{"id":153546,"date":"2023-06-01T07:00:00","date_gmt":"2023-06-01T13:00:00","guid":{"rendered":"https:\/\/www.biggerpockets.com\/blog\/?p=153546"},"modified":"2023-08-26T01:18:48","modified_gmt":"2023-08-26T07:18:48","slug":"investing-in-a-fourplex","status":"publish","type":"post","link":"https:\/\/www.biggerpockets.com\/blog\/investing-in-a-fourplex","title":{"rendered":"Investing in a Fourplex: Pros, Cons, &amp; Tips For Investors"},"content":{"rendered":"\n\n      <iframe loading=\"lazy\" frameborder=\"0\" height=\"200\" scrolling=\"no\" src=\"https:\/\/playlist.megaphone.fm\/?e=BIGPOC1808355096\" width=\"100%\"><\/iframe>\r\n  \n\n\n\n\n<p class=\"wp-block-paragraph\">A fourplex may be a good place to start if you&#8217;re considering testing the waters as a residential real estate investor. It&#8217;s also a sound investment for the first-time homebuyer, as you can live in one of the fourplex units and rent the others\u2014your tenants pay the mortgage. If you want it strictly as an investment property, that&#8217;s not a problem, although it may limit some attractive financing options.<\/p>\n\n\n\n<h2 class=\"wp-block-heading\">What Is a Fourplex?<\/h2>\n\n\n\n<p class=\"wp-block-paragraph\">A fourplex is a multifamily home with four separate units under one roof. You may also hear it referred to as a quadplex. Each unit has its own entrance. Some fourplexes include a common building entrance with separate interior entrances for each unit. The units are either side-by-side or stacked on top of each other.<\/p>\n\n\n\n<p class=\"wp-block-paragraph\">From the street, a common entrance quadplex may resemble a large, single-family home.&nbsp;<\/p>\n\n\n\n<h2 class=\"wp-block-heading\">Fourplex Investing Pros<\/h2>\n\n\n\n<p class=\"wp-block-paragraph\">There are plenty of reasons to invest in a fourplex. Here are some of the best:<\/p>\n\n\n\n<h3 class=\"wp-block-heading\">Additional cash flow potential<\/h3>\n\n\n\n<p class=\"wp-block-paragraph\">If you&#8217;re looking for cash flow, a fourplex represents a better deal than two-to-three-unit properties. Each unit represents an income stream.&nbsp;<\/p>\n\n\n\n<h3 class=\"wp-block-heading\">Favorable financing<\/h3>\n\n\n\n<p class=\"wp-block-paragraph\">Quintplex isn&#8217;t a term used by most real estate investors. That&#8217;s because once a multifamily building surpasses four units, it&#8217;s considered a commercial, not residential, property. That makes financing for fourplexes more favorable, as you can obtain a residential mortgage rather than the commercial loan necessary for five or more units.<\/p>\n\n\n\n<h3 class=\"wp-block-heading\">One mortgage for multiple doors<\/h3>\n\n\n\n<p class=\"wp-block-paragraph\">Buy several single-family homes as investments, and you&#8217;ll likely pay a separate mortgage for each property. If you live in your fourplex, you&#8217;ve got just one mortgage payment and property tax bill. Paperwork and recordkeeping are simpler.<\/p>\n\n\n\n<h3 class=\"wp-block-heading\">Economies of scale<\/h3>\n\n\n\n<p class=\"wp-block-paragraph\">Because you&#8217;ve got four units, you will pay less on expenses due to economies of scale. That&#8217;s true of insurance, lawn care, and snow plowing.<\/p>\n\n\n\n<h3 class=\"wp-block-heading\">Tax advantages<\/h3>\n\n\n\n<p class=\"wp-block-paragraph\">You&#8217;ll pay lower property taxes on a fourplex than if you purchased four separate rental properties. You may receive other tax breaks, such as real estate depreciation and investment tax deductions.<\/p>\n\n\n\n<h3 class=\"wp-block-heading\">Tenant loss is less impactful<\/h3>\n\n\n\n<p class=\"wp-block-paragraph\">When a tenant leaves, you lose money if the property remains vacant. However, if you are a duplex property owner and rent out one unit, you will lose all rental income if a tenant leaves. When one tenant leaves a fourplex, you still have rents coming in from two to three units, depending on whether you are an on-site owner.<\/p>\n\n\n\n<h2 class=\"wp-block-heading\">Fourplex Investing Cons<\/h2>\n\n\n\n<p class=\"wp-block-paragraph\">For all the pluses, there are still some reasons a fourplex isn&#8217;t suitable for every new investor. Think about whether you can handle the following before investing in a fourplex.