Financing a Fourplex: Construction Costs & Loan Options

Financing a fourplex construction can be difficult, but there are a variety of loan options available to help get the job done. Take time to explore and understand each of these options as well as the costs associated with building a fourplex before planning a development. 

What Is a Fourplex?

A fourplex is a residential property with four separate units. Fourplexes are usually smaller than larger apartment buildings, and they may be owner-occupied or rental properties. This type of multifamily development is typically built as rentals, but can also be converted into condos or co-ops.


Fourplexes are unique because they’re the largest multi-family properties (in terms of number of units) that are eligible for conventional financing through Fannie Mae or Freddie Mac loans. That means that if you’re looking to finance a fourplex construction, you have more loan options available to you than if you were building a larger apartment complex.

How Much Does It Cost to Build a Fourplex?

The cost to build a fourplex varies widely based on a number of factors, including the location of the property, size of the units, construction quality, and interior finishes. In general, you can expect to pay anywhere from $200,000 to $400,000 for the construction of a fourplex, but it may cost more. These are some of the expenses associated with building a fourplex:


How much you pay for land depends primarily on the size and location of the property, but expect to pay $40,000 or more for the land. For example, building a fourplex in a city center will typically be more expensive than building one in a suburban or rural area where land costs are lower.


You’ll also incur several thousands of dollars in financing costs for the purchase of land. Also, keep in mind that land usually must be purchased with cash, and the land will ultimately be used as collateral to secure a construction loan. 

Site Preparation, Utilities, and Permits

After you purchase the land, you’ll need to pay to have the site graded and utilities installed, including septic systems or sewer hookups. This can cost anywhere from $5,000 to $50,000 or more, depending on the size of the property and the location.


You will also need to obtain several permits in order to begin construction on your fourplex. These include a building permit, a plumbing permit, and an electrical permit. The cost of permits varies widely depending on the municipality in which the property is located, but you can expect to pay several hundred to several thousand dollars in permit fees.

Fourplex Construction Costs

Fourplex construction costs vary based on the type of materials used and the level of finishes. Using higher-end materials and finishes will obviously cost more than using basic materials. Budget for around $125 to $150 per square foot for basic construction costs depending on floor plan, material construction, number of windows, and finishes. 


For example, building a 2,000-square foot fourplex with basic materials and finishes would cost approximately $250,000 to construct.

Holding Costs

Don’t forget you will have to cover holding costs for the property leading up to and during construction. These expenses are extremely property-specific and include taxes and insurance, as well as any interest you may accrue on your construction loan.

Ways to Finance Fourplex Construction Costs

There are several financing options available for those looking to build a fourplex. One option is to take out a construction loan, which can be used to finance the entire project from start to finish. Another option is to secure financing through an investment group or private lender. Finally, you could also use your own savings or equity to finance the construction of your fourplex.

Construction Loans

The best way to finance construction of a fourplex is with a multifamily construction loan. To take advantage of this option, use cash to buy the land where you intend to build, and then put together a pro forma showing the projected costs of construction and value of units. Then, apply for a loan through a  commercial lender.


Construction loans are typically interest-only during the draw period, meaning you only have to make payments on the interest accruing on the loan during construction. Once construction is complete, the loan will need to be refinanced into a permanent mortgage with fixed monthly payments.

Conventional Residential Loan

A conventional residential loan can be used to finance the construction of a fourplex. This type of loan is typically available through banks and credit unions, but requires that you live in one of the units. The terms of these loans vary, but they typically have fixed interest rates and require a downpayment of 20% or more.

Hard Money Loans

Hard money loans are another option to consider for fourplex construction. These loans are typically provided by private investors or lending companies, rather than traditional financial institutions. Hard money loans often have higher interest rates and shorter repayment terms than other types of loans. However, they can be easier to qualify for, and the approval process is usually quicker.

Where to Get a Fourplex Construction Loan

If you’re thinking about financing a fourplex construction, it’s important to understand the different types of possible lenders and the loan options available. Here’s a brief overview:

Commercial Banks

Commercial banks are one of the most common sources of financing for fourplex construction. If you have a good relationship with your local bank, this can be a good option to explore. However, commercial banks typically have more stringent eligibility requirements and may require higher down payments than other lenders.

Credit Unions

Credit unions are another potential source of financing for fourplex construction. They typically have lower interest rates than commercial banks and may be more willing to work with borrowers who don’t have perfect credit. However, credit unions usually require memberships, though these may be obtained as part of the application process.

Loan Brokers

Loan brokers can be a good option for those who are having trouble securing financing from other sources. A loan broker will work with you to find lenders who are willing to provide the financing you need. However, loan brokers typically charge fees for their services, so be sure to factor this into your overall costs.

Private Lenders

Private lenders include individuals, investment groups, and companies that are willing to provide financing for fourplex construction. Private lenders typically charge higher interest rates than other types of lenders, but they may be more flexible in their eligibility requirements.


Financing a fourplex construction can be a challenge, but there are a number of different loan options available. Be sure to compare offers from multiple lenders and choose the loan that best meets your needs.


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