Here we go – I’m so excited to help you build wealth today!
If you want to improve yourself from poor or middle class and into wealth, you need to think big. Then follow up on that abundant thought with strategy and action.
Here’s a specific, actionable way for your to build wealth: buy a four-plex building.
It’s exactly how I started investing in real estate. I went from a rent-paying tenant one day to a four-plex owner collecting rents the very next day!
Why a four-plex? Well, for one thing, this four-unit building is the largest building you can buy with a Federal Housing Administration (FHA) loan. You can use an FHA loan this way:
- Buy a single-family home, duplex, triplex, or four-plex.
- Use just a 3.5% down payment. You can even borrow this from family!
- Your credit score may be as low as 580.
- You must reside in one unit at least twelve months, called “owner-occupying.”
In order to do this, you don’t need any formal education, degree, or qualification course.
But you might be thinking: “That’s great. But I can’t afford it.”
Instead, ask yourself one of Rich Dad’s favorite questions: “How can I afford it?”
Here’s how: you can use 75% of the building’s existing tenants’ rent income toward your qualification before you even purchase the property!
You see, you want to focus on using other people’s money to ethically build wealth for yourself. With a four-plex that’s bought right, you’re actually using other people’s money three ways at the same time!
- Tenant’s Money = Your Qualification and Ongoing Monthly Income
- Bank’s Money = To Control The Building and Use Leverage
- Government’s Money = Generous Tax Incentives
Buying a four-plex was my springboard to wealth. I grew equity on an entire building rather than just one single-family home. But there are some things to be careful for.
There is not a comprehensive list of cautions, but here are just a few guidelines to be mindful of:
- Buy in a market or neighborhood that has stable or growing employment nearby. You need to keep your building occupied with rent-paying tenants that have jobs.
- Find a four-plex whose four monthly rent incomes equal or exceed 1% of the purchase price. Example: $3,000+ monthly rent income on a $300,000 four-plex.
- Is this a neighborhood you feel safe in? Is it a neighborhood where a good manager will manage it after your move out and retain the asset?
- You will likely be self-managing your three tenants when you live there. You will almost certainly have “people problems.” It’s the classroom of life!
When you move out after a year or more of on-site residence, you just vacated one of the four units. So now rather than just three rent incomes, you’ve got four! This is often when you become “cash flow positive.”
Very few people know about FHA loans and four-plex buildings. It’s not a certain path to wealth. Investing involves risk. But it greatly increases your chances.
Buying a four-plex with an FHA loan is a specific, actionable, idea. Ideas are like a little hinge. Little hinges open big doors.
Will you open your big door and act?
If you do, your four-plex means you’re actually starting out larger than the smaller properties that moguls Robert Kiyosaki, Kim Kiyosaki, and Ken McElroy all began with. Think big!
To have wealth, you need to think differently and act. Expand your comfort zone. Be bold.
If you want to know more, I completely devote Episodes 44 and 45 of the Get Rich Education podcast to the subject of how you can start out big with a four-plex, just like I did.
If you have a 25% down payment and seek a brand new construction four-plex, visit: www.GetRichEducation.com/FourPlex
Here’s to your wealth and success!
Thought getting your money to work for you creates wealth? It doesn’t! That’s a myth. My one-hour investing video course is now 100% free: Real Estate Pays 5 Ways. For a limited time, you can learn how wealth is really created, here.
How Can I buy a 4 plex ?
If you’re not planning to live in the four-plex, it’s a 25% down payment. Use Ridge Lending Group for the loan.
If you do plan to live in the four-plex at least twelve months, you can use an FHA loan for just a 3.5% down payment.
I explain this & much more about four-plexes in Get Rich Education Podcast episodes 44 and 45. Thanks for the question!
Thank you! This is easy to understand and to the point.
I am excited to watch episodes 44 and 45!
Is it possible to use fha to buy a property that has 2 duplexes on it?
firstname.lastname@example.org. I want to learn how to buy a FourPlex soon
Can i build a fourplex and still make money
Can I build a fourplex
There are certainly options to build a fourplex. We have a provider called the Fourplex Investment Group which builds brand new fourplexes. You can reach them by going to https://getricheducation.com/fourplex/. They are a great company to work with and offer a solid product!
I want to buy and live in one of my FourPlex
My credit score is 660, not great. I want to buy a 4-plex or larger. I put my second home on the market and will get almost 1.2 million in profit to invest. The property is fully paid. I have $250,000 cash to invest as well. I live in a different house that is also fully paid (I have two properties and am selling one).
Can I get a low interest loan and leave one unit vacant while I live in my house and not in one of the units? If I can’t get a low interest loan, how much should I expect to pay for an investment building. I would like to go large (more units) and get a property management company to manage it for me. What are your thought? I am a physician looking for added investment income as I look to retire in about 15 years. I am 53.
To obtain the desirable owner-occupied FHA 3.5 down payment financing, it is required that one live in one of the units for 12 months.
It’s pretty unlikely that one will check if you’re sleeping there at night, but it shouldn’t be rented to anyone else for 12 months. We’re proponents of following the rules.
As for non owner-occupied duplexes up four-plexes, it’s a 25% down payment requirement.
So once I’ve secured my 4plex via FHA, how do I use it to buy another 4plex?
Typically, one can only have one FHA loan at a time. There are extenuating conditions, for example, if you have a job transfer you may be able to get more than one. But that’s rare.
If you have one FHA four-plex and desire a second, you could:
1) Refinance your existing (first) four-plex into a conventional loan. Then get a new FHA loan.
2) Keep the FHA loan on your existing first four-plex and obtain a conventional loan for additional four-plexes. Conventional loans require a 20% down payment, and no owner-occupant requirement.
Hope that helps!
Would you ever recommend buying a 4-plex within a larger apartment community?
Yes, that can work. It’s often best if you (or your LLC) are the sole owner of the fourplex.
Thanks for the informative post. I live in an area (near NYC) where rent is almost never 1% (usually closer to 0.5%) of market prices, and even more rare are four-plexes that have a favorable rent to market ratio above 1%.
Any advice for someone looking to invest in a prime area like this? I haven’t modeled out the numbers entirely, but generally speaking, one would come out cash flow negative after all the expenses and mortgage payments, assuming one bought at valuations in line with today’s real estate market around my area.
I’m no expert, but I wouldn’t buy rental properties in NY/CA. Especially NYC. The laws are very tenant centric and landlord unfriendly in addition to the numbers not making any sense like you pointed out. In addition condos have so many restrictions in what you can build / modify. Coops are out of question for investments & so on.