Why 2 to 4 Units Are the Best Real Estate Investment of 2026

[0:00]All right, in 2026, a lot of people are planning on buying single-family homes as investments. Others are raising capital by 100 unit apartment complexes. The sweet spot in my opinion, and from what I'm seeing from investors on the front lines, is two to four unit properties. In this video, I'm going to tell you different advantages whether it comes to financing, simplicity versus scale, the 2026 tailwinds that makes this specific class of investment a winner in my book. So stick with me as I share real life scenarios from real life people who are out there winning and why you might want to at least consider two to four unit properties. Now, let's start with what I can speak to as a mortgage broker as financing advantages. When you look at financing, quote unquote, multifamily real estate, when you get to five units plus, you're getting commercial financing. Commercial financing for a lot of people is a lot harder than residential financing. Residential financing is the same financing that you use when you go out there and qualify to buy a three bedroom, two bath home for you and your family. This same residential financing is available for two to four unit properties and for some people you live in one of the units, you rent out the others. For others, it's strictly an investment, but it still is considered residential financing. So, the qualifications are a lot simpler, right? You don't have to be some advanced investor, know how to read PNLs and and all this other stuff. The financing part is for sure an advantage. Another thing to think about, brand new rule that Freddie Mac implemented recently is 5% down. If you're living in the property, if you're going to occupy it, you can buy two unit, three unit, four unit with only 5% down. You're never going to find that in commercial financing, where you're buying five unit, 10 unit, 20 unit plus complex, like you're going to be putting 25, 30, 40% down based on the performance of the property. Another huge advantage in the commercial space, a lot of times that thing's going to adjust after five years. Not only will your interest rate adjust, but they're going to re-analyze the property. They might make you bring capital. Imagine putting 30% down on a property, and five years later they go, you know what, based on rents, based on X, Y, and Z, we need you to bring an extra $100,000 to this deal. And your rate's going to go from 6.75 to 8.75% because rates have moved. 30 year fixed rate financing, that's traditional type of of loan you get on the residential side, is what you're going to find on these two to four unit properties. That's huge. People don't understand how huge that is. 30 year fixed rate debt, the best kind of debt. Lastly, when it comes to ease of financing, and the financing advantage, is that you get easier appraisals and more lender competition. More lenders can offer the products like myself and tens of thousands of mortgage brokers across the country. So we are going to offer competitive terms because we have to because we're competing against a lot of other brokers. And the appraisals aren't going to take two months and cost $3,000, right? It's going to be a $700, $800 appraisal depending on the size of the property and other characteristics, but not going to be, I've heard about some of these wild and expensive but lengthy appraisals on the larger buildings. All right, secondly, let's go into risk and income balance. When you own a four unit property, unlike you would experience by owning a single family, you aren't going to have the risk of having no rent, of being 100% vacant. If you own a single family residence that you're renting to somebody, when they move out and before you get another tenant in place who's paying, you have 100% vacancy, you have zero rent coming in. On a four unit, if you're getting $1,500 per door, it's easy math, you're getting $6,000 a month from four units. If one person moves out until you fill that, you're getting $4,500 instead of $6,000, so you're 25% vacant, you're not 100% vacant. That just is easier to stomach for smaller investors, right? It's easier, especially if you've got, you know, cash flow built in, maybe your mortgage is $4,500. So, you're cash flowing $1,500 a month on the months where you're turning one of the units, or you're missing rent from somebody, you're breaking even, but you're certainly not losing money. These small multi families are really easy to force appreciation. I know a specific client who bought a four unit for $575, and I was like, man, that's a, that's a high price for this four unit in this neighborhood. Well, the rents have gone from $950 to $1,500 over the course of four or five years and when those rents increase, other buyers looking to buy this property care about the rent, so they're willing to pay more. And so something close to him just sold for $880,000. This thing has gone up over 50% in value because the rents have increased, so it's, it's, it's easier to see increase in value similar to the larger units, dissimilar to the single family residents that just sells based on comparables. And lastly, when it comes to risk and stability, these are more stable in downturns versus single family homes. And the reason I believe that is because in downturns, in tough economic times, you have less of a pool of renters who are willing and able to pay $2,500, $3,000 a month for a single family residents. Plenty of them that can afford $1,500 for a two bedroom one bath unit in a four unit fourplex. And so, as the economy tightens, tougher economic times, there's always going to be demand for the more affordable housing. And I'll get more to that later, but that's, that's my closing argument, right? Is that affordable housing is the solve. It's the problem. And so these two to four units solve that problem. Okay, real quick, talking about simplicity versus scale. As a mom and pop investor, as a normal, small time investor, like I'm used to talking to, like I love to consult with, like I personally am, right? Owning a few properties that are rentals, you can own these with much less headache than a 50 unit. Most of us don't have the time or bandwidth or capacity to deal with a 50 unit complex and all that's, you know, needed for that. Somebody managing the place, full-time handyman, full-time leasing office, all the other stuff that's involved in it, but like owning two or three four unit properties, maybe a property management company takes care of leasing the units up, they take care of the small incidental repairs and they bill you and they and they track everything. Like it's a lot easier to learn landlording on a smaller scale, even if you have the help of property management