4 Unit Apartment Buildings For Sale
A great way to build wealth is to buy a 4 unit apartment building. A four-unit building is the largest building you can buy with a Federal Housing Administration (FHA) loan. Use just a 3.5% down payment. Your credit score may be as low as 580.You must reside in one unit at least twelve months, called “owner-occupying.”
Buying a 4 unit apartment building for sale allows you to grow equity on an entire building rather than just one single-family home. Purchasing small multi-unit properties requires some basic understanding of how to locate, finance, and manage multiple units. Financing is one of the most important factors when buying a fourplex. Buying 4 unit apartment building provides a good entry into multi-family investment.
While there are advantages to buying a duplex, triplex, or fourplex, there are downsides you must be prepared for. Even if the property is your residence, you are still a landlord. Tenant turnover is higher and tenant care lower in multi-unit buildings than with single-family properties.
Buildings that are five- or more-units require commercial financing versus residential financing. Managing a larger building generally moves beyond do-it-yourself, requiring hiring a property management company or on-site property manager.
Commercial Lending vs Residential Lending
Home buyers and residential investors can use traditional residential lending for buying a duplex, triplex, or fourplex. Commercial real estate loans are typically used for large multifamily properties consisting of five or more units. They usually carry higher interest rates and fees, with a shorter loan term of 20 years or fewer, which raises the monthly mortgage payment.
As a landlord you can typically handle the management responsibilities when buying a fourplex. Buildings larger than four units are more challenging to self-manage.
Once you find a building for sale, you need to evaluate the potential purchase. An evaluation includes assessing the building’s location, inspecting the building’s condition, and evaluating the property’s financial situation. Location is the number one factor. Good location usually attracts good tenants.
It’s important for investors planning to buy a multi-family building to examine the property’s financial data, including rental and other income, expenses that will transfer with the property, and net income for the property.