Buying a Duplex in Durango: Live in One Unit, Rent the Others

Yes, you can buy a duplex, triplex or fourplex in Durango, live in one unit and rent out the others, and finance it as your own home instead of as an investment property. That usually means more loan choices and easier qualifying than buying a rental outright. Investors call it “house hacking.” I call it one of the most practical ways to get into real estate in a town where rent and home prices both run high.

Here is how it works, which loans fit, and what to watch for in La Plata County.

[Video: Peter’s 90-second take]

How does buying a 2-4 unit home as your primary residence work?

When you live in one of the units, the whole building counts as your primary residence. Conventional, FHA and VA loans all allow homes with up to four units as long as you occupy one of them. A few things set these loans apart from a single-family purchase:

• The rent can help you qualify. Rent from the other units can often be counted as income, based on existing leases or the appraiser’s estimate of market rent. Each loan program has its own rules for how much counts.
• You have to actually live there. You sign an occupancy statement at closing. FHA, for example, expects you to move in within 60 days and live there for at least a year.
• The appraisal is different. The appraiser looks at the building as a small income property as well as a home, including a rent estimate for each unit.

FHA, VA or conventional: which loan fits a duplex?

• FHA: more flexible credit, which helps many first-time buyers. Three- and four-unit buildings must also pass a “self-sufficiency” test, meaning the rent has to cover the full housing payment. More on FHA loans in Durango.
• VA: eligible veterans and service members can buy up to four units if they live in one. See VA loans.
• Conventional (Fannie Mae and Freddie Mac): often the best fit with stronger credit, and mortgage insurance can come off once you have enough equity.

The right answer depends on your credit, your savings and the building. I’ll run all three side by side so you can see the trade-offs in real numbers.

Can I buy a rental in my LLC?

Fannie Mae and Freddie Mac loans are made to people, not companies. If you want the property owned by your LLC from day one, that is usually a DSCR loan, which qualifies on the property’s rent instead of your personal income. It’s doable, but it typically costs more than a Fannie or Freddie loan. If you’re thinking about deeding a financed property into an LLC later, talk with your attorney and me first, because your mortgage and title insurance both matter. My investment property loans page covers loans for homes you won’t live in.

What’s different about duplexes in Durango and La Plata County?

• Not many come up for sale. Duplexes and small multi-unit homes are a small slice of what’s listed in Durango, Bayfield, Cortez and Pagosa Springs, so have your pre-approval ready before one hits the market.
• Long-term vs. vacation rental rules. The City of Durango and La Plata County each have their own vacation rental rules and permits. Plan your numbers on long-term rent unless you’ve confirmed a unit can legally be a vacation rental and the lender will count that income.
• Older buildings. Many small multi-unit homes here are older. Check whether the units have separate utility meters, and look closely at the roof, heating, plumbing and any shared well or septic system.
• Insurance. You’ll need a policy that covers the rented units, and wildfire risk can affect the cost in some parts of the county. Get a quote before you’re under contract.

Is buying a duplex a good idea?

It can be, with your eyes open. Your tenants live on the other side of the wall, repairs and vacancies are yours to cover, and fewer buyers shop for duplexes when it’s time to sell. On the plus side, the rent helps carry the cost, and you learn the landlord side with your own home as the first property. Before you make an offer, run the numbers with my free rental property calculator to see whether the rent covers the costs.

Questions people ask me

Can I count rent from the other units to qualify?

Often, yes. Lenders use current leases or the appraiser’s market rent estimate, and each loan program sets its own limits on how much of that rent counts. I’ll tell you exactly how your lender would treat it.

Can I move out later and keep the whole building as a rental?

You have to buy it intending to live there and meet your loan’s occupancy terms. After that, keeping it as a rental when your life changes is common. Moving out right after closing is not allowed.

Do I need landlord experience?

Not to buy a duplex you’ll live in, but some loan programs add extra requirements for first-time landlords, such as more savings in reserve. I’ll check which apply to you.

Thinking about a duplex?

Call or text me at 970-828-1610 and I’ll call you back the same day. Tell me about the property and I’ll compare FHA, VA and conventional for you. You can also see what price range fits your budget with my home price range tool, or read why buyers work with a local Durango mortgage lender.

Peter Pritchard

Sources: HUD Single Family Housing Policy Handbook 4000.1 (occupancy and three- to four-unit self-sufficiency); VA Lenders Handbook M26-7, Chapter 3 (multi-unit properties); Fannie Mae Selling Guide B2-1.1-01 (occupancy) and B3-3.1-08 (rental income).