A triplex or fourplex is analyzed like a single rental with more moving parts: several rents, bills that belong to the building, and stricter loan limits. Below, one fourplex goes from its rent roll to a month with a unit empty.
What paperwork do you need before you start?
Ask the seller for these before trusting any figure on the listing:
- The rent roll, a list of every unit with its rent, whether someone lives there, and when each lease ends.
- The leases themselves, to check the rent roll against. A rent with no signed lease behind it isn’t income yet.
- A year of the building’s bills: property taxes, insurance, water, sewer, trash and power for halls and outside lights.
- Who pays which utility, and whether each unit has its own meters.
Check the tax bill with the county too, since a new owner’s can differ from the seller’s. It’s one of seven costs a first pass tends to miss.
How do you turn a rent roll into income?
Add up what every unit rents for, whether or not it has a tenant today. That total is the building’s scheduled rent. Here’s the fourplex, priced at $460,000, or $115,000 a unit:
- Units 1 and 2 have two bedrooms and are leased at $1,650 each.
- Unit 3 has one bedroom and is leased at $1,300.
- Unit 4 has one bedroom and is empty. Similar units nearby rent for about $1,300.
That’s $5,900 a month of scheduled rent, an average of $1,475 a unit. Only $4,600 of it arrives now, because Unit 4 is empty.
Use the lease rents for the occupied units and today’s going rent for the empty one. A seller’s higher rent after updates is a forecast, not income that comes with the building; this duplex example shows how far apart the two can land.
Then set aside part of the rent for the weeks units sit empty between tenants. This example uses 7%. For scale, the Census Bureau put the national rental vacancy rate at 7.3% in the second quarter of 2026. Ask local property managers how long units like these take to let.
What does the owner of a small building pay for?
A small building’s owner pays for more than a house’s owner does, because some costs belong to the whole building. This fourplex pays:
- $5,800 a year in property taxes and $3,400 for insurance
- $425 a month for water, sewer, trash and the hall lights
- 10% of rent set aside for repairs and big repairs, such as a roof or a boiler
- 8% of rent for a property manager
Rent after the vacancy allowance, minus those costs, is net operating income, or NOI. It leaves the mortgage out on purpose, so it describes the building rather than your loan. For this fourplex it’s $38,800 a year, and running costs take 41% of the rent that comes in.
What does this fourplex earn each month?
Loans on a two-to-four-unit building you won’t live in have a stricter limit than loans on a house. Freddie Mac’s limits for the loans it buys cap them at 75% of the price, so a loan that meets them needs at least 25% down. This example puts 25% down on a 30-year mortgage at 7%.
| Each month | |
|---|---|
| Rent roll: $1,650 + $1,650 + $1,300 + $1,300 | $5,900 |
| Empty months (7% of rent) | −$413 |
| Property taxes and insurance | −$767 |
| Water, sewer, trash and hall lights | −$425 |
| Repairs and big repairs (10% of rent) | −$590 |
| Property management (8% of rent) | −$472 |
| Mortgage | −$2,295 |
| Cash flow each month | +$938 |
These are example figures, not a forecast for any market.
The cash to buy it is $133,800: the $115,000 down payment, $13,800 of closing costs at 3%, and $5,000 of paint and flooring so Unit 4 can be let.
Which numbers tell you whether the price is right?
Four figures come out of that table.
- Cap rate: 8.4%. NOI divided by the price. It measures the building as if bought for cash, which makes buildings comparable.
- Debt coverage (DSCR): 1.41. NOI divided by a year of mortgage payments. The building earns 41% more than its loan costs. Lenders that use this number set their own minimum, so ask yours what it is.
- Cash-on-cash return: 8.4%. A year of cash flow, $11,256, divided by the $133,800 you put in.
- Price per unit: $115,000. The figure to compare with nearby sales of similar buildings.
The two percentages match here by coincidence, and this comparison of cap rate and cash-on-cash shows why they often don’t.
Turned around, the cap rate sets a price. A buyer who wants 7% on this NOI could pay up to $554,285. One who wants 9% would stop at $431,111, below the asking price.
What happens when a unit sits empty?
A 7% allowance spreads empty months evenly across the year. Real vacancies arrive a whole unit at a time.
Until Unit 4 is let, the building collects $4,600 a month, and with nothing set aside for other vacancies it clears $285. To see that month in the calculator, set Unit 4’s rent and the vacancy rate to zero. The building still covers its bills because Unit 4 is 22% of the rent; in the duplex example, one empty unit was half.
The allowance comes to $4,956 over a year. If Unit 4 takes four months to let, it uses all of that and $244 more, before any other tenant moves out.
| Cash flow each month | |
|---|---|
| The example, all four units let | +$938 |
| Today, with Unit 4 empty | +$285 |
| Vacancy allowance of 10% instead of 7% | +$761 |
| Mortgage rate of 8% instead of 7% | +$702 |
| Property taxes of $7,400 after the sale | +$805 |
| Insurance of $4,400 instead of $3,400 | +$855 |
No single change in the table sinks this building. It breaks even if the rent roll falls to about $4,649, around $1,162 a unit, if about 23% of the rent goes uncollected over a year, or if the mortgage rate reaches about 10.8%.
How do you run the numbers on your own building?
Two things change the loan. Fannie Mae’s rules for home loans cover buildings of one to four units, so a fifth unit means a different kind of loan. At five units the calculator switches to commercial terms, a loan capped at what the NOI covers 1.25 times over and due in five years; edit both to match a lender’s quote. Living in one of the units can cut the down payment sharply, and how much money you need to buy a rental covers those loans.
Then enter the rent roll in the multifamily calculator unit by unit and mark any empty unit. Set the down payment to 25% unless you’ll live there, replace every cost with the building’s real bills, and see which input comes closest to breaking the deal. That’s the number to check hardest before you make an offer.