A fourplex is a single residential building divided into four separate, self-contained living units, each with its own kitchen, bathroom, and living space. It sits on the residential side of a hard line drawn by federal lenders: buildings with one to four units qualify for standard residential mortgages, while five units and up cross into commercial real estate.1Office of Thrift Supervision. One- to Four-Family Residential Real Estate Lending That single-unit difference is why fourplexes attract first-time investors: you can buy a small apartment building using the same loan programs available for a single-family home.
How a Fourplex Is Configured
Each unit has to function as a complete, independent home. Layouts vary widely, from stacked apartments with two units per floor, to side-by-side townhouse arrangements, to hybrids. Older buildings sometimes route tenants through a shared lobby or stairwell; most modern fourplexes give every unit its own exterior entrance.
Utility metering is the practical detail worth checking before you buy. Separately metered electric and gas mean each tenant pays their own consumption. When meters are shared, the owner absorbs those costs, and rents have to be set higher to compensate. Separate metering is a meaningful expense reducer.
The unit count itself is the definitional line. Add a fifth unit and you’re no longer buying a fourplex; you’re buying commercial multifamily, with different loan products, stricter underwriting, larger down payments, and shorter amortization.
How Fourplexes Are Financed
Because a fourplex counts as residential, the loan options depend heavily on whether you plan to live in one of the units.
Owner-Occupied Loans
If you occupy one unit as your primary residence, the property qualifies for the same low-down-payment programs that finance single-family homes. FHA financing allows a down payment as low as 3.5% with a qualifying credit score. VA-eligible borrowers can buy with zero down. Conventional loans through Fannie Mae and Freddie Mac generally require 5% down on owner-occupied two-to-four-unit properties. All of these come with 30-year fixed-rate terms.
FHA loans on three- and four-unit properties add a step called the self-sufficiency test. The property’s net rental income (calculated as 75% of gross rents to account for vacancy and maintenance) must cover the full monthly mortgage payment, including principal, interest, taxes, insurance, and FHA mortgage insurance. Fail the test and the loan is denied, no matter how strong your personal income or credit.
Investment Property Loans
Buying a fourplex without living in any unit keeps you in residential lending but on tougher terms. Conventional lenders typically require 25% down for a non-owner-occupied fourplex, and the interest rate runs noticeably higher than what an owner-occupant pays.
One qualifying tool helps: lenders can count up to 75% of the property’s projected rental income toward your debt-to-income ratio.2Fannie Mae. Fannie Mae Selling Guide – Rental Income The 25% haircut covers assumed vacancy and maintenance; the rest can be the difference between qualifying and falling short. Lenders establish the rental figure using a market rent appraisal or existing leases.
2026 Loan Limits
Conforming loan limits cap what residential mortgage programs will finance. For 2026, the baseline conforming limit for a one-unit property is $832,750 in most of the country, and the four-unit limit scales up to $1,601,750 in standard-cost areas.3Federal Housing Finance Agency. FHFA Announces Conforming Loan Limit Values for 2026 High-cost markets carry higher ceilings. The 2026 FHA floor limit for a four-unit property is $1,041,125.4U.S. Department of Housing and Urban Development. HUD Federal Housing Administration Announces 2026 Loan Limits Prices above these thresholds require a jumbo loan with stricter qualification standards and a larger down payment.
House Hacking: Why Most Buyers Choose a Fourplex
The strategy that makes fourplexes so appealing is straightforward: live in one unit and rent out the other three. If the three rented units cover a large share of the mortgage, taxes, and insurance, your personal housing cost can drop to nearly nothing while you build equity in a property worth considerably more than an equivalent single-family home.
The residential loan programs are what make the math work. As an owner-occupant, you access FHA, VA, and low-down-payment conventional financing that pure investors never see. You’re buying a small apartment building on a homeowner’s mortgage.
The income diversification helps, too. A single-family rental drops to zero income the moment its tenant leaves. Lose one tenant in a fourplex and you still collect from three units. A 25% income reduction is manageable in most scenarios and makes the property far more resilient to vacancies and late payments.
Tax Treatment of a Fourplex
Depreciation
Depreciation is the most valuable tax benefit in rental real estate. The IRS lets you deduct the cost of the building (not the land) over a 27.5-year recovery period using the straight-line method.5Internal Revenue Service. Publication 527 – Residential Rental Property It’s a paper loss. You deduct it against rental income without actually spending the cash, which lowers your taxable income without touching your bank balance.
