How I Bought 4 Fourplexes in 12 Months

Fourplex homeJoel is the author of the personal finance site 5AM Joel

Today he shares the story of how he and his brother bought 4 fourplex rental properties in just 12 months in a small town in Texas.

In the last 12 months my brother and I purchased 4 x 4-unit rental properties in a small town in Texas. These were all off-market properties (not listed publicly for sale on the MLS), all purchased from the same owner, all in the same neighborhood, and all bought “under market value.”

Oh yeah, and we did all this while both holding full-time day jobs!

Why Multi-family Investment Properties?

I never had formal real estate education or training. It all started with reading books. Yep, boring old books. Out of the 30 or so Real Estate Investing Books I’ve read, the following 2 were the most influential to me and easiest to consume:

If you’re new and want to get into real estate investing, start by reading these books. Everything I have learnt about real estate investing comes from reading books, online research, making phone calls to strangers, and asking good questions.

Dog reading

Even my dog likes to read real estate investing books before bed.

Before we move any further, let me define a few terms:

Single Family Home = 1 house/unit only.
Small Multi-family properties = 2, 3 or 4 units only.
Large Multi-family properties = Anything 5+ units.

Financing Small Multi-family Properties is Easy

In the USA, any property with 1 – 4 separate living spaces is classified by lenders as “residential” property. Anything with 5 or more units is considered “commercial” property.

Banks and lenders typically offer much more favorable loan terms for people purchasing “residential” properties. A fourplex is treated just like a single family home.

If you are moving into the property as your primary residence, you will usually get offered the lowest available interest rate and lower down payment options. Even if you are moving into only 1 of 4 units, you still can qualify as “owner occupied” financing. This is HUGE for people who are house hacking.

Fannie/Freddie Loans

Most banks allows each person to have up to 10 residential Fannie/Freddie loans in your personal name. These are the best loan types for new real estate investors. (Yes, you can have 10 loans in your name and 10 loans in your wife or husband’s name)

As soon as you step into 5+ unit properties, you need to finance using commercial or private loans, which can be a little more complex. Commercial loan terms depend more on experience, personal relationships with banks, and the actual assets that you are lending against.

Multiple Rent Streams

Vacancies hurt a lot. If you own a single family investment property, and that family moves out, you have 100% loss of rent until you find a new tenant. Whereas with multi-family properties, losing one tenant only hurts you partially.

If you own a duplex and one tenant moves out, you only have 50% loss of rent until you find a new tenant. A fourplex = 25% loss of rent with 1 unit vacant.

Fourplex vacancy vs single family home


With vacancies not hurting so bad, you’re under a little less stress to find new tenants immediately. So you can search longer and hold out for higher quality tenants instead of being pressured to accept just anyone to fill a house that may have been empty for a while.

Also, if you’re planning to do any renovations or interior upgrades, this can be done one unit at a time while the remaining units continue to be rented out. With a single-family house, you will have no rental income for the entire time you are renovating. Again, you’re under a little more pressure to rush renovations with single-family homes.

Note: It’s important to note that vacancy risk is still the same for any size property you purchase. You will experience the same amount of vacancies as everyone else. But, the higher the unit count, the less likely it is you will experience multiple vacancies at the same time.

One Roof, One Yard, One Insurance Policy

Major repairs and disasters can be a huge setback for investment properties. Simply put, the less ‘structures’ you own, the less major repairs you will need over time.

With the 4 fourplexes I just bought, if I hold onto them for my entire life, I will eventually have to replace 4 roofs. Compare that to the guy with 16 small single family rental homes – he will eventually need to replace 16 roofs! He also has 16 lawns to mow, driveways to shovel, and insurance policies to maintain.

Important note: It’s not all roses… Multiple units within one structure tend to have a lot more small repairs. Fourplexes have 4 times as many toilets, light bulbs, and kitchen appliances than single family houses. Definitely keep this in mind when calculating maintenance costs on new purchases.

Less Competition

When buying a single-family home in a nice neighborhood, you’re competing against everyone else who wants to buy that house too. This includes the thousands of local families that want to move into the neighborhood and use the house as their primary residence. The better the neighborhood, the more competition you have.

Usually with multi-family properties, you’re only competing against other investors. Better yet, if you’re buying in small towns outside of major cities, there’s even less competition and less investors interested. Most people haven’t even heard of the town in Texas that I invest in. (And, I like it that way!)

Competition in Real Estate

You might be thinking: But aren’t other investors more savvy and experienced than me?

Yes and no. Experienced investors can be very ruthless in competition. But that’s not necessarily a downside for new investors. Ever read the book David and Goliath by Malcolm Gladwell? Read it. Think outside the box. It’s not what you know, it’s who you know. And keep this in mind when you are making friends in real estate.


“Everybody pulls for David. Nobody roots for Goliath.


Even as a beginner in real estate, I beat out a lot more experienced investors because of the personal relationships I’ve built. More on that later.

Lastly, the extremely savvy investors have typically graduated to buying larger apartment complexes. Measly little 1 – 4 unit properties are small potatoes for major league real estate investors.

Easier To Emotionally Evaluate

There are tons of metrics to consider when evaluating a new investment property. Above all, everything needs to add up to making good return on investment. If you’re not making money, there’s no use investing in the first place.

But, as humans, it’s very easy to think with our emotions, instead of using our investing brain.

When looking at single-family homes it’s very easy to picture yourself living there. Real estate can be romantic. 

“Spacious kitchen, nice bathroom, my kids would enjoy playing in this yard…”

5am Joel Model

My wife and I used to model. A couple of our photos made it on to 🙂


This type of thinking makes people over-pay for properties. It makes people overlook the core mathematics. (I’ve gotten emotional about real estate before, and it cost me a lot)

With multi-family properties, it’s more difficult to picture yourself living there. It’s about the raw math and numbers. It’s hard to fall in love with a Fourplex.

