Fourplex: What It Is and Why You Should Invest in One
A real estate hack explained.
In this article we’ll talk about what a fourplex (or quadplex) is, what are the advantages and cons of buying a fourplex and how to easily make money through it.
So, if this sounds like something you might be interested in, make sure to read this post until the end.
What Is a Fourplex?
With the financial crisis that is starting to affect the entire world, many people are desperate to find additional sources of income to live a decent life.
That said, one of the best ways to earn extra income is investing in multifamily properties. More specifically, investing in a fourplex.
A fourplex (also known as quadplex or 4plex) is a type of multifamily property that can house not just one but four families under the same roof.
The best thing about the fourplex is that it has four separate entrances. And each unit is independent. This way each family has the comfort and privacy they need.
Additionally, as these types of properties are known for their fairly low price but high cash flow, the number of people interested in buying one is increasing.
If this is something you are interested in, you can read the benefits of buying a fourplex and how you can make the most out of it.
Benefits of Buying a Fourplex/Quadplex/4Plex
After seeing what a fourplex is and what it usually offers, it’s time to move on to more important aspects, like the benefits of buying a fourplex.
As the interest in the fourplexes is constantly on the rise, there must be a good reason behind that.
So, let’s check out the fourplex benefits and why many prefer this type of multifamily property over the others.
You can purchase a fourplex with a residential loan
When you decide to invest in one or more properties you want to rent, it’s usually hard to get a loan — especially if you already have a mortgage on your own house.
But, when you invest in a fourplex, you have the opportunity to purchase it with a residential mortgage loan. If you live in one of the units, the property is eligible for this type of loan.
As mentioned on My Mortgage Insider, it’s like buying a home and get your tenants paying the mortgage for you.
If you can’t afford to buy a fourplex, by taking a residential loan, you would be able to make an investment that will have a great ROI.
Easier property managing
If you compare managing several properties scattered around a town and four different properties in one place, it’s pretty clear that fourplexes are the easiest choice.
If you decide to buy a fourplex, all you will need to do is manage your tenants in one location. Which is a great saving of time, money, and energy.
Not to mention, if you do not feel ready for property management, you can always hire a professional to do that for you.
Also, hiring a professional for one location will cost you much less than hiring one for different locations.
Great potential of generating more rental income
By buying a fourplex, you will be able to save all the taxes and fees you would need to pay if you bought four different properties.
Read that again, because this is probably the most important benefit of owning a fourplex.
For a better price, you can earn rental income from three different units.
Best economical choice
The first and most important economical and financial benefit you get is that, when it comes to renovation, your finances will be distributed between four different housing units instead of two or one.
Next, in the case of vacancy, you will still have three other units from which you will earn income.
Finally, returns on any improvement projects will be multiplied by three to four times.
This means that instead of increasing the rent by, let’s say, $50 for only one family or one tenant, you will be able to do that for all four families that will live in the fourplex and earn an extra $200.
Tax benefits
When you invest in a fourplex, your tax deduction potential is maximized. The tax deduction is usually also applied for any upgrades and maintenance, property tax write-offs, and property depreciation.
This means that for a significantly low price, you will be able to do much more things that would otherwise cost you two to three times more in a duplex or regular house.
Training for further and bigger real estate projects
If you want to start orienting more toward real estate investment, investing in a fourplex is the way to start.
By managing a fourplex, you will get much more advanced training than if you have to manage only one house and family. Managing a fourplex is often the best starting point for a successful real estate career.
Vacancies carry a lower risk
As vacancies represent the biggest nightmares of every landlord, you will be relieved when you hear this.
Since you will be managing four units, one vacancy will not have such a big impact. You will still have three more properties to collect rent from.
And this means you will still have a decent income until you find a fourth tenant.
With this in mind, you will be able to avoid all that unpleasant constant stress and fear of losing your tenant and staying without a regular income.
Recommended read: How to Become a Millionaire in 5 Years or Less
The income a Fourplex generates
Imagine that you own a fourplex or quadplex and you live in one of the four units. You can rent out the other three units.
- If you rent out each unit for $1000 a month, you would earn $3000 per month.
- By renting out each unit for $2000 a month, your rental income would be $6000 a month.
- If you rent out each unit for $2500, your rental income would be $7500 each month.
Cons
Although the benefits of buying a fourplex outweigh the cons, there are still some things you need to consider so that you can make the right decision.
The cons of buying a fourplex are:
- Higher tenant turnover.
- High frequency and number of people — the tenants might feel like they are living in an apartment complex.
- Living next to tenants — if you decide to live in the fourplex, you will have to be available for them 24/7 for any major inconveniences. And you will have to manage and deal with many different issues probably on a daily basis. That’s why hiring a property manager would be a good idea.
- If you want a good cash flow, you must ensure that all the units are constantly occupied by tenants.
How Can You Make Money Owning a Fourplex
Invest in frequent renovation and necessary fixes
The best way to make more money out of a quadplex is to invest in frequent, but not too frequent, upgrades and renovations.
By doing this, you will be able to gradually increase the rent while the tenants get much better conditions to live in.
Also, by slightly increasing four different rents simultaneously, it might not be a big deal for the tenants, but you will certainly feel the benefits. And the renovations will definitely pay off.
Advertise
If you still do not have any tenants, investing in good advertisement is key. Find a marketing company that understands what you offer so that they can help you target your potential buyers.
Make sure to include every advantage of why your fourplex is the right choice for that particular group of people. And make them feel it would be the ideal home for them.
Include lots of pictures and, if possible, do a home staging to make the apartments more appealing.
By doing this, you will be able to attract many more potential tenants. This means you can start renting the units and earning money immediately.
Here are some good home staging tips you might find useful.
Conclusion
Fourplexes are one of the most wanted properties on the market right now. For this reason, many people are literally “fighting” to buy one.
After going through this article, you probably have a good grasp of what a fourplex is, its pros and cons. You now have the necessary knowledge to buy and invest in one, so why wait?
Spot the fourplex you want and finally make your investment dreams come true.
This article is for informational purposes only. It should not be considered Financial or Legal Advice. Consult a professional before making any major financial decisions.
