First 4-Plex

10 Replies

BP Community,

I'm looking into purchasing a 4-Plex, Before this i have only delt in single family

The numbers make sense and the location i believe is a safe one with potential for growth.  From discussion with the listing agent there are 2 current 1 yr leases and 2 current 3 yr leases with 2+ years remaining.

My questions are what are some things to consider about a 4-plex that i may not have encountered with SFR?

How does the process of switching over leases from the current landlord to myself work?

I'm new to this, working towards my first fourplex deal and doing a lot of geeking out on all the details.  Here are some of the issues I've come across that might be new/unique to a 2-,3-, or 4-plex investor :

  • Landscaping, snow removal, litter cleanup : Ususally covered by owner.
  • Setting/increasing rents : Tenants are neighbors, so expect that they will talk to each other. I've heard it is best not to have any big discrepancies in rent.
  • Parenting: Disagreements between tenants about parking, noise, ??? need to be smoothed out.
  • Mortgages: Some terms might vary depending on number of units.
  • Timing: Showings/inspections/repairs take a lot longer to get scheduled and completed when all units are occupied.
  • Turnover: Some people report a higher turnover rate compared to SFH.
  • Maintenance: My observation is that n-plexes tend to be cheap and simple boxes built to do nothing but cash flow.  So maintenance costs should be lower.  OTOH, I've heard that tradespeople will sometimes try to jack up their rates on a MFH b/c you are an "investor" and must be very rich.
  • Tenants: My observations and others are that often fourplex dwellers are looking to escape the uptighness and rules of an apartment complex.  So expect things to be a little less tidy unles you really hold the line.
  • Resale:  MFH's are a less liquid asset.
  • Appreciation: A 2-4 unit MFH is said not to appreciate (or depreciate) as much as a SFH. I'm not so sure that's true in my current market, though.
  • Upkeep: With 4 times as many thingies (furnaces, appliances, toilets, countertops, ...) to break down or wear out, I'm imagining it might make sense to replace 4 at a time.  If one has (clearly) reached its useful service life, the other three are probably close to it.
  • Neighborhood: Seems like in my market, fourplexes come in clusters.  Makes it easy to compare sales prices and rents, but makes for a shabbier street appearance.

If anybody has more, I'd love to hear 'em.

Posting for the follow on comments. I am looking into finally get into REI by house hacking a multi family. I have my eye on a 4-plex. It has utilities payed by owner as well but that should be a plus instead of a negative. Means after you get it you can decrease the expenses by splitting the bill.

You don't have to transfer the tenants to your lease. In fact, it's against the law unless the tenants are willing to sign a new lease. The current lease transfers with the sale of the property. All you need is a short addendum that says you bought the property on (DATE) and that all parties will abide by the existing agreement. Make sure you are familiar with the agreement! Look for holes and be prepared to deal with violations that aren't covered by it.

You may want to get an estoppel certificate to ensure the terms are as presented.

@Nathan G. That is good advice! Luckily the 4 Plex I am looking at all the tenants are month to month with rent far below market value. If I decide to pursue it when I put it under contract I am going to make sure it says I can market for new tenants.
Originally posted by @Nathan G. :
@Collin Savunen you can let the current tenants know you intend to screen them and increase rent to market rate. Let the Seller know that if a tenant leaves, you want to take it over vacant and find your own tenants.

 That is brilliant. Thank you. Then either I start with a full lot of qualified tenants paying full price or a clean slate to bring in new tenants