Is building a Duplex the best move as a first-time investor?

[Richard Roberts]

I've been on the hunt in this hot market I'm living in for a duplex. No one wants to sell (no surprise) and the one's who do won't accept FHA financing. I could switch to Conventional likely but both lending professionals suggested FHA as the rates are relatively low.

The issue I'm having is the duplexes that are for sale are hovering around $200k range. The ones who will accept FHA financing either need some work (outdated, paint, floors, etc), are in a bad area, or both. I don't mind the work but after talking to another realtor, he mentioned I could have one built for around the same price. After some investigation he has come up with a figure around $220k or above for a new construction.

He insists that I get into a single family home with multiple bedrooms and rent out the other rooms. I have no desire to have roommates as I had for 6 years. I also mentioned to him that with a single family home, I am *speculating* that the appreciation will rise in a single family home and this is my only source of equity. His argument for a duplex is that if I decide to move, I am "stuck" with a duplex that no one will buy and will have difficulty purchasing a new home in the area I move to.

First of all, I am not sure why I would ever want to sell (for a while at least). If I were to move, I was told by another lender that I could do some desirable financing. He said this is because of my equity I would have already in a duplex plus my side being rented out (when I leave) - if I were to buy another duplex or single family home.

Sorry for the long post but I guess my question is, for a first time investor, I have always been under the impression that a duplex is an ideal investment. Is this not the case? Has anything I stated above incorrect or based on speculation? Is he correct in his perspective? He could be right, the market could keep rising in this area and a single family home work out in the long run. I guess I just feel that this route limits me to any kind of cash-on-cash return. I am essentially committing to years of financing and hoping the market keeps rising.