One of the best-kept secrets in real estate investing is hiding in plain sight: duplexes, triplexes, and fourplexes. These 2-4 unit properties are legally classified as residential real estate, not commercial. That means you can finance them with the same loan products used to buy a single-family home — lower down payments, more lenient qualification standards, and better interest rates than commercial lending.
Once you hit five units, the rules change completely. You're in commercial lending territory, which means higher rates, larger down payments, and underwriting based heavily on the property's income. The jump from four units to five is a different world.
If you plan to live in one of the units, FHA financing is on the table:
Important catch for 3-4 unit FHA loans: the self-sufficiency test requires that 75% of the gross rental income from all units covers the monthly PITI payment. For duplexes, this test doesn't apply — one reason many first-time house-hackers start with a two-unit property.
Conventional loans allow you to count 75% of market rent (as established by an appraiser) toward your qualifying income — which can make a significant difference in how much property you can afford.
For investors who don't want their personal income scrutinized, DSCR loans qualify based on the property's income relative to the mortgage payment. Typically require 20-25% down and a solid credit score, with rates running a bit higher than conventional.
Multi-family is one of my favorite areas because the math often works better than people expect. Reach out and let's take a look at your deal together.