<\/p>\n\n\n\n<h3 class=\"wp-block-heading\">Management responsibilities<\/h3>\n\n\n\n<p class=\"wp-block-paragraph\">It&#8217;s one thing for an investor to manage one or two other units themselves. A properly managed fourplex takes a lot more time and effort. If you don&#8217;t reside in one of the units, you deal with at least three and possibly four separate tenants. That manageability is one reason the fourplex is in far less demand than a duplex or triplex. Of course, managing a fourplex is still easier than caring for four separate single-family properties. Many investors hire a property management company to oversee their fourplex buildings.<\/p>\n\n\n\n<h3 class=\"wp-block-heading\">Harder to sell<\/h3>\n\n\n\n<p class=\"wp-block-paragraph\">Because there is less demand for a fourplex compared to duplex properties, it&#8217;s often harder for fourplex owners to sell when the time comes.<\/p>\n\n\n\n<h3 class=\"wp-block-heading\">Less privacy<\/h3>\n\n\n\n<p class=\"wp-block-paragraph\">If using one of the units as your dwelling, expect tenants to knock on your door when issues arise. Expect less privacy when you&#8217;re an on-site fourplex landlord. On the plus side, when repairs are needed, or emergencies happen, you&#8217;re right there rather than having to go to your rental. While you enjoy less privacy, you benefit from greater convenience.<\/p>\n\n\n\n<h3 class=\"wp-block-heading\">High tenant turnover<\/h3>\n\n\n\n<p class=\"wp-block-paragraph\">Fourplexes tend to have higher tenant turnover than single-family dwellings. For tenants, fourplex buildings tend to be starter living spaces. Many fourplex tenants wait until the single-family housing market becomes more attractive or save a large enough down payment to move.<\/p>\n\n\n\n<h2 class=\"wp-block-heading\">How To Find a Fourplex<\/h2>\n\n\n\n<p class=\"wp-block-paragraph\">Work with a local real estate agent or use the MLS to find available fourplexes. <a href=\"https:\/\/get.biggerpockets.com\/agent-finder-bd\/\" target=\"_blank\" rel=\"noreferrer noopener\">BiggerPockets agent finder<\/a> can match you with an investor-friendly agent specializing in multifamily property deals.<\/p>\n\n\n\n<p class=\"wp-block-paragraph\">If there is not a suitable inventory of fourplex living units in the local housing market you&#8217;re targeting, contact the owners of fourplexes in the area and ask them if they are considering selling. Find the owner by visiting the municipal tax assessor&#8217;s or the county recorder&#8217;s website. Information from the assessor will include current property taxes.<\/p>\n\n\n\n<h2 class=\"wp-block-heading\">Financing Your Fourplex<\/h2>\n\n\n\n<p class=\"wp-block-paragraph\">When it comes to financing, a fourplex holds several advantages. A fourplex does not meet the five-unit requirement for a commercial loan, so you can obtain a conventional residential loan with a 30-year fixed-rate mortgage for this investment.&nbsp;<\/p>\n\n\n\n<p class=\"wp-block-paragraph\">No matter the current interest rate environment, <a href=\"https:\/\/www.biggerpockets.com\/loans\" target=\"_blank\" rel=\"noreferrer noopener\">residential mortgages<\/a> have lower rates than commercial loans.<\/p>\n\n\n\n<h3 class=\"wp-block-heading\">FHA loans<\/h3>\n\n\n\n<p class=\"wp-block-paragraph\">Financing is even more advantageous when utilizing a <a href=\"https:\/\/www.biggerpockets.com\/glossary\/fha-loan\" target=\"_blank\" rel=\"noreferrer noopener\">Federal Housing Administration (FHA) loan<\/a>. The minimum down payment for an FHA loan is just 3.5 percent of the purchase price. Buyers may qualify with a lower credit score than conventional mortgages, at just 580. Purchasers with a credit score of 500 may qualify with a 10 percent down payment. Under FHA rules, you can buy a property with up to four units. A caveat is that you must live in one of the units.<\/p>\n\n\n\n<h3 class=\"wp-block-heading\">VA loans<\/h3>\n\n\n\n<p class=\"wp-block-paragraph\">Veterans can finance a fourplex with 0 percent down with a VA loan. Interest rates are also lower than with a conventional loan. However, while you can become a fourplex owner via a VA loan, you must reside in one of the units. A VA loan is available only for primary residences, not investment properties. A fourplex offers the best of both worlds.<\/p>\n\n\n\n<h2 class=\"wp-block-heading\">Can You Live In Your Fourplex and Still Generate Rental Income?