One of the more popular investment vehicles in the Phoenix real estate market has been the four-plex – four units under a common roof. (There also are both duplexes and tri-plexes available in the area.)
Four-plexes are attractive to investors because there’s additional cash flow – the rent from four units, often for a price similar to a larger single-family home – and because a four-plex can be purchased with traditional residential financing.
At the same time, a four-plex also can require additional maintenance beyond what you would find with a single-family home, again because there are four separate units. There may only be one roof but there are four dishwashers, four electrical systems, four sets of plumbing, etc.
There are a few things to consider before purchasing a four-plex in the Phoenix area:
1) Location: Four-plexes are not widespread in the Valley. For the most part, the units are located in Phoenix, Mesa and Glendale with a few others spread across Maricopa County.
2) Age: There are relatively few newer four-plex projects in Phoenix. Most of the units are 20 years old, or possible older depending on the location. The primary reason is the Phoenix area is dominated by large-scale apartment complexes – on the scale of several hundred units in a given development. Rents are higher in these complexes than in the typical four-plex but residents are offered a wide array of amenities including community pools, fitness centers, business centers and childrens’ playgrounds.
Many renters seem to prefer either a single-family detached home or these large-scale apartment complexes, assuming they can afford the rent. And that phenomenon leads to the following …
3) Do you want an HOA? Many buyers are adverse to the concept of an HOA because it tends to limit what an owner can do with their own property. But HOAs are a somewhat different animal when it comes to multi-family housing.
HOA fees for multi-family homes tend to be steep, often into the thousands of dollars, but they usually include expenses for sewer, water and trash pickup. In some cases they may also cover maintenance costs for the exterior of the units and common areas.
Most commonly, HOA fees are tied to four-plexes located in developments that appear to the public to be apartment complexes. For example, there is a development in northern Phoenix along the Greenway Parkway that looks to be an apartment complex, down to the rental office in the front. But it isn’t, at least not in the usual sense. The development is a collection of four-plex units – even if the tenants don’t realize it.
Not only are many of the upkeep and fixed costs covered by the HOA in such an area, but rents also tend to be a little higher – priced more akin to the rents in a large-scale complex rather than those for a four-plex.
One quick side note … there are four-plexes and other multi-family units in many of the active adult communities in the Phoenix real estate market. However, nearly all of these are marketed and sold as single units rather than as a multi-family unit as a whole.
As always, if you have further questions about multi-family properties or any other aspect of the Phoenix real estate market, feel free to call or e-mail me and I’ll be happy to help.
[tags]multi-family housing, four-plexes, Phoenix real estate[/tags]