Take a fourplex purchased at $600,000 with land worth $100,000. The depreciable basis is $500,000, which produces roughly $18,180 per year in deductions over 27.5 years. If you live in one unit and rent three, you can only depreciate the rental portion (75% here), or about $13,635 annually. House hackers need to track that allocation carefully.
Qualified Business Income Deduction
Rental income from a fourplex may qualify for the Section 199A qualified business income deduction, which allows eligible taxpayers to deduct up to 20% of qualified business income.6Internal Revenue Service. Qualified Business Income Deduction The IRS provides a safe harbor for rental real estate that requires at least 250 hours of rental services per year and separate books and records for each rental enterprise.7Internal Revenue Service. Revenue Procedure 2019-38 Reaching 250 hours a year is realistic for a hands-on fourplex owner handling tenant communications, maintenance coordination, and bookkeeping. Rental activity that misses the safe harbor may still qualify if it rises to the level of a trade or business under general tax law, but the safe harbor gives more certainty.
Depreciation Recapture at Sale
Depreciation saves tax every year you own the property, but the IRS collects some of that benefit back when you sell. All the depreciation you claimed (or should have claimed) is recaptured and taxed at a maximum federal rate of 25%, on top of any capital gains tax on the profit itself.8Internal Revenue Service. Depreciation and Recapture Any gain above the recaptured amount is taxed at the standard long-term capital gains rates of 0%, 15%, or 20%.
One way to defer the recapture bill entirely is a Section 1031 like-kind exchange. You sell the fourplex and reinvest the proceeds into another qualifying investment property, identifying a replacement within 45 days of the sale and closing on it within 180 days.9Internal Revenue Service. Like-Kind Exchanges Under IRC Section 1031 Those deadlines are strict. Most investors line up replacement properties before listing the fourplex. A qualified intermediary must hold the sale proceeds during the exchange; touching the money yourself disqualifies the transaction.
Landlord Obligations
Owning a fourplex makes you a landlord. The federal Fair Housing Act prohibits discrimination based on race, color, national origin, religion, sex, familial status, or disability in nearly all housing transactions. A narrow exemption exists for owner-occupied buildings with no more than four units, sometimes called the Mrs. Murphy exemption, which allows the owner to apply certain personal preferences when selecting tenants.10GovInfo. 42 USC 3603 – Effective Date of Subchapter
The exemption is narrower than most people assume. It does not permit discriminatory advertising.11U.S. Department of Housing and Urban Development. Fair Housing – Equal Opportunity for All Using a real estate agent or property manager to find tenants eliminates the exemption entirely. Many states and cities also add protections for sexual orientation, gender identity, source of income, or criminal history. Screening every applicant with the same documented criteria is the safest approach whether or not you technically qualify.
Landlords also have to comply with local habitability standards, security deposit rules, lease disclosure requirements, and eviction procedures. These vary significantly. Security deposit limits range from one month’s rent to no statutory cap. Eviction timelines and required notices differ just as widely. Learn your local landlord-tenant code before collecting your first rent check, or hire a property manager who already knows it.
Insurance
A standard homeowners policy does not cover a rental property. A fourplex needs a landlord or dwelling-fire policy covering property damage, liability for injuries on the premises, and lost rental income when a covered event makes a unit uninhabitable. The lost-income coverage alone can prevent financial disaster if a fire or flood takes units offline for months. If you house hack, ask your insurer how to structure coverage for the rental units and your own personal property; some carriers write one policy, others require separate coverages. Umbrella liability is worth considering, since four units multiply the number of people who might file a claim.
Zoning: Where a Fourplex Can Legally Exist
Not every lot can hold a fourplex. Local zoning codes cap the number of dwelling units per parcel, and many residential neighborhoods are restricted to single-family or duplex construction. Fourplexes are generally allowed only in zones designated for multi-family use, and minimum lot sizes, setbacks, and parking mandates can make one impractical even where zoning technically permits it. Some jurisdictions have recently loosened these rules to allow more multi-unit housing in previously single-family neighborhoods. Before you commit to a lot or an existing building, confirm the current zoning designation and whether the property is permitted by right.