Why buy a fourplex??

Question

Brent Coombs · Answer

Er, because, they cost $800k, (whereas a whole duplex only costs $250k)!...

Adam Webb · Answer

super helpful thanks everyone. So assuming those numbers are correct you wouldn’t buy a fourplex.

@Josh E.

Here’s the last two fourplexes I saw. Maybe I just need to keep looking till a better deal comes up!

$809k

Built 1965

4800 sq ft.

$565k

Built 1977

3600 sq ft.

Josh E. · Answer

@Adam Webb Are you talking about duplexes and 4plexes in Utah county?  It seems the only 4plexes for 800k are new construction, which is very different than the duplexes in the 250k range that are definitely in the older category.  It skews it a little bit when you are comparing apples to oranges due to future expected maintenance costs.

It seems the new construction duplexes are at about 480k, thus making the 800k for a 4 plex easier to understand due to the economies of scale mentioned earlier.

There are older 4 plexes similar to the age of the duplexes you mentioned that will sell for anywhere from 450k - 550k, which seems about right.  So it will just depend on the type of property you are looking for - older with a little more expected maintenance?  Or brand new with a more hands off approach with the hope for more appreciation?

Brent Coombs · Answer

@Adam Webb, owner-occupier buyers (who can get favorable low deposit, low interest loans) obviously prefer the idea of getting 3x incomes to help with their mortgage, instead of just 1x. [So in effect, blame it on those Lenders]. But I agree with you, all else being equal (condition/location), the supply and demand looks to be way out of whack there. So if you're a pure investor, you'd be so right to go for those much-cheaper-per-door duplexes! Good luck...

Terry Lao · Answer

@Adam Webb

Looks like it depends on your market. In Las Vegas, duplexes go for $150-180k, and 4plexes go for $280-400k. It is all about cashflow, and 4plexes in general get better cashflow due to economies of scale.

However, in your market, it looks like 500k vs. 800k. That difference of 300k is a no brainer.

Is this Provo, Utah, market?

Terry

Omar Khan · Answer

@Adam Webb Without knowing the details of your market, if there is such a wide disparity, you are better engaging in a simple arbitrage trade (as you've pointed out) and buying duplexes all day long.

There are always other factors at play like neighborhood, vintage, market preferences and other factors.