I met with a seasoned real estate investor and he said ditch the duplex, go for the fourplex.

12 Replies

So I am just about to buy my first property. Let's go back a second and say that I am prepared to buy but haven't found Mrs. right yet. I have looked at a few duplexes and got a chance to hang out with a client of mine who flips houses and has done buy and hold in the past. He gave me the advice of staying away from the duplex because it wouldn't cover my expenses if something happened with the other side (I will be doing the FHA 3.5% down and live in for a year). I understand what he is saying that a fourplex is more "safe," but in the end is a duplex that much of a bigger risk than a triplex or a fourplex? Any advice is definitely welcome!

The same could be said for a 100 unit deal.  More units the lower the impact on your occupancy when you have people move.  I'd say do the deal you are comfortable with and then keep moving on.  Don't over think it.  Use the calculators they have here (BP) to make sure you are in at a good basis.  Thats really the biggest mistake people make.  I'm sorry but sellers, realtors and anyone on the other side of the equation LIE.  Do your math and you will be fine.

4 plx opportunity looks better because you will be "losing" only 25% of income living there. And it is more reasonable to buy better quality as this is your chance to get potential higher equity with 3.5% down - you are "buying" cashflow today and potential equity in the future and a headache of course :))) so all three parameters are better with a better quality 4 plx, risk is higher though but in my experience better quality small Multi Families are appreciating better. My opinion is valid only for stable markets. I would not do over-leverage on markets which have done -70% dive in 2007 -2008

@Michael Williams I agree with you, there is always risk in anything and I appreciate the advice. I think it definitely did help me think a bit about which way I wanted to go. 

@Jane A. I appreciate your opinion. I am in the Minneapolis area and even though the price did drop steeply during the 2007-2008 dive I don't think it was a 70% drop. I also agree that it is less of a risk at 25%.

Either way I agree I should go with what's best after analyzing the best deal. It's just me as a single person so living in one unit for a year like that would be ok with me. The fourplex I'm looking at is about 937 square feet per unit, they are 2 bedroom and 1 bathroom. I wouldn't probably get a roommate, just would use one room as an office. Thanks for the input!

Daniel O. Sounds like exciting times in your neck of the woods! I'm assuming he told you to get a quad because your FHA loan will allow you to buy up to a quadplex, otherwise it would be considered commercial. It makes sense in theory that 4 streams of revenue are better than one. As far as more risk is concerned ...4 streams of income can become 4 possible liabilities if you aren't prepared to handle the larger property. If you can afford the maintenance of a bigger property, maintain occupancy, and will be getting a better ROI vs having a duplex I say go for it. I'll be rooting for you here in Orlando!

It is exciting times for sure @Jeff Joachim ! I'm very excited to be able to share my success story someday! I agree with you there, the nice thing with how I am positioned is I have a really good friend who has a property management company and will give me great rates, so that will be handled by them. Hopefully that will keep me out of most of the issues. I will definitely have reserve cash if issues arise, but if I do indeed get a duplex I will make sure that everything is updated so the risk is hopefully lower due to my diligence. I understand unexpected things happen but I'm preparing myself as much as I can. Thanks for rooting for me! I'm sure I will be wishing I was down there come November! 

Daniel O.

Welcome to BP.

Go for 4 unit because your cash flow will be better. You could still qualify for FHA 3.5% down and enjoy a decent cash flow.

In most markets, it's much easier to find a duplex vs fourplex (4 unit), there is a reason for it as 4 unit gives you more cash flow vs duplex while having a FHA 3.5% down loan.

Someone had motioned if you buy 100 units, there will be more cash flow, well it's understood more units means more cash flow, however you can't enjoy 96.5% LTV, fixed for 30 years.

Hope it helps.

James Syed, Real Estate Agent in IL (#471018522)

Its still about the cash flow and the numbers.  It still depends on how much cash you will be flowing and what you can afford to put down on either the duplex or the four plex.    


I'd reccomend you give investing in duplexes, triplexes and quadplexes by larry b loftis.  He goes into more depth than just cashflow. In case you don't, to summarize you can live in flip the quad easier because it makes the numbers easier to work. You rehab your current unit. When a tenant leaves you move in to the unoccupied unit, rent out your old unit and rehab the new one and so forth.  Force appreciation, refi out of fha and use fha on another property.  You just keep building inventory while working your job and building wealth.  While he does emphasize Quads, trips and then duplexes as long as the numbers work for YOU.  So even if it's your first and your mortgage just gets paid by someone else, then cool.  Make the next deal a cashflow king because you have more experience now. But I would still the read book since his advice is still pretty solid.

Hi Daniel,

We prefer 4 units if we can find them- one roof, 4 streams of income!  We look at any property that is 2-4 units and do not live in any of them.  Typically, we can't find a duplex that will cash flow like the 3 and 4 units, sellers tend to ask for a higher price per unit on the duplexes so the numbers just aren't as good.  That being said, we are currently under contract on a duplex- we got a good price on it, the leases were almost up, and rents were below market rates.

Long term, it will be likely easier to sell a duplex than a 3 or 4 unit to a buyer who plans to owner occupy it.  Duplexes I think will appreciate at a higher rate (probably why the prices are higher compared to the 3 and 4's in our market).  You would have less tenants to manage and get along with, but when the unit is empty you have no other income stream...


Daniel O.

 A 4-plex makes more sense, but there are two barriers. One, fourplexes are going to cost more than a duplex. Depending on your available income and debt to income, you may not qualify for many of them. 

The other issue is finding them. There are very few on the MLS in the Twin Cities. In a decent, not great, area you're looking at $300k to start.

If the deals are equal it's better to go with a fourplex, you'll make more and have less risk since the income and expenses are now diversified. Plus you'll get more exposure to managing tenants, and you can still do the FHA loan with a fourplex. If I could find an affordable fourplex in Atlanta that's not in an awful location I'd be all over it.

Wow! Thank you all for such great advice! I really appreciate the wonderful feedback from the BP community. @David S. I will be able to afford the fourplex first and I think in the end equity is more important for me right now starting off so I'll be looking at a couple of these in the next week, thanks for the solid advice. 

Again, I appreciate all the feedback, most would agree four income streams are better than two. It also helps if I don't have to find a roommate if I'm living in one unit of four rather than one unit of two. 

In the end it will come down to if the numbers work, I will go for the best solution with the best cash flow as @Kelly N. and others mentioned. This is good information to know because I think taking advantage of the FHA with more units just makes sense if the numbers do as well.

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