The old saying is that they don’t build more dirt. Land speculators have repeated that mantra forever but in reality it is in fact true. They don’t build more dirt. If you have a spot of land and are wondering if you should build a new rental property on it, build for yourself or sell, it takes a bit of effort on building rental homeyour part to evaluate all your options.

The lot is only so big and the local ordinances do have specific setback requirements which mean your footprint will have limits. So instead of building one home, maybe you can build four on your own dirt?

Not four separate houses but a 2-4 unit. A fourplex. Investors know that multi-unit properties can provide a greater profit per square foot potential than a single family home and it doesn’t take a whole lot to determine if in fact a fourplex is a better idea when building new compared to a single family home. What should you factor when arriving at your decision?

The first is to make sure a 2-4 unit is permissible according to local zoning ordinances. A residential zoning code for a single family home is R1 and the code for a four unit rental is R4. The first place to check if an R4 is okay is with the city. If you see other two or four unit structures in the neighborhood, it’s probably just fine. If not, then the city may restrict residential structures to R1.

If you find the city welcomes a fourplex, your next step is to explore current market rents for the area. By calling a few “For Rent” signs or logging onto local real estate websites you can make a fair determination what you can expect for rental income. Finally, consider your financing and holding costs and if your rents more than cover your mortgage and related charges, you might find that the fourplex will provide you with rental profits for years to come.