<\/h2>\n\n\n\n<p class=\"wp-block-paragraph\">Yes, living in your fourplex and generating rental income from the other units is a prime reason for investing in this type of housing. Live in one unit as an on-site owner, and your tenants pay your mortgage. This arrangement makes a great <a href=\"https:\/\/www.biggerpockets.com\/real-estate-investing\/house-hacking-strategy\" target=\"_blank\" rel=\"noreferrer noopener\">house hack<\/a>.<\/p>\n\n\n\n<p class=\"wp-block-paragraph\">Do you have family or friends seeking a home but don&#8217;t want to share your dwelling space with them? A fourplex allows you to rent units to them without sharing your kitchen, living room, bathroom, or personal privacy. While under the same roof, walls and separate entrances allow for seclusion.&nbsp;<\/p>\n\n\n\n<h2 class=\"wp-block-heading\">Tips for Investors Interested in a Fourplex<\/h2>\n\n\n\n<p class=\"wp-block-paragraph\">If you\u2019re interested in a fourplex as your next investment property, here are a few tips to follow to ensure you\u2019re maximizing your cash flow:<\/p>\n\n\n\n<ul class=\"wp-block-list\">\n<li><strong>Find a good location:<\/strong> As with any real estate investment, the mantra of &#8220;location, location, location&#8221; holds sway. Look for quadplexes in safe neighborhoods with a strong job market, near shopping, recreational opportunities, and a good school system.<\/li>\n\n\n\n<li><strong>Determine how to handle utilities:<\/strong> Decide how you want to handle the utilities for each tenant. For example, a separate water meter for each unit billed to the tenant means they pay exactly what they owe. A separate bill means a separate, often steep base fee. If you pay the water bill as a landlord, there&#8217;s just one base fee, and you can divide water usage by four. You can raise the rent if water costs increase significantly. You&#8217;ll also have tenants saying they aren&#8217;t using more water, and the other tenants are at fault.<\/li>\n\n\n\n<li><strong>Carefully screen your tenants:<\/strong> Perform careful background checks for every tenant. While you would certainly do that with people you don&#8217;t know, it may prove a delicate subject if one or more of your potential tenants is a friend or relative. You may know that there is no criminal or eviction history, but you may not know whether that person pays their bills. A credit check report reveals their credit score, much of which is determined by timely bill payments. You don&#8217;t want to worry about whether a tenant will pay their monthly rent.<\/li>\n<\/ul>\n\n\n\n<h2 class=\"wp-block-heading\">Is a Fourplex Right for You?<\/h2>\n\n\n\n<p class=\"wp-block-paragraph\">Is a fourplex a good investment for you? Much will depend on whether you live in one of the units or are an absentee investor. For the latter, a good property manager is almost always a necessity.&nbsp;<\/p>\n\n\n\n<p class=\"wp-block-paragraph\">Consider a fourplex if you&#8217;re just getting started in real estate investing. Along with attractive financing choices for fourplex buyers, such a purchase offers hands-on experience with property management. You might find this is right up your alley or that you are better suited to a more passive investment. It&#8217;s an opportunity to learn more about real estate investing and yourself.&nbsp;<\/p>\n\n\n\n    \n  <div id=\"visibility-group-block_707254da3a1b081a54a6bfd8e05db565\" class=\"visibility-group alignwide  hidden\">\n        \n\n<div id=\"hero-block_b38dc4c4fe1175972640f85d22199504\" class=\"first:mt-0 hero-block py-4  alignwide   has-background has-slate-200-background-color has-text-color has-theme-gold-color\">\n    <div\n        class=\"gap-10 lg:gap-20 flex flex-wrap lg:flex-nowrap max-w-screen-xl mx-auto px-4 relative lg:items-center \">\n\n        <div class=\"relative z-30 lg:w-1\/2 \">\n            <main class=\"py-4\">\n                \n\n<p class=\"has-slate-800-color has-text-color has-large-font-size wp-block-paragraph\" style=\"font-style:normal;font-weight:800\">Find the Right Agent, Close the Best Deal<\/p>\n\n\n\n<p class=\"my-3 md:my-5 lg:my-8 has-slate-900-color has-text-color wp-block-paragraph\" style=\"font-size:18px\">Step #1: Use Agent Finder to match with top <em><strong>investor-friendly<\/strong><\/em> real estate agents to help you find, analyze, and close your next deal.