Why investors look at 2–4 units
- Several rents, one purchase. Income comes from more than one tenant, so one vacancy doesn’t take your rent to zero.
- Shared costs. One roof, one lot and often one insurance policy cover several units.
- Residential financing. Properties with up to four units are generally financed with residential loans rather than commercial loans. Terms differ from single-family loans, so ask your lender early.
Living in one unit
Some buyers live in one unit and rent the others. Loan programs for owner-occupied 2–4 unit properties can have different down payment and qualification rules than loans for pure investment property, and they usually come with occupancy requirements. A lender can tell you which programs fit and what rental income they will count.
What’s different from a single-family rental
- Utilities: check whether units have separate meters for electricity, gas and water. If not, the owner may pay more of the bills.
- More turnover and wear: more tenants means more move-outs, more make-ready work and more shared-area upkeep.
- Tenant law: older multifamily buildings are generally covered by California’s Tenant Protection Act, which caps rent increases and requires just cause for many evictions. Existing leases and rents come with the purchase.
- Permits: confirm that every unit is legal. Unpermitted units, garage conversions and ADUs added without permits can create code, insurance and financing problems.
Due diligence checklist
- Current leases, rent amounts, deposits and payment history for every unit
- Which utilities and services the owner pays
- Building permits and the legal unit count
- Condition of shared systems: roof, plumbing, electrical panels, water heaters, parking and laundry
- Insurance quote for the full building
- Property tax estimate at your purchase price, plus any special assessments
- Whether current rents are below market, and what the law allows you to change
Run the numbers per unit and for the whole building
Analyze the property the same way you would a single rental: realistic rents, a vacancy allowance, every operating expense, then financing. Our rental analysis guide has the formulas and a worked example.