and whatnot. And also with small economies of scale, it's, it's lower expenses per unit, right? If, if you have four single family houses, you've got four water sewer garbage bills, or four landscaping bills, four of everything versus these lower expenses per unit. Okay, 2026 tailwinds. I truly believe that tight new housing supply, strong rental demand are things that we're going to continue to see in 2026. And like I mentioned earlier, affordable housing is on top of everyone's list for things we need to solve, you as a small time investor, owning a four unit property where inherently this is affordable housing. Somebody who lives in one unit that's in a four unit building is paying less, it's more affordable than the 2,000 square foot single family home that might be one block over, two blocks over. I know tons of small investors that have a lot of pride in they like to keep their units clean and safe and a nice place to live, but it's also affordable. And you can keep it affordable and you can still see great returns as an investor because you've got four in one. You buy one building for $600,000, you get $1,250 per door versus that same $600,000 purchase on a single family property, you might only get $2,600 a month or, you know, those are random numbers, but it's a great place and a great pond in my opinion to fish in. You know, you, you fish in the small pond, small two to four units. Rest assured, Blackrock and big time investors aren't worried about buying a four unit property in the neighborhood you live in, right? They're going to buy the 60, 80, 100, 400, 600, 800 unit apartment complex. And even players that are smaller than Blackrock, but much bigger than mom and pop investors, they're looking for 50 units, they're looking for 60 units, they're looking for 100 units. They're not looking for two, three and four units, right? So that is something that I see as a tailwind where you're not going to have a lot of competition, you're going to provide affordable housing and mom and pop investors who own those are going to do really well. Some of these mom and pop investors I talked to one today are house hacking and they've done it before. The coolest stories I hear is like, I lived in a four unit, lived in one, rented out three others, then I moved to a three unit, lived in one, rented out two others, then I moved to a duplex, lived in one half, rented out the other. And they've done this multiple times, all of a sudden they have 10 units that makes up a small but mighty real estate portfolio that's going to serve them super well in retirement. In places like California, where I'm at, this is a great way to quote unquote, house hack and instead of paying $4,000, $5,000 in rent or $5,000 or $6,000 as your primary mortgage, you take on maybe a larger mortgage, but if it's split four, if you've got four different units and you got a $6,500 mortgage payment, but you get $2,000, $2,000, $2,000 for three other units, you're out of pocket is $500 versus you renting something down the street for $4,000. And so, in those cases, like house hacking, not only helps you build wealth and add investment properties, it helps you lower your biggest expense, which is your housing expense. Okay, some risks, some caveats, some things to think about where it might be tough to utilize this strategy in 2026. Limited inventory, harder to find deals. I'm experiencing that. If I go into any of my favorite tools for searching for real estate and I go to multifamily and search for just multifamily in the zip code, I want to buy in, there's only one, it's a two unit. Other zip code where I might consider buying, there's two and it's a two unit and a four unit. The four units in a really, really bad spot. I don't want to buy that one either. And so there's limited inventory, that is a real concern caveat. You got to be able to find the inventory. Sometimes you got to go off market. Sometimes you got to be in real estate groups and meetups to find them. Another caveat to it is management is still required, it's not hands off. I think a lot of single families can be easy to manage if they're in B minus, B, B plus or better neighborhoods. Somebody's going to Venmo you $2,600 a month. They're going to let you know when they ever there's issues, they're going to take good care of the house. You might be in a position where, you know, you get a great deal that's got great numbers on a four unit, but it's going to require some hands-on management. In, in my case, I hired that management, um to take care of it, because it's a lot, you know. You get a couple four unit properties, that's eight different tenants with eight different issues, eight different closet doors that can break, eight different washers and dryer, eight different H-VAC units that, that can that can go down. So, it's not all sunshine and rainbows. And lastly on that too is like there can be capital expenditure hits that are large. For instance, one roof equals one point of failure, like one roof goes bad, you're it's not split into four different sections and you're like, oh, I'm just repairing the roof on unit A. You're repairing the whole thing and it might be quite a big expense. So, that's all I've got to say about that. I'm a huge, huge fan. I talk to investors every single day and I'm talking to you from personal experience, having owned four units, having owned those and looked at the numbers alongside of single family and and the returns on it. I'm telling you as someone who talks to investors every single day and the more investors I talk to, the more I realize there's a couple different strategies that I see working in 2026. This one I really, really think is going to be one where investors are going to be pleasantly surprised, because I think that with the need for affordable housing, and I'll go back to it again, because it's important, there's going to be plenty of upward pressure on some of these lower rent type units that just, you know, naturally are part of a four unit building. Single family homes, if you're currently renting one for $2,600, I wouldn't expect a bunch of rent increases over the next three to five years. If you have a two bedroom, one bath unit that's part of a four unit property, I could see those things going from $1,400 to $1,600 to $1,750 because there's going to be more need for it, because it's more affordable, right? So if you found value in this, like, comment, subscribe, do all the things on YouTube. If me and my team can help, if it's just a phone call to kind of discuss and strategize, more than happy to. Go to greatmortgagebroker.com, fill out the quick form, we'll be in touch. Hopefully this is helpful. Let me know what you're investing in in 2026. I would love to hear. Talk to you soon. Bye bye.