Buying a fourplex

My Uncle, a real estate agent, recently inherited some money, and decided to use it to purchase my duplex’s big sister, “the fourplex.” Not sure exactly if he purchased it out-right, most likely they just used it for a 20% or larger down payment.

How is buying a fourplex, or four-flat different than buying a duplex?

At least where I live, anything larger than a triplex is no longer considered residential — it’s commercial property. Which means that you’re subject to different local rules and regulations. For instance, here, residential properties have 24 hours to clear the snow from their sidewalk after the snowfall, while commercial properties have only 4 hours.

Higher insurance costs — while I can have a normal (inexpensive) homeowner’s policy for the duplex that I live in half of, a commercial insurance policy is needed for a larger, multi-unit property. I believe (although I am not sure), that this is still the case if you were to elect to live in one of the four units.

Less lenient financing — a 20% down payment is generally needed for commercial property, and you don’t get all of those nice “first-time-homeowner” deals.

And, of course, the obvious:

  • Higher purchase price
  • Higher maintenance costs
  • Higher taxes
  • Higher rental income
  • More tenants to manage
  • Less risk if you have one until unrented for a period of time (1/4 your rental income is missing, vs. 1/2).

As with most things, dealing in higher volume (fourplex, vs. a duplex) is likely to be more profitable, it just requires a bit more work. My uncle is aware of this, and is hiring out all maintenance and management of the units. He’s hoping that he can just sit back and collect those rent checks, without dealing with too many headaches. (My aunt, allegedly wants no part of the day-to-day management responsibilities.) I hope it works out well for them!

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One thought on “Buying a fourplex

  1. Less risk if you have one until unrented for a period of time (1/4 your rental income is missing, vs. 1/2).


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