Quadplex

Last updated: December 28, 2024

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

Best Markets to Invest in Quadplex Rental Properties

The best markets for quadplexes typically combine strong rental demand, affordable property prices, and favorable landlord laws. Look for areas with robust job markets, population growth, and a low cost of living.

1. Sun Belt States: Cities in Texas (e.g., Austin, Dallas), Florida (e.g., Tampa, Orlando), and Arizona (e.g., Phoenix) are popular due to population growth and strong rental demand.
2. Midwestern Cities: Markets like Indianapolis, Kansas City, and Cleveland offer affordable entry points with stable cash flow.
3. Secondary/College Towns: Smaller cities with universities, such as Boise, ID, or Knoxville, TN, have steady rental demand from students and faculty.
4. Military Towns: Areas near military bases, like Fayetteville, NC, or Colorado Springs, CO, ensure a constant tenant pool.

When investing in a quadplex, focus on locations with diverse employment opportunities, favorable cap rates, and local laws supportive of landlords.

Quadplex vs Single-Family Homes

Investing in a quadplex offers distinct advantages over single-family homes, primarily in terms of cash flow and financing. A quadplex consists of four units within one property, which diversifies risk. If one tenant vacates, income from the other three units can still cover expenses. In contrast, a vacancy in a single-family home results in zero rental income until a new tenant is secured.

Quadplexes often yield higher monthly cash flow compared to single-family homes, given their ability to house multiple tenants. However, single-family homes typically attract long-term tenants, reducing turnover costs. Additionally, single-family homes are more liquid, as they appeal to both investors and owner-occupants, while quadplexes primarily target investors.

From a financing perspective, quadplexes have an advantage. Like single-family homes, they qualify for residential loans, enabling investors to use conventional financing with lower interest rates and smaller down payments than commercial properties.

Quadplex vs Duplex

Compared to duplexes, quadplexes provide greater economies of scale. Managing four units in a single building reduces per-unit maintenance and operational costs. Additionally, quadplexes generate more income potential with two extra units, often leading to better cash-on-cash returns.

However, quadplexes usually require a higher initial investment and may face stricter zoning and building code requirements. Duplexes, being smaller, are often easier to find in suburban or rural areas, while quadplexes are more common in urban markets.

Duplexes may appeal to first-time investors due to their lower price point and simpler management. They also tend to have lower vacancy rates since the smaller property size often feels more personal to tenants. Quadplexes, however, are better for experienced investors seeking to scale their portfolio efficiently.

Quadplex vs Triplex

When comparing quadplexes to triplexes, the main difference is the additional unit. Quadplexes generally generate higher gross income and better economies of scale. For instance, the cost of property insurance or landscaping for a triplex and a quadplex might be similar, but the quadplex can spread these expenses across four units instead of three.

Triplexes might be more prevalent in certain markets due to zoning restrictions or historical building designs, offering slightly lower barriers to entry. However, quadplexes maximize rental income without the complexity of moving into the commercial property space.

Quadplexes also offer more stability in terms of cash flow. With four units, the impact of a single vacancy is proportionally smaller than in a triplex. This stability makes them appealing for investors prioritizing consistent returns.

Quadplex vs Multifamily (5+ unit)

There is a major difference between financing for 1-4 unit residential properties compared to 5+ unit "multifamily properties. Capital is more freely available for 1-4 unit properties, in part because Fannie Mae offers conventional financing for 1-4 unit properties, but not 5+ unit properties.

As you can see from the table above, for rental property investors seeking multiple units, drawing the line at 4 units can offer serious advantages.

Financing Quadplexes: Strategies and Options

Financing a quadplex can be highly lucrative, particularly when using creative financing strategies tailored to the property’s condition and your investment goals. Quadplexes, as four-unit residential properties, qualify for residential loans while offering the income-generating advantages of multifamily properties. Below are the key financing strategies to consider.

Fix and Rent Loan

A Fix and Rent loan is a bundle of hard money fix and flip loan to purchase and rehab a 1-4 unit rental property and then a DSCR loan cash out refi once the property is rented. This is a popular financing program among rental property investors who use the BRRRR method.

The "BRRRR" method—Buy, Rehab, Rent, Refinance, and Repeat—is a popular strategy for investors purchasing distressed quadplexes to maximize equity and cash flow. Here's how financing works under this approach:

1. Buy and Rehab with a Fix and Rent Loan
   A hard money loan or fix and flip loan is typically used to purchase and rehab a distressed quadplex. These loans are short-term, interest-only, and asset-based, meaning lenders primarily assess the property's after-repair value (ARV) rather than the investor's income or credit score.
   Hard money lenders often fund up to 70–75% of the ARV, covering both the purchase price and rehab costs. This allows investors to acquire properties in poor condition with minimal out-of-pocket expenses.
2. Rent and Stabilize
   Once the quadplex is rehabbed and rented to tenants, it generates stable income. Establishing a steady rental history improves the property’s appraised value and makes it attractive for long-term financing.
3. Refinance into a DSCR Loan
   After stabilization, the hard money loan is replaced with a DSCR loan (Debt Service Coverage Ratio). DSCR loans focus on the property’s cash flow rather than the borrower’s income. A DSCR of 1.25 or higher (net operating income exceeding 125% of debt obligations) is usually required. This refinance allows investors to lock in a longer-term, lower-interest loan while pulling out any built-up equity for future investments.

DSCR Loan

Purchase Transactions

For investors targeting quadplexes that are already rehabbed and generating rental income, a DSCR loan is a convenient and straightforward financing option. These loans prioritize the property’s rental income rather than the borrower’s personal financials, making them ideal for investors with non-traditional income or those building a large portfolio.

• Down Payment: DSCR loans generally require a 20–25% down payment. However, the loan-to-value (LTV) ratio may vary based on the property’s cash flow and your credit score.
• Key Benefits: With no debt-to-income (DTI) requirement, these loans are accessible to experienced and novice investors alike. They also offer fixed and adjustable-rate options, making it easier to budget long-term.

Refinance Transactions

Refinancing a quadplex into a DSCR loan is a powerful and cost effective way to quickly free up equity for future investments. Common scenarios for refinancing include:

• Lowering Interest Rates: A DSCR refinance helps lock in lower, long-term rates compared to higher short-term loan rates, such as those from hard money loans.
• Accessing Equity: If the quadplex has appreciated or undergone value-adding renovations, a DSCR refinance allows you to cash out equity for reinvestment while maintaining a manageable payment structure.
• Improving Cash Flow: Refinancing into a DSCR loan based on the property’s rental income can often lower monthly payments, enhancing the property’s profitability.

Why DSCR Loans Work for Quadplexes

Quadplexes are uniquely positioned for DSCR loans because their strong rental income often easily satisfies the lender’s DSCR requirements. Whether you're purchasing a turnkey quadplex, rehabbing a distressed property, or refinancing to access equity, the DSCR loan offers flexibility, scalability, and investor-friendly terms. With careful planning, these financing strategies can be a cornerstone of a highly profitable quadplex investment strategy.

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.

Related concepts:

• SFR
• Duplex
• Triplex
• Fourplex
• House Hacking
• Off Market Properties