Buy A Four-Plex Building – Keith Weinhold
If you are looking to improve your financial wealth from poor or middle class and into wealth, you must think big. After your mindset is ready, follow up with strategy and action. I want to give you an actionable way to build your wealth: invest in a four-plex building. That is exactly how I started investing in real estate. I moved up from a rent paying tenant to a four-plex owner collecting rents. You can go from paying to collecting too.
So, why buy 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.”
You do not need any formal education, degree, or qualification course in order to do this. Now, if you have bought into the idea and think it is great, you are probably asking yourself if you can afford such an investment. 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 what launched me into wealth. I grew equity on an entire building rather than just one single-family home. However, 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 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.
Here’s to your wealth and success!
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