<\/p>\n\n\n\n<div id=button-custom-event-block_c650531bea3619af0b96e7cb13216823 class='button-custom-event'>\n      <a\n    href=\"https:\/\/www.biggerpockets.com\/agent\/match\"\n        x-on:click=\"window.analytics.track('Blog Block | B2C Marketplace Agent Finder', {\n      referrer: 'https:\/\/www.biggerpockets.com\/blog\/investing-in-a-fourplex',\n    });\"\n    class=\" btn-shape inline-block no-underline has-background has-theme-blue-background-color has-text-color has-white-color\" target=\"_blank\">Find an Agent<\/a>\n  <\/div>\n\n            <\/main>\n        <\/div>\n\n                <div class=\"lg:w-1\/2 first:mt-0 relative h-full lg:flex lg:items-center\">\n            <img decoding=\"async\" class=\"object-cover w-full relative z-20 my-0  rounded-md hidden lg:block\" src=\"https:\/\/www.biggerpockets.com\/blog\/wp-content\/uploads\/2021\/08\/Marketplace-Blog-Blocks-Agent-v3.png\" alt=\"investor friendly real estate agent\" title=\"\">\n        <\/div>\n            <\/div>\n<\/div>\n\n  <\/div>\n  \n\n\n<div class=\"wp-block-group\"><div class=\"wp-block-group__inner-container is-layout-constrained wp-block-group-is-layout-constrained\">\n    \n  <div id=\"visibility-group-block_64dd31c79f00f\" class=\"visibility-group  \">\n        \n\n<div style=\"height:10px\" aria-hidden=\"true\" class=\"wp-block-spacer\"><\/div>\n\n\n\n<div id=\"hero-block_64dd2875dba9d\" class=\"first:mt-0 hero-block py-4    has-background has-slate-100-background-color has-text-color has-theme-slate-color\">\n    <div\n        class=\" flex flex-wrap lg:flex-nowrap max-w-screen-xl mx-auto px-4 relative lg:items-center \">\n\n        <div class=\"relative z-30 w-full \">\n            <main class=\"py-4\">\n                \n\n<h3 class=\"wp-block-heading my-0 tracking-tight font-extrabold has-theme-slate-dark-color has-text-color has-large-font-size\">Join the community<\/h3>\n\n\n\n<p class=\"my-3 md:my-5 lg:my-8 has-theme-slate-color has-text-color wp-block-paragraph\" style=\"font-size:16px;font-style:normal;font-weight:400\">Ready to succeed in real estate investing? Create a free BiggerPockets account to learn about investment strategies; ask questions and get answers from our community of +2 million members; connect with investor-friendly agents; and so much more. <\/p>\n\n\n\n<div id=button-custom-event-block_64dd2888dba9e class='button-custom-event'>\n      <a\n    href=\"https:\/\/www.biggerpockets.com\/signup\"\n        x-on:click=\"window.analytics.track('Blog Block | Acquisition | Free Membership Signup', {\n      referrer: 'https:\/\/www.biggerpockets.com\/blog\/investing-in-a-fourplex',\n    });\"\n    class=\" btn-shape inline-block no-underline has-background has-theme-blue-background-color has-text-color has-white-color\" target=\"_blank\">Sign Up<\/a>\n  <\/div>\n\n            <\/main>\n        <\/div>\n\n            <\/div>\n<\/div>\n\n\n<div style=\"height:10px\" aria-hidden=\"true\" class=\"wp-block-spacer\"><\/div>\n\n\n  <\/div>\n  <\/div><\/div>\n","protected":false},"excerpt":{"rendered":"<p>A fourplex may be a good place to start if you&#8217;re considering testing the waters as a residential real estate investor<\/p>\n","protected":false},"author":613668,"featured_media":153552,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"_acf_changed":false,"footnotes":""},"categories":[7357,7119],"tags":[],"class_list":["post-153546","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-multifamily-real-estate-investing","category-biggerpockets-daily"],"acf":[],"comment_count":0,"_links":{"self":[{"href":"https:\/\/www.biggerpockets.com\/blog\/wp-json\/wp\/v2\/posts\/153546","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.biggerpockets.com\/blog\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.biggerpockets.com\/blog\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.biggerpockets.com\/blog\/wp-json\/wp\/v2\/users\/613668"}],"replies":[{"embeddable":true,"href":"https:\/\/www.biggerpockets.com\/blog\/wp-json\/wp\/v2\/comments?post=153546"}],"version-history":[{"count":0,"href":"https:\/\/www.biggerpockets.com\/blog\/wp-json\/wp\/v2\/posts\/153546\/revisions"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/www.biggerpockets.com\/blog\/wp-json\/wp\/v2\/media\/153552"}],"wp:attachment":[{"href":"https:\/\/www.biggerpockets.com\/blog\/wp-json\/wp\/v2\/media?parent=153546"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.biggerpockets.com\/blog\/wp-json\/wp\/v2\/categories?post=153546"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.biggerpockets.com\/blog\/wp-json\/wp\/v2\/tags?post=153546"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}