Quadplex
What is a quadplex?
A quadplex is a four-unit apartment building, with four completely separate units. For legal reasons to qualify as a quadplex, all units must have four locks to secure all of its apartments. Unlike a single family home or single family residence ("SFR"), a quadplex contains four completely separated living units under one roof:
- 4 entrances (four different keys and locks)
- 4 kitchens
- 4 separate utility meters (typically)
Each unit has their own front door for privacy. There are many different layouts that quadplexes can have, such as the units can be stacked on top of each other, with two units per floor or all on the same level but the key idea is that all of them have a separate entrance, separate kitchen, separate bathrooms and living spaces.
Why are quadplexes an attractive real estate investment?
Quadplexes are more attractive than SFRs, duplexes and triplexes to many rental property investors because they qualify for residential (non-commercial, 1-4 unit) mortgage loans. This is a huge advantage, which is often overlooked. By default they qualify for a huge amount of financing or leverage which immediately improves many financial metrics by which rental properties are judged. This is all due to the fact that quadplexes qualify as single family homes under conforming (government sponsored) loans. We seen first time buyers, with as little as 10% down qualifying for loans of up to a million dollars to take over quadplex properties, giving them a great head start on building their rental real estate portfolios.
This property type allows an investor to diversify tenants while maintaining one common housing structure to maintain. Many investors would much prefer owning and managing a quadplex instead of 4 single family houses or 2 duplexes. Quadplexes are also wonderful for house hacking as you can live in one unit and rent out the other three units which should easily pay your PITI and provide free cash flow
What are the Pros of Living in a Quadplex?
The pros of living in a quadplex are that you can live with your friends and family nearby. Some people might think that living in a quadplex is not as good as living in separate houses, but the pros of having own entrance, bathrooms, living space while sharing some of the wall with your neighbors might actually be beneficial for your utility bills.
Heat and cooling for a quadplex structure will definitely be more efficient than doing it for a similar sized stand alone structure. Additionally, living in a quadplex you don't have to share common spaces with other people, you can make as much noise as you want without bothering anyone, and the tenants that you rent the rest of the property out will enjoy their own privacy. Apart from that, it’s common to rent out extra units to tenant, thus producing a rental income which you can use to offset your own living expenses. There are also tax benefits to consider then looking at owning a quadplex, such as depreciation and ability to write off maintenance expenses from the taxable rent that you receive form other tenants. < br>
Finally, one of the biggest benefits is ease of maintenance, since you live on the property, you will be intimately aware of the condition of the property and will be able to keep a close eye on needed repairs and keep problem tenant in check. While this might be extra work, your bottom line will appreciate it because you wont have to hire a dedicated property management that will cut into your margin, not to mention potential inflation of prices since you won’t be aware of how much time he actually spends on maintaining your property.
What are the Cons of Living in a Quadplex?
Living in a quadplex can be an exciting experience, but there are some cons too. For instance, the living space is smaller, and it may be difficult to find parking on the street. One of the most significant disadvantages of living in a quadplex is that often the apartments are small and do not offer much living space for people who like to entertain guests or even just want to have their own space for themselves. Additionally, some people may not feel comfortable with having so many neighbors so close by and some noises might be audible through the walls, as well as that there is no yard for the kids to play in, parking can be difficult depending on the neighborhood, and it might not suit those who enjoy a quieter lifestyle.
If you don’t take care of tenant selection you might allow bad tenants to move into your property. This becomes a larger nuisance for you and your tenant since you share walls with this individual and you might hear or feel the effects of their presence. On the plus side you will be keenly aware of the issues since you will be close by and will be able to put a stop to offending behavior before it gets worse or out of control, driving away other tenants and potentially causing financial damage to your property.
Finally, being a landlord is a job. Being a landlord for tenants that live right next door presents unique social challenges that not everyone might be up to, even if there are good financial incentives to do so. You will have to be responsible for the property and its condition, and any short-falling will impact your lifestyle. Needy tenants can simply knock on your door any time of the day to request anything they want. Being a landlord that lives on the property is not as simple as renting it out and just leaving it at that.
How do I find quadplexes for sale?
Buying a quadplex could be a bit tricky. The availability of quadplexes varies based on the local market. Here is where you can find your next quadplex investment property:
- Zillow
- Redfin
- OfferMarket
- Local wholesaler buyer's list
Conclusion
Ultimately, quadplexes are best positioned for house hacking , where you can live in one of the units and rent out remaining three. This is the best possible scenario for house hacking since anything over four units won’t qualify for a conventional mortgage, single family mortgage and will be considered a multi-family property which will needs a different kind of debt financing with its own specific hurdles, such as different standards to qualify and a higher interest rate since its aimed at professional investors.
