The Economics of Owning a Fourplex

A fourplex looks like the cheapest way into real estate. $20,000 down, and three tenants supposedly pay your mortgage. But that "tenants pay your mortgage" math skips vacancy, reserves, and one roof over four units — and it's why some owners refinance into a second building, while others sell at a $60,000 loss. This is the real economics of owning a fourplex. Most people assume the pitch is simple: four rent checks cover one mortgage payment, and you live for free. The truth is that math only works with zero vacancies, forever — and a single empty unit is 25% of your income gone overnight, not a rounding error like it would be in a real apartment building. We break down the FHA self-sufficiency test that quietly kills "cheap" deals, the four hidden layers of return that actually make fourplexes profitable (rent is the least important one), why a cash-out refinance can hand back your entire down payment tax-free, and two real buyers — one who turned $20,300 into eight units, and one who lost $60,000 buying sight unseen. Would you house-hack a fourplex, or does living next to your tenants sound like a nightmare? Let us know below. If you enjoyed this, hit like and subscribe for more on the economics behind everything. 📑 VIDEO CHAPTERS 0:00 Intro 3:04 The obvious pitch, demolished 7:30 Cost of entry 11:10 The real mechanism 15:10 Hidden costs 18:06 Named examples 24:56 The profit math ――――――――――――――― SOURCES ――――――――――――――― ▸ FHA 3.5% down payment requirement on 1-4 unit owner-occupied properties: U.S. Department of Housing and Urban Development (HUD), 2024 ▸ FHA "self-sufficiency test" for 3-4 unit properties requiring net rental income to cover 75% of PITI: HUD Handbook 4000.1, 2024 ▸ House hacking strategy and cash-out refinance (BRRRR-style) mechanics: BiggerPockets, 2024 ▸ Typical vacancy rate reserves (5%) and maintenance/capex reserve guidelines (10% each) for small multifamily: BiggerPockets / National Apartment Association operating benchmarks, 2023 ▸ The "50% Rule" for estimating rental property operating expenses: BiggerPockets, 2023 ▸ Multifamily properties of 5+ units valued via income/cap rate approach vs. 1-4 units valued via comparable sales: Appraisal Institute, 2023 ▸ Regional home price disparities (Midwest vs. Sunbelt/coastal metros) for multifamily properties: Zillow Research, 2024 ▸ Average 30-year mortgage interest rates used in payment calculations: Freddie Mac Primary Mortgage Market Survey, 2024 #RealEstateInvesting #Fourplex #HouseHacking #PassiveIncome #RealEstate #EconomicsExplained