Duane Duggan, Realtor and Author RE/MAX of Boulder

When most people think of buying a home, condos, townhouses, or single-family houses usually come to mind. It is very rare that someone thinks of buying a duplex, triplex, or a fourplex in an owner-occupied situation. However, it could turn out to be an incredible opportunity for the right person or couple. Here’s why!

Low down payment available with FHA financing

Typically, when someone buys a two- to four-unit as a non-owner-occupied investment, there is a large down payment required, usually in the 25- to 30- percent range. This down payment amount usually makes the thought of this insurmountable for most.

Welcome to FHA owner-occupied financing for two- to four-units. If you live in one of the units, you can purchase it with a down payment of 3-½ percent down, plus closing costs.

Living in a multi-unit may not be everyone’s idea of a long-term, dream, forever home, but it is a great way to start a real estate investment portfolio. Due to FHA loan limits, it doesn’t work in all markets.

The FHA loan limits (not purchase price) in Boulder County are as follows:

  • Duplex $824,450
  • Triplex $996,550
  • Fourplex $1,238,500

Loan limits are different from county to county across the country so be sure to check for the county you are thinking of investing in.


As with any investment, there is no guarantee of gains. In most cases over time, real estate has gone up in value. Let’s say real estate might go up 3 percent per year in value. If a first-time homebuyer buys a single-family home for $300,000 and it goes up 3 percent per year for five years, it has increased in value to $347,782. The increased value amounts to $47,782.

Instead, let’s say the first-time homebuyer purchases a four-unit for $800,000 and the value goes up 3 percent for five years, then the value has increased to $927,419. The increased value amounts to $127,419. That amounts to $79,637 more than buying a single-family home. Is there more risk? Sure, the tenants could all move out and suddenly there is no income from the other units. Having a professional property manager with the other three units can help reduce that risk.

Debt reduction

Anytime you purchase real estate with a mortgage loan, each month you make a monthly payment, the amount owed on the loan goes down a little bit. Over time, equity continues to build. To make a comparison using the example above over a five-year period, here is how it looks:

A $300,000 purchase of a single-family home or townhome/condo with an FHA loan of $289,500 (without financing mortgage insurance) at 4% will reduce the principal by $27,654. A loan on an $800,000 4-unit would start out at $772,000 (without financing mortgage insurance), and the principal would be reduced by $73,745,45. The principal reduction over five years would amount to $46,091 or $18,437 more equity built up than the single-family home example. The actual interest rate at the time of purchase affects these numbers.

Cash flow

The ultimate goal of owning real estate is to provide cash flow to live on. In the early years for the example above, this can be difficult. If you are considering a purchase like this, you need to look at exact numbers with your REALTOR®, mortgage, and tax professionals. You will need to compare your monthly outflow of cash buying a single-family home compared to what cash flow would look like if you bought a 4 unit for living in one unit and renting out the other three units. Let’s look at these examples below.

$800,000 four-unit purchase (Longmont would be the most likely in Boulder County):

  • Down payment of $28,000 plus closing costs
  • Loan of $772,000 at 4%, 30-year amortization schedule
  • Live in one unit, rent the other three units at $1,200 per month or $3,600 a month coming in
  • Principal and interest monthly payment ($3,685)
  • Expense estimate ($1,440)

Expenses on a four-unit might run about 30% of gross rent. In our example above, there is $3,600 coming in from three units. The owner-occupied unit value is assumed at $1,200 also. Therefore, a total rental value of $4,800 x .30 is $1,440. Actual expenses to review and total up should include a minimum of mortgage insurance, hazard insurance, taxes, utilities, property management and maintenance.

If numbers in this example proved to be true, the net outgo of buying a 4 unit, living in one, and renting the other three would be about $1,525.

Buying a single-family home or condo at $300,000:

  • Down payment of $10,500 plus closing costs
  • Loan amount of $289,500 at 4%, 30-year amortization schedule
  • Principal and interest monthly payment: $1,379
  • Taxes, mortgage insurance, hazard Insurance, maintenance, and maybe HOA might total $450.

In this example total cash outgo could be estimated at about $1,829 a month.

Tax benefit possibilities

When you invest in real estate, it is important to review tax benefits with a tax professional who can not only show you the tax benefits of being a homeowner, but also show you the possible tax benefits of being a rental property owner. One of the most important concepts to review is the concept of depreciation. It’s a tax deduction you get, but don’t have to spend money to get it. Depreciation can result in tax savings which ultimately improves the cash flow of the investment. Again, your tax professional can run an analysis for you.

Steps to move forward with this idea:

  1. Visit with your licensed mortgage loan officer and see if you qualify
  2. Visit with your tax professional to review any tax benefits
  3. Meet with your Realtor® to determine the most appropriate properties to view and make offers on

Real estate has proven to one of the best wealth building investment opportunities. Most people just don’t make the first step to get started. With the right planning, buying a multi-unit and living in one of the units could be a great way to start your real estate investment portfolio.

By Duane Duggan. Duane has been a Realtor for RE/MAX of Boulder in Colorado since 1982. Living the life of a Realtor and being immersed in real estate led to the inception of his book, Realtor for Life. For questions, e-mail [email protected], call 303.441.5611 or visit boulderco.com.