Four Families or Fourplexs’ are apartment buildings that contain four units. They are often touted as good buys or great investments, but caution must be maintained when purchasing such property. On the surface, these properties are desirable but they have many hidden costs associated with them. As such, they are predominantly sold by real estate agents who have very little expertise or experience.
Buyers of Four Families can be generally categorized as inexperienced and over-conservative. The inexperienced tend to go for Four Families because of their inexperience in gauging cash flow. Their decision to buy is solely based on comparing the price they have been offered to the price others have paid for their properties. Meaning, one asks the question: Is my apartment cheaper than theirs is? The over-conservative types, however, know exactly what they are getting into but their reasoning for the purchase is very different. They look for an easy way to manage property that gives them a somewhat guaranteed, albeit slow, return on investment.
The problems in owning a Four Families property are varied. Fees are payable to the bank, the accountant, the advertising process, etc. Apart from these, there are wear & tear as well as replacement costs associated with heating, roofing, etc. Therefore, when you consider all these “hidden” costs, they are an additional burden on the mortgage payments that have to be made. The Four Families property is not worth at the price it is being offered. It only makes sense to someone who has enough liquid cash to make a massive down payment, so that the cash flow can be effectively managed.