Is Buying a Quadplex a Smart Investment?
If you’ve dipped your toe into real estate investing (or are wanting to get started), a quadplex can be your next big move. These rentals are great for house hacking as well as extra income through rentals. Keep reading to learn more about the advantages of owning a quadplex.
What is a quadplex?
A quadplex (also known as a fourplex) is a single building with four separate living units and entrances. Each unit can be side by side, which is more common or stacked as individual floors, which is less common.
Each unit is used as separate residences, though it can look like one single-family home from the outside, which helps differentiate them from apartments.
While there are some shared aspects, such as one roof, one yard, and one driveway, each unit is autonomous and has separate water heaters, furnaces, entrances, and so on.
Quadplexes come in a variety of floorplans. However, each unit is generally the same inside.
What is the average cost of a fourplex?
The average cost of a fourplex will vary depending upon several factors, such as:
- If you are building from scratch or buying an existing quadplex.
- The city or local area that the fourplex is located.
- The housing market, supply costs, and even shortages can play into the price (as we’ve seen in the past year or two).
In researching this article, I saw several quadplex for sale near me, starting at $118,000 up to 1 million dollars at Trivot. These quads were throughout the U.S., so finding one in a great location will play significantly into pricing.
How many rooms does a quadplex have?
The floorplan for a quadplex varies greatly, so they can only have a single bedroom for each unit, up to four per unit. Each rental has a separate kitchen, living room, and bathroom.
What is a duplex or triplex?
A duplex is a building that has two single-family units together. They’ll have separate entrances and rooms but share a roof, driveway, and yard.
A triplex is the same as a duplex or quadplex but has three units together. Multi-family units can even go up to five or ten units together!
Is buying a fourplex a good investment?
Buying a quadplex building can be a fantastic investment, especially for new real estate investors or someone interested in house hacking or becoming mortgage free. Let’s talk about the advantages and disadvantages to purchasing this type of property.
The Advantages of Buying a Quadplex
There are several reasons why a quadplex house can be a wonderful investment property:
Financing a quadplex is as easy as buying a single family home.
Suppose you choose to finance a building with more than four units. In that case, you’ll end up having to apply for commercial financing, which requires a larger downpayment, a shorter repayment period, and a higher interest rate. Dealing with the complexities of commercial funding can all be too much for a beginner real estate investor. The government does not back commercial loans, so it’s up to the bank to decide if you’ll be approved or not.
A fourplex is the largest building you can purchase with a conventional loan, the same one you’d get for single family homes. A conventional loan also means you’ll have a lower interest rate, a longer repayment term (up to 30 years), and a lower downpayment. The U.S. government approves these, so you can potentially qualify for a VA or FHA loan.
Note: Any housing with one to four units will qualify for conventional financing, however, the fourplex is the biggest one.
Quadplexes are not considered commercial apartment buildings.
Since the building is residential and not a commercial premises, you’ll have less strict zoning laws and a lower startup cost.There are tax benefits to owning a quadplex. When you rent out properties, such as the units in a fourplex, you’re able to write off expenses like repair costs, property maintenance, advertising, insurance, and interest paid on the mortgage, and so on.
Quadplexes are great for house hacking.
Fourplexes allow you to rent one of the units yourself rather than owning a single-family home and renting out the basement or a bedroom. House hacking is an excellent method to help you boost your progress to financial independence. Having other renters means that their rent will pay your mortgage and utilities, and you can essentially live for free.
All of your rental property will be in one place.
Owning multiple single-family homes means running around town every time something breaks and needs fixed. If all the units are together and you live onsite, you’ll find it’s effortless to manage. Living in one of the units also means there’s no need for a property manager either.
You won’t lose all of your income if a tenant moves out.
If one tenant moves out with a quadplex, you’ll still have the others to help pay the mortgage since it’s very unlikely to have 100% vacancy rate. Whereas in a single-family home, if the tenant moves out, you have no income coming in to pay that mortgage. Having a multifamily home means all your eggs aren’t in one basket, and the other units can help support the empty one.
You’ll know what your tenants are up to.
While it sounds a little over the top, your tenants will likely behave better and be less likely to stir things up if you live in the quadplex. If they do, you’ll know about it ASAP and deal with the situation or remove them promptly.
The Disadvantages of Buying a Quadplex
It’s not all sunshine and roses, and there are some downsides to owning a quadplex.
- You won’t have as much privacy as a single-family home if you live there. You’ll share a wall (or floor or ceiling) with at least one tenant, so there could be more noise.
- Quadplexes aren’t as easy to find as single-family houses or duplex apartments. They aren’t as standard and can be more challenging to find. They’re also in high demand, and a more experienced real estate investor could have a leg up on you since they have more cash flow to make the purchase.
- You’ll have to share a yard and driveway. Again, if you live there, you’ll have to deal with sharing public spaces, such as the backyard. Though, some bits of fencing could be helpful!
- Fourplexes can have high maintenance costs. With four different units, it’s four times the items to maintain.
- They can have a higher turnover rate – maybe. Depending on which research you believe, quads can either have a higher turnover rate or a better retention rate. The jury is still out on this one, but it’s worth mentioning.
So is investing in quadplex apartments an intelligent choice? If you’re interested in house hacking or real estate investment, owning a fourplex can be a great passive income source for a beginner.
Interested in learning more about passive income sources? Read more about active versus passive income streams here.
A forty-ish web designer/developer by day, a budget & financial fanatic by night. I’m a mom, wife, avid reader, and DIY enthusiast who’s tracking our journey to debt freedom. Read More