There are many advantages to living in a duplex as a landlord — you get help from tenants in paying your mortgage and you have lower insurance costs. But there are also several disadvantages. Think about whether you want to live in close proximity to your tenants indefinitely, and keep in mind that not all improvements are tax-deductible.
Improvements made to a single-family home that you live in are not tax-deductible. Renovations made to an investment property are tax-deductible. If you live in a duplex as a landlord, it's mix of these two: any improvements made to the rental unit are tax deductible, but any made on the unit you inhabit are not. And if a renovation involves both units (like repainting the entire exterior), you can only deduct half the cost for tax purposes.
Sharing the Property
Living as a landlord in a duplex means that you will have to share some common areas with the other tenants, like the front lawn, backyard or basement. If you are accustomed to living in a single-family home where the entire property was your own, this sharing may feel uncomfortable initially.
Some tenants who live in your property may feel that they have the right to complain to you about problems with their home whenever they want. Although this may initially seem like a good thing (you may be able to nip serious problems in the bud before they get out of control, like structural damage or mold), if the tenants tend to complain constantly, it can feel intrusive.
Deterrent to Prospective Tenants
Some renters who are ideal — who live peacefully, take care of the property and maintain good relations with you and nearby neighbors — may dislike the idea of living so close to their landlord. They may think that you will be nosy, or that you want them to be completely silent at all times. Such close proximity may deter prospective renters who would otherwise be good tenants.