Last year my wife and I just did exactly what you are thinking about. We bought a triplex in Ballard (renting two and living in the third). Duplexes around here go for at least $500k. So I am, also, interested in what areas you are looking in. We do have a low vacancy rate here, but you have to be careful.
From my experience I have the following a advice:
1. Take your time and make sure you know what you are getting into. We are renting our places for just under $1500. I question if $1500 is realistic for a $350k duplex with 2bed/1bath units. Make sure you know the market.
2. When we were looking the inventory was low and we were looking for a pretty specific place. You don’t want to be forced to buy a place in only the month of May. Figure out a way to do a month to month rent at your current palce. How long have you lived there? If it is longer than a year, talk to your current landlord, tell them what your situation is and ask what it would take to get out of a year lease at your leisure (with notice of course). From my experience open communication in that type of thing is a huge assets. It took us 9 months of looking before we could move in.
3. Aim for nicer neighborhoods. The areas yuppies want to live, this will allow you be a lot more selective with your tenants. We looked north of downtown. The other reason we only looked in that area was were familiar with this part of town and that is where I work.
4. Stay away from single family homes - For me SFHs didn't pencil out at all (at least when we were looking), and IMO don't make sense as rentals here in Seattle. People buy SFHs because they want the "American Dream" or that beautiful craftsman, and not because they want to save/make money.
5. You will need at least 20% down. If you don’t you will need a FHA loan with PMI. When we were looking annual PMI was about 1.2% of the loan amount which killed our numbers. They also have pretty strict requirements.
6. Don’t worry about kicking the tenants out. You have no idea going in if they are good tenants or not. Many sellers wait until one unit is open before putting it on the market anyways. This allows them to clean it up and have something solid to show without having to deal with the existing tenants. Buying an empty place, in my experience, was an advantage. I could ask what I wanted instead of what dealing with what the tenant was paying before, or raising the rent on them. Also, you can be selective with who you rent to.
7. I found that multifamilys that were purpose built as multifamily buildings were more attractive. Usually they are legal and do not have extra units added that they city doesn’t know about. The living spaces are more comfortable too. Also, from what I saw, less maintenance.
8. Start talking to a realtor and a lender right away. The lender will give you an idea of the rates and what you can get away with. Realtors are often pretty slimy and just want to make a sell. The smart ones will understand that you are looking for an investment and that if you are happy with the first one you will come back or refer your friends. We had a great one, if you need a recommendation I would be happy to share his information with you.
9. Put together your own spreadsheet calculator and include all the possible factors. Start running homes through it with reasonable numbers.
10. Most importantly do your numbers carefully. My criteria was that the place cash flowed when it was entirely rented out (assuming you are paying market rent for the unit you live in). Assume reasonable rents and factor in all your costs, I assumed 1 to 2 % of the houses value annually for maintenance (depending on condition), 5% vacancy, WSG, insurance, and taxes. Make sure if there are repairs needed that you have cash after the purchase to do them. I found that the 50/2 rule or the other rules out there didn’t work out so well here in Seattle. I think this is because the land value here is so high which throws off the ratios. These are just ball park estimates anyways. Do the numbers yourself.
Maybe a little long winded, but this is just my two cents. So far we are doing great. Rents are going up we have better deal than expected.
Good luck and be careful.