approve higher loan amounts based on potential rental income rather than your income (as long as you have enough money for a down payment).

This means you can buy something more significant and nicer than you could otherwise afford.

Rental income can help you qualify for larger loan limits

Many think buying a duplex instead of a single-family home is too risky. But it can be far less risky than you think!

One of the biggest advantages of buying a duplex as your first home is using future rental income from one or both units to qualify for larger loan limits. This means you'll be able to buy more houses for less money, making it an excellent investment opportunity.

According to Fannie Mae, 75 % of the potential rental income can offset mortgage debt-to-income ratios.

There are rules around how much you can rent out a home before you start looking like an investor rather than an owner-occupant, but these rules are not too onerous. It would help if you showed that you intend to live in the unit as your primary residence for at least 12 months.

Investment property tax breaks benefits

You'll have access to tax breaks on your investment property.

You can deduct any interest paid on your mortgage from your federal taxes and write off depreciation (decline in value), insurance, and repairs against the income you earn from renting out part.

You make money

It's pretty simple: Your mortgage will be covered or exceeded if you buy a duplex and rent the other side. If you're paying that much for your house payment, why not jump at the opportunity to get some of it back? Have you ever rented an apartment? That check that comes to you is nice.

The fact is that some people don't care about owning their place and would rather rent than buy. That's OK—there will always be someone out there who wants to rent. And it doesn't matter if they're a friend, relative, or someone you found through an online posting service.

Gain equity

There are no hassles with selling in the future. Like other homeowners, you can add value to your investment over time by repairing and upgrading the property.

You'll also benefit from home price appreciation in your neighborhood—which could increase faster than inflation if you live in an area with desirable job growth or other attributes that attract new residents yearly.

Whether you want to move on to a new home in five years or retire in 15, selling a duplex is no more difficult than selling any other single-family home.

You might even have an advantage in that already-established relationship with the tenants who would love to continue living there!

Cons of Buying a Duplex

There are multiple benefits to purchasing a duplex, but some potential downsides.

Most banks require at least 5 percent down or more, which might not be easy for you to develop as a first-time homebuyer.

You will most likely need to take out two mortgages—one for each unit—which can be difficult even for established homeowners who know the market well and what's in store for them day-to-day.

If you're considering buying a duplex as an investment property and renting out both units, remember that these homes are more expensive than single-family homes and require more maintenance and repairs.

Duplexes also often require extensive repairs and upkeep. This can pile up quickly when considering it's not just one house but two units that need your attention!

The cost of a major repair on one unit could easily bankrupt someone who doesn't have any money saved up beforehand.

The rent from your tenants may not cover all of your mortgage, taxes, and insurance payments, especially if you buy in an area where rents are very low or if mortgage rates rise significantly after you buy.

If that happens, you may have to come up with extra money.

Preparing for Landlord Duties with a Florida Duplex

Renting out half of a duplex in Florida entails unique preparations beyond the usual first-time homebuying process.

In Florida, it's essential to familiarize yourself with the state-specific landlord-tenant laws to understand your legal obligations and any potential rent control measures. Additionally, a thorough market analysis is crucial to determine competitive rental prices in your area.

As a future landlord in Florida, you'll need to prepare various documents for prospective tenants. These should include forms for credit checks, background checks, income verification, rental history, and personal references.

Another critical step is creating a detailed inspection form. This form is used to record the condition of the rental unit both at the start and end of a tenancy.

Conduct a comprehensive walk-through with your tenant during move-in and move-out to complete this form.

For added protection and clarity, taking time-stamped photos of the unit's condition at these times is advisable. These records are invaluable for tracking any changes or damages during the rental period.

Frequently Asked Questions About Buying a Duplex in Florida

Is Buying a Duplex in Florida a Wise Financial Decision for First-Time Homebuyers?

Buying a duplex in Florida can be a smart financial move for first-time homebuyers. It offers the chance to live in one unit while generating rental income from the other, potentially covering a significant portion of the mortgage and other ownership expenses.

However, it's essential to consider factors like the local real estate market, rental demand, and your readiness to take on landlord responsibilities.

What Are the Key Differences in Financing a Duplex Compared to a Single-Family Home in Florida?

Financing a duplex in Florida often requires qualifications similar to those of a single-family home, like credit scores and down payment percentages.

The unique advantage of a duplex is that lenders may consider potential rental income, which can help qualify for a higher loan amount. This aspect is particularly beneficial in areas with higher property values.

How Does Being a Landlord of a Duplex Differ From Owning a Single-Family Rental Property?

As a landlord of a duplex in Florida, you'll live close to your tenants, which can offer convenience for property management but may also require setting clear boundaries and expectations.

You'll need to proactively maintain the property and manage tenant relationships, which might be more hands-on than a single-family rental property.

What Insurance Requirements Are Specific to Duplex Owners in Florida?

Duplex owners in Florida must secure homeowner's insurance for their living unit and landlord insurance for the rental unit.

This dual insurance requirement is essential to protect against potential property damage and liability issues arising from renting out part of the property.

Can Rental Income from a Duplex Offset the Higher Costs of Insurance and Maintenance?

Yes, the rental income from a duplex can help offset the higher costs associated with owning and maintaining a duplex, such as increased insurance premiums and potential repairs for both units.

However, conducting a thorough financial analysis is crucial to ensure that the rental income will sufficiently cover these additional expenses.

What Should Potential Duplex Buyers in Florida Know About Market Analysis?

Conducting a market analysis is crucial for potential duplex buyers in Florida.

This analysis should include researching rental rates, understanding the demand for rental properties in the area, and evaluating the local real estate market trends.

This information will help set competitive rent prices and assess the investment's viability.

How Important Is Understanding Florida's Landlord-Tenant Laws When Owning a Duplex?

Understanding Florida's landlord-tenant laws is vital for anyone considering buying a duplex.

These laws govern the responsibilities and rights of both landlords and tenants, including aspects like rent control, lease agreements, and eviction procedures.

Being well-versed in these laws can help prevent legal issues and ensure a smooth landlord-tenant relationship.

The Bottom Line: Investing in a Duplex in Florida

Investing in a duplex in Florida can be a smart and lucrative move for first-time homebuyers, blending the appeal of a single-family property with the added benefit of an income-generating unit.

The potential to offset mortgage costs with rental income presents a unique opportunity to grow assets and build equity, making it an attractive option for those entering the housing market.

However, this venture requires careful consideration beyond the allure of financial savings.

The appeal of a duplex, particularly in Florida's varied and dynamic housing market, lies in its flexibility and the potential for significant financial rewards.

Yet, weighing these benefits against the responsibilities and challenges of owning and managing such a property is important.

In summary, while a duplex can be a wise investment and an excellent stepping stone to real estate ownership, it demands a comprehensive understanding of the market, a readiness for property management obligations, and a clear assessment of personal financial stability.

Considering these factors, buying a duplex in Florida could be a golden opportunity for the right buyer.