Definition:
A two- to four-family property is a residential building that contains two, three, or four separate housing units. Each unit typically has its own entrance, kitchen, and bathroom, making it suitable for multiple families or households.
Explanation:
These types of properties fall under the residential real estate category, unlike properties with five or more units, which are considered commercial. Two- to four-family homes are often used by owner-occupants who live in one unit and rent out the others. This setup allows buyers to offset their mortgage payments with rental income.
Because they are still classified as residential, these properties are eligible for standard loan programs like FHA, VA, or conventional mortgages. Lenders may also consider potential rental income from the additional units when determining how much a borrower can afford, which can make qualifying for a mortgage easier.
Example of Two- to Four-Family Property
Maria buys a four-unit property. She lives in one of the units and rents out the other three. The monthly rent she collects helps pay her mortgage, property taxes, and maintenance costs. Since the building has fewer than five units, she was able to use an FHA loan with a low down payment.
Why is Two- to Four-Family Property Important in Real Estate Transactions
Two- to four-family properties offer a unique opportunity for homeowners to build equity while earning rental income. They are attractive to first-time buyers and small-scale investors because they provide an affordable path into real estate investing. For sellers, these properties appeal to a wider range of buyers—both investors and owner-occupants—which can make them easier to sell. Their classification as residential also means simpler financing options and fewer regulations than commercial buildings.