All You Need To Know About a Fourplex

All You Need To Know About a Fourplex

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Investing in real estate is one way to build wealth. With the right assets and informed decisions, you can enjoy lower taxes, good returns on investment, and stable cash flow. Concurrently, you can even diversify your investments to reduce risk and losses.

A fourplex property is among the most valuable investment options for real estate investors. This investment is ideal for first-timers kickstarting their real estate investing. Moreover, this property is an excellent choice for straightforward management that generates significant cash flow.

While fourplexes are known for their rental advantage, there’s more to know about them. With various options in the real estate market, will investing in one be worthwhile?

Defining a Fourplex

A fourplex is also called a quadplex. It is a multi-family home with four living spaces and separate entrances. This property’s distinct characteristic is that each unit has its own roof and foundation, regardless of the structure.

The individual units may be constructed as multi-floor dwellings or built on separate floors. Some units may be a combination of both. Either way, standard fourplexes have private entrances, kitchens, bathrooms, and bedrooms for each residential space.

Fourplexes can be urban, historical, or newly-constructed properties. They are considered prime real estate investments and sell for higher amounts than single-family homes. Nonetheless, they are popular investment options due to the separate rental incomes they can generate—whether you occupy one unit or not.

Why Buying a Fourplex Is a Good Investment

Purchasing a fourplex can bring benefits beyond separate rental incomes. Here are the noteworthy advantages of investing in one:

Consistent cash flow

A fourplex investment can offer consistent cash flow opportunities similar to four single-family home properties—three if you occupy one unit. Three or four tenants can provide you with constant monthly payments, provided the property sits in an area with high rental demands.

Despite possessing four units, some people may not consider fourplexes because they think these properties aren’t worth as much as other choices, such as condos and single-family homes. Since they have this notion, the demand for fourplex properties is usually lower.

Still, there are local markets where fourplexes could be in demand. If you invest in one of them, you can enjoy consistent cash flow from three or four monthly payments.

Flexible financing terms

Like other real estate investments, fourplex-buying offers flexible financing terms. You can look into the different types of multi-family financing available: conventional, government-backed, short-term, and private. A fourplex purchase is also possible with a Federal Housing Administration (FHA) loan through house hacking.

House hacking involves different ways of generating income from your home. Examples include renting out a room in a single-family property or turning an attic or basement into a small apartment unit. Occupying one unit and renting out the other three in a fourplex is also a form of house hacking.

FHA loans are ideal for house hacking because you don’t necessarily need a good credit score, particularly when buying your first home. The most popular FHA loan—203(b) Basic Home Mortgage—allows first-time buyers to purchase properties with up to four units, like fourplexes.

Easy to manage

If you manage the fourplex alone, you can consolidate the maintenance and management tasks and tailor them based on your and your tenants’ needs. Meeting incoming and outgoing tenants can be easy while attending to your management duties. You may not enjoy this benefit if you hire a property management company.

The purchase paperwork is typically less than buying separate rental properties. Standard home maintenance is also easier to conduct. For instance, when one tenant experiences ventilation issues while another has trouble with some appliances, you can fix them both in one property simultaneously.

Furthermore, outdoor maintenance—like snow removal and landscaping—is done within one property, saving more time and money.

Remember that a fourplex investment also has its fair share of drawbacks. You may experience high tenant turnover when the market enables your tenants to move into a single-family home. Keeping your fourplex property occupied is necessary to ensure cash flow.

Moreover, property taxes on multi-family investments are usually more expensive than those on single-family properties.

All You Need To Know About a Fourplex

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Things To Consider Before Investing in a Fourplex

Not all fourplexes are worth investing in. Each fourplex has qualities that may or may not suit you. Consequently, choosing the best opportunity can be time-consuming.

Following these tips can help you make the process less stressful, so you won’t have to spend too much time finding one.

Research your local housing market

Location is significant in fourplex investments. Researching your local housing market is a way to determine the best locations to invest in a fourplex.

When researching, you must consider the neighborhood, population, safety and security, fourplex property regulations, and the job market. You should also look into the accessible amenities, such as nearby hospitals, property maintenance services, restaurants, and food markets.

Researching enables you to set clear objectives and parameters to ensure you invest in the right opportunity. Similarly, you’ll see how living in the area would be and assess whether it has high rental demand that can generate consistent income.

Shop for listings

Once your goals are set, start shopping for listings. Listings will provide various fourplex options you can check for features and pricing.

You can also browse listings on a multiple listing service (MLS) or by working with a real estate agent specializing in fourplexes. You can even consider off-market listings for exclusive offers. You can learn about off-market listings from an agent, contractor, or direct mail marketing.

Consider loan options for financing

Saving cash for a fourplex investment takes significant time. Several loan options are available if you don’t want to take too long to save funds.

Here are the types of loans you can consider:

  • Conventional mortgage – Private lenders like credit unions, banks, and mortgage companies provide this type of loan. They will require your credit history and score to assess your loan eligibility. If you choose this, you should use a real estate banking solution, as your personal bank may not have the features necessary to manage your mortgage
  • Government-backed mortgage – Government agencies like FHA provide this type of loan. They often have flexible requirements and can offer competitive rates
  • Short-term loan – This loan is ideal for investors looking to finance a property in poor condition. Generally, it must be paid within three years. It also has more straightforward qualification requirements
  • Private financing – This financing option obtains funds from individuals or private entities

Go for inspections

Paying for unexpected repairs is the last thing you want. You should go for inspections when looking at fourplex options.

Inspections are necessary to ensure your desired fourplex is in good and habitable condition. Hiring a multi-family home inspection company is worthwhile for expert opinion and comprehensive inspections.

Make Your Fourplex Investment Worthwhile

Investing in a fourplex property is worthwhile when you know what to do. Make informed decisions by evaluating the pros and cons, and follow the tips above to ensure your investment suits your goals and needs.

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