Property Q&A in Dallas>Question Details

Sophie, Renter in Dallas, TX

Cost to manage a fourplex?

Asked by Sophie, Dallas, TX Wed Dec 12, 2012

I am interested in purchasing a fourplex and be a landlord. What insurances do I need to get, and what other spending is involved to manage it?

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The insurance you mentioned is to cover liabilities, which can be part of the rental property insurance, or can be separate policies you purchase to cover additional liabilities. To buy an investment property such as a fourplex, you do need to take into account of all expenses to figure out whether you will make money or not. A realtor specialized in investment properties can assist you in conducting such financial analysis.
0 votes Thank Flag Link Wed Dec 12, 2012
It's a good time to buy a fourplex! You could even be an owner occupant and get FHA financing and 3.5% down payment if you so desire. You'll need a property insurance policy which will run in the $2k to $3k range. If you're not going to manage it yourself, the standard rate is 10% of the gross rents for the property. You may want to also purchase a Home Warranty for each unit, around $400 per unit per year which would cover major repair issues. Otherwise, you would want to budget for repairs, probably 5% to 10% of the gross rents per year. You'll also probably have some common utilities, like electric bill for house lights, lawn watering, and such. And you'll need to account for some vacancy.

I have lots of experience in this area so, please feel free to contact me and I can also help you find some nice properties.

Beau Beasley
Coldwell Banker
Cell# 214 966-2100
2 votes Thank Flag Link Wed Dec 12, 2012
In addition to what other agents have mentioned, you need to consider property tax and costs to advertise and list the property for lease. Maintenance will be a major part of spending, exactly how much will depend on the conditions of the property. If you lease it by yourself, there will also be spending in screening prospective tenants, including background check and credit check, etc.
1 vote Thank Flag Link Wed Dec 12, 2012
Sophie, I highly recommend that you find a really good lender who can keep you updated on the current guidelines, as they do change frequently. My best advice is to "start with the end in mind". This means that you should start your due diligence with finding the right financing so that you know how much the down payment and monthly payment will be, in addition to any requirements/restrictions that could impact your profitability. Your down payment will be 20% of the purchase price. It's is the standard down payment required for investment properties, unless you live in one of the units (which could reduce the 20% requirement).

Besides the typical hazard insurance required for all properties, you will also need to get at least 6 months of rent loss insurance. Rent loss insurance covers situations that would otherwise keep tenants from paying rent such as a fire, flood or other weather event that makes the property uninhabitable (for up to 6 months in this case). During this 6 months, the property would be repaired/rebuilt so that you can begin receiving rents again in order to pay the loan payments. The rent loss insurance pays the amount of the lost rents (up to "market") during this time. I believe most lenders require it, but even if you paid cash, you should obtain this insurance for at least the amount of rent that you forecast to receive from the units.

I began underwriting investment properties in 1989 and would be glad to discuss the details of obtaining a loan, returns on (and of) your investment, reasonable projections and assumptions based on various markets within the DFW Metroplex and certainly, the search of a property that would meet your objectives.

I'm available by email, phone or text.

Brent Rice, Top Recommended Broker
The Rice Group, Inc.
0 votes Thank Flag Link Mon Dec 17, 2012
My advice is to get a management company for which you will pay a monthly fee on the rents collected, unless you know how to fix everything yourself or have a great all around handiman. They will do the work for you, no headaches. You would need to talk with an insurance broker to see how much insurance you will need and another fee for you but that's required. You will need to talk with a morgage person to see how much you can get on a loan. Good luck with your new adventure.
0 votes Thank Flag Link Wed Dec 12, 2012
Hi Sophie,

Its about 8-12% for the management fee. Insruanace will be depends on your lender if you are getting a loan. Lender always have a required on what kind of insurance you need.

But if you are paying cash, I will just get it at replacement cost to cover the property in case of fire or storm.

JP and Assocaite
0 votes Thank Flag Link Wed Dec 12, 2012
It depends on the company/Realtor. Prices range from 5% to 20% of collected monthly rent.

Turtle Creek Realty
0 votes Thank Flag Link Wed Dec 12, 2012
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