63 PANDORA Avenue N, Kitchener, N2H3C1
63 PANDORA Avenue, Kitchener, Ontario N2H3C1
326,328 FOUNTAIN Street S, Cambridge, N3H1H8
326 FOUNTAIN Street, Cambridge, Ontario N3H1H8
240 MAYFIELD Avenue, Waterloo, N2J3S5
240 MAYFIELD Avenue, Waterloo, Ontario N2J3S5
98 JOHN Street W, Waterloo, N2L1C1
98 JOHN Street, Waterloo, Ontario N2L1C1
What is a Fourplex?
A fourplex is a type of multi-family dwelling that is designed to provide four homes under one roof. There is one property on a single lot with one owner that contains four unique residences with separate entrances and unit numbers.
Tenants usually share one or two common walls in fourplexes, but each unit has its own kitchen, bathroom(s), and living room. A shared foyer or entryway is also common in fourplexes. The owner of the fourplex is responsible for the upkeep and insurance of the property. Fourplexes are often not permitted in residential zones.
Styles and Formats for Fourplexes
Fourplexes can be built with intentional planning as a four-unit dwelling, or can be the result of the conversion of a dwelling which was originally built as a single family home. Side by side units or stacked units are most common for fourplex layouts.
Side by side fourplexes are similar to townhouses or row houses and consist of four units which are attached by one or two shared walls. The stairs for each unit are usually located along a shared wall. These residences often have more than one level.
Stacked fourplexes are similar to apartments and consist of four units located above or below one another. These residences often consist of one level with no interior stairs.
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Where Can Fourplexes Be Found in Kitchener-Waterloo?
The highest concentration of fourplexes is evenly distributed across multiple areas in the Central Kitchener area – Downtown Kitchener, Frederick Street, East Ward, and Mill-Courtland. In Waterloo you can find fourplexes in the University area.
Advantages of Fourplexes
Financial Benefits – Four times the living spaces potentially means four tenants paying rent! If you are living on-site, then it’s three tenants helping with the mortgage and housing costs, and that’s still a great investment. To start, the rental income generated by a fourplex can help towards obtaining a mortgage for the property.
Fourplexes are still classified under residential mortgages which is great news. Monthly rent can help with repairs, renovations, or maintenance issues that may arise with the property.
Having that steady stream of income will ease some worries if there are times of vacancy for the property. Simply put, fourplexes can potentially generate more income than a duplex or triplex.
Taxes – The rental portion of the fourplex can result in tax benefits when it comes to things like the interest paid on your mortgage, the costs of insurance and utilities for the property, and home repairs and maintenance.
Friends / Family as Tenants – If a property is needed to house a large family or a group of friends, a fourplex could be the perfect solution. Even with one owner, the costs of keeping the property in good condition with all the bills paid, can be a shared venture between family / friends. This is especially helpful to family members who may need extra care or friends who are starting out in a new career or family situation.
Disadvantages of Fourplexes
Increased Responsibilities – With four units to care for, landlords will be busier with caring for the unique spaces of the property and the people living in them.
Tenant turnover may be higher in a fourplex than in a duplex or triplex, and this could mean more time and effort to screen potential tenants. Landlords are often on call 24 / 7 and this is definitely something to consider – with more units comes more calls.
Tenants – In a fourplex there are 4 sets of tenants living in 4 separate units, but all are sharing the same property and often the same outdoor amenities like yard space, parking areas, garbage collection bins, and foyers. Hopefully tenants will get along easily with one another but this may not always be the case.
Longer Time to Sell – There may come a time when you want to sell your fourplex. These properties tend to sit on the market for a longer period of time than a duplex, triplex, or single family home. Fourplexes also don’t seem to be as popular when it comes to rental investment properties.
Considerations When Buying a Fourplex
Fourplexes can be a great source of rental income as well as hold the most potential for frustration. Of all the “plexes” these properties can house the most people which can result in more demands on the owner’s time and energy. But the flip side is they hold the greatest potential for generating revenue which can help with the housing costs.
If owners choose to live on-site this makes it easier and quicker to deal with any issues that arise in a multi-unit dwelling since there is no commute and you would know the property well by residing there.
Living in close proximity to your tenants could be a blessing or a curse and it’s hard to determine even with a good screening process.
A fourplex in good condition can help owners reach their investment goals, but if the property is in disrepair this could hinder potential income if not all units can be rented out immediately or consistently.
Obtaining a Mortgage for a Fourplex
Residential mortgage loans are available for rental properties up a fourplex, so this is great news when trying to obtain a mortgage! Residential mortgages mean at least 10% down payment if the owner is living on-site, and at least 20% down payment is the property is used solely for investment purposes.
Also of importance to note with a fourplex is that a large portion of the rental income can be used toward obtaining the mortgage.
Financial and Cashflow Considerations for a Fourplex
Cashflow will depend on how consistently rental units can be occupied and what sort of rent can be charged for the units. This must be weighed against the normal costs of the property along with any repairs that may be needed.
With older homes the utilities may be higher and the maintenance and repairs may be more extensive (and expensive!).
Even if major repairs are needed, will they increase the value of the property and will the owner recoup the expenses in due time? It is important for rental property owners to know all the numbers and see if they result in a positive cash flow for the property.
Conclusion
With the proper management, fourplex ownership can become a well-oiled machine of generating rental income and furthering an investors real estate goals and dreams. Most important is keeping up with maintenance issues and screening tenants well.