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How Much Does It Cost to Build a 4 Plex. To Build or to Buy?

Building a 4-plex or Buying One. Which is the Right Choice

By | 2020-01-10T11:57:36+00:00 January 10th, 2020|Hard Money Blogs|Comments Off on Building a 4-plex or Buying One. Which is the Right Choice

How Much Does It Cost to Build a 4 Plex? For those keen on building a 4 plex, the matter of cost can vary greatly depending on destination. Yet, it goes without saying that in recent years the 4 plex has become a most sought after project.

There is a huge variation on offer when building these residential dwellings. And the profit from them when completed is fantastic.

Many believe that 4 plexes are the perfect choice to get onto the property investing ladder. In this article, we take a look at what 4 plexes are, considering the probabilities of the costs involved. We also consider the advantages and potential disadvantages of this property route. 

How Much Does It Cost to Build a 4 Plex – What Is a 4 Plex anyway?

For those new to the term, a 4 plex is simply a small residential building type that has four apartments.

4 Plexes are often referred to by other terms, the more common of them being a multi-family home. But, visually, they will tend to look like that of a larger house – as opposed to an apartment block.

Each plex is a residential dwelling and generally consists of four distinct living areas. Each living areas separated by either floors or walls or even both.

But, 4 plexes, when rented out for income, are considered solely as commercial property. This is because only property larger than a 4 plex is considered as commercial real estate property.

The Potential Costs Involved in Building a 4 Plex

how much does it cost to build a 4 plex

Most people looking to build 4 plexes prefer to look at purchasing a current property and converting it into a 4 plex. This allows you to keep the costs down as well as avoiding red tape regarding construction, permits, and even different loan types for finance.

For those looking to build 4 plexes from scratch, it can be a harder project to take on as it’s difficult to find zones for such units.  Alongside this, building and planning can become harder to obtain when attempting such builds.

Ultimately, when you look at the costs involved in building a 4 plex, you’ll need to get a good idea of what is involved with such an extensive project.

Exact figures are not possible due to variables such as location, districts, materials, and professional fees. Though we can create a practical picture of where the money will initially be spent.

The Land You Want to Build On

Unless you currently own the land in question, your first cost is going to be land for your 4 plex. For those looking to build from scratch, you’ll need a figure here of cost per square foot for this initial cost.

The Building You Want to Convert

If you aren’t starting from scratch, unless you already own the building, this will be your first cost. If you already have access to the building you wish to convert, this won’t factor. However, if not, you’ll need to consider the purchase price of your intended building.

Many real estate investors and contractors rely on hard money loans or direct loans to fund their projects as these provide fast source of funds without much paperwork and time.

The Services of an Architect

This is the person/people who will look at the scope of the project ahead. They will then provide you with a preliminary budget. Creating a plan of the design, they will also help you when it comes to liaising with the right departments. This is especially so for permits as well as advising contractors on the necessary details. The costs here are in the form of the architect’s time, which should ideally be invoiced as a fixed rate.

A Contractor

This is the person or indeed company who will carry out the job of building your 4 plex. They will use the required number of subcontractors to provide the materials, deliver on the plans, and finalize your build. It’s strongly advised that you aim for a figure here and get a quote. This can be used by the contractors to determine when they may need to stop and converse with you once again, should more time be required. Be wary of selecting those contractors that want paying by the hour here.

Other Costs Involved

Depending on how much you’re willing to commit to your contractor, you may want to take on as much of the build as you can do so on your own. If so, there will still be the inevitable cost of time of installation alongside the physical outlay of purchasing such things as:

  • Electrics
  • Windows
  • Doors
  • Heating
  • Cooling
  • Lighting
  • Insulation
  • Interior items
  • Exterior items
  • Carpets
  • General flooring
  • Cabinets
  • Paints
  • Hardware
  • Built-in appliances
  • Countertops
  • Roofing
  • Fascia
  • Plumbing / Septic systems
  • Foundations
  • Cleaning

In addition to such purchase costs, you should also be aware of the potential of aspects such as:

  • Utility connection costs
  • Insurance costs
  • Delayed build costs
  • Landscaping costs
  • Allowances/contingences

The Many Advantages of Taking on a 4 Plex

Successful 4 Plex owners will lay claim to there being many advantages to this concept:

  • Perhaps most popular is the financial aspect of 4 plexes. Many profitable owners of these builds will claim it’s easier to obtain conventional financing via a bank. Thus, a low and modest down payment is a huge bonus for many investors here.
  • Better still, an additional benefit not often discussed by many is the existing rent figure from your units. Many banks will consider this as a qualifying income on your loan application. Thus, you can look toward as much as 75% of this income when applying!
  • The loss of one rental income in one plex will not usually significantly impact your finances. Whereas in a house, should your renter move out – along with them goes their income. With a 4 plex, you’ll still continue to earn from your others until you fill that empty unit. Furthermore, it’s hardly likely that you’ll ever find all of your units empty all at the one time.
  • 4 Plexes can be a great introduction to the world of commercial building success. Once you’ve got to grips with your 4 plex, you’ll learn and retain some of the most valuable skills, strategies, and tactics for further employments. Thus, successful investors often then transfer their knowledge to the wider property market.

Potential Disadvantages of Taking on a 4 Plex

As with all financial investments, there’s cautionary advice you may want to consider beforehand. When considering a 4 plex, this can include:

  • Finding a piece of land and working from scratch is harder to do when it comes to 4 plexes.
  • The costs can easily increase dramatically once the work gets underway, and curveballs are thrown your way. This means you may overrun if you don’t have a contingency plan in place.
  • You may find yourself taking on more work with each plex if you decide to keep the dwelling and run it as a business. Thus, more tenants equal more potential hassle.
  • If you have no other choice than to live in one of your plexes initially, you may well find the constraint of apartment living a struggle. Living with your tenants as their landlord means you may never quite relax at home. You may also find yourself at the mercy of some of the needier of them!
  • Though considered easier to let out, rental income is not a guarantee of a 4 plex. Thus, you may well find there are times you can’t find tenants for all your units.

Final Thoughts on how much does it Cost to build a 4 Plex

In conclusion, 4 plexes are only slightly more involved than that of single properties. Yet, the rewards undoubtedly pay off more. Thus, when done properly, the profit potential from a multi-unit investment is well-received.

Though – they certainly aren’t for everyone! But, for those prepared to work at it and willing to put in the time and effort, financial freedom, later on, is a greater possibility.

So, a 4 plex could just be the more profitable of ways to get you started with your real estate ventures.

About the Author:

Yanni Raz is The Founder and CEO of HML Investments, with over 15 years in the real estate and hard money lending industry, Yanni is an expert in real estate investing, trust deed investments and more.