Finding the Deal

Probably the coolest detail in this whole story is that this Fourplex package was found and purchased off-market, meaning nothing was listed for sale publicly on the MLS and I was the only investor who knew about it. No competition, no worries.

One of the biggest mistakes new investors make is thinking that services like Zillow, Redfin, and the MLS are the only ways to find properties for sale. Even worse, most people sit back and think that awesome deals will magically appear in their inbox without effort on their part.

So how did I find my deal? I simply asked.


“Ask, and you shall receive.”


A few years back when I started researching Texas, I was still pretty new to real estate investing and didn’t have any contacts.

Since I didn’t know anyone, I started just making a lot of phone calls to realtors, property managers, and friends of friends. I began each call with a standard introduction, then asked them the same set of questions.

At the very end of each phone call, I would finish with this:

“Before we get off the phone, I’m curious if you know any successful real estate investors or old friends that are looking to sell some of their investment properties. I’m growing my portfolio, and want to learn from others who have had success in the area. Can you connect me with anyone like this?”

As the years went on, I repeated this same statement/question over and over to the same sets of people. I did this to stay front of mind and so that I might be the first phone call if they found anyone interested in selling a portfolio of properties.

The Opportunity

In March 2017, I got an email out of the blue from a property manager in TX. She said that one of her older family members was selling a Fourplex and will be listing it soon on the market. I jumped at the opportunity! I quickly asked if she could set up an introduction phone call with the seller.

The next day I had a call with the seller, and learned that he was actually selling 2 Fourplexes (not 1), and I offered to buy them both. We made a verbal deal right there and then. We settled on $195k per building.


So is that, like, a good deal or something?


Oh yeah. Shortly after we made the agreement, the seller realized his mistake. We agreed on $195k each, and later that very day the exact same property next door listed and sold immediately for $289k ALL CASH.

I was effectively buying each building for $94k less than what they were worth!

The seller and I eventually became good friends. I later found out he had 2 more fourplexes on the same block (total of 4), and I agreed to buy those also. Still under market value, we agreed on $250k each building. 🙂

Timeline and Financing Overview

Since I didn’t have the money to buy the fourplexes all at once, I asked the seller if I could purchase one at a time. We ended up agreeing to purchase 2 in 2017, and 2 in 2018. This worked better for me so I could work out financing, and worked better for the seller and his ‘tax reasons’.

The first purchase was relatively simple. I used financing from a large, national bank, and qualified fairly easily. Most lenders make you put a minimum of 25% down for investment properties.

The second purchase took a little longer. Large, national banks become difficult to work with when you have 4,5,6+ mortgages, and the documentation required is more complex.

Red tape, miscommunication, and lack of bloody common sense held up the second deal a little. It took around 50 days to close with lending delays.

In Search of More Flexible Lending

Later in 2017 I started to get smarter about financing. Instead of calling just a few banks to compare rates etc…, I scheduled calls and meetings with about 20 banks and lenders. Again, I asked them all the same set of questions, and gauged who was the most investor friendly.

I ended up finding a niche, national lender who came highly recommended by the Bigger Pockets community.  One of the best things about this lender was they took into account rental income from the new property I purchasing.

Because these fourplexes are cash-flow positive (rent income exceeds the mortgage/tax/insurance payment), investor-friendly banks see them as good investment opportunities, and want to partner up.

The fourth and final fourplex was the easiest. I worked out a win-win situation with the existing owner for seller-financing. This way I didn’t have to go through all the bank/lender process, and the seller is able to make a good % return every month on his money.

I’ve never done a seller-financing deal before this, but it was very simple and we closed in less than 14 days.

Summary of Purchases Prices, Mortgage Terms, and Rental Incomes

The table below provides a summary of the purchase price for each fourplex along with the mortgage terms and rental incomes:

Purchase Price Rental Income Mtg Term Rate % P.I.T.I
F1 $195k $2585/m 30 years 4.875% $1245/m
F2 $195k $2625/m 30 Years 4.500% $1246/m
F3 $250k $2515/m 30 Years 5.125% $1509/m
F4 $250k $2505/m 25 / 5 Term 5.500% $1817/m
TOTALS $890k $10,230/m n/a n/a $5817/m

What Now?

So now we have 4 fourplexes, all with separate loans, all bought under market value, all paying for themselves with some nice positive cash flow each month.

It’s the slow road to building wealth. What now?

I have a few problems:

  1. I now have a lot of “equity” tied up in these properties. Sure, the money is working hard for me, but could it work even harder??
  2. As time goes on, my return on equity will continue to decrease. This is because the debt is being paid down. Remember, this is good debt – it actually hurts me to pay down good debt. (example here)
  3. I have to save up new cash all over again to buy any more properties. This takes a long time to save.

I want to keep expanding my real estate portfolio, but it sucks that I have to save $50k – $75k for a down payment each time to buy new properties.  Being that these fourplexes were purchased for less than their appraised value, I might be able to tap into the equity and withdraw money.

A Hypothetical “Bundle” Refinance:

Let’s say I can find an investment bank who will give me one new large loan to take the place of the 4 x small loans. If they can loan against all 4 x buildings in one bundle, and offer a LVR of 75%, we could potentially withdraw a large chunk of cash to purchase a more investment properties.

That’s something to work on in the future. Until then, you can find me on the slow road to building wealth 🙂

. . .

It has been 12 months since Joel officially posted on this topic. For an update on how he currently manages his properties and his accounting, check out his latest post here.

Republished with the permission of 5AM Joel.

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