Buying a multi-unit property—like a duplex, triplex, or fourplex—can be a powerful way to build wealth while living in one unit and renting the others. But the mortgage math is different than for single-family homes. In 2025, lenders expect
additional documentation and income analysis, especially when including rental income in your qualification. This article breaks down how owning multi-unit homes changes affordability, rental income, and qualification calculations—using clear examples and actionable steps.
1) Why multi-unit properties are different (and valuable)
Multi-unit properties allow you to:
- Live in one unit (primary residence)
- Rent the others to offset your mortgage
- Build equity faster if managed well
But lenders treat them differently because of the
added complexity and risk of rental income and vacancies. Unlike a single-family home, rental projections and debt coverage play a central role in underwriting and affordability.
Actionable tip: Before you bid, calculate both
owner living cost and
rental income contribution conservatively—leaning on
verified comps rather than optimistic assumptions.
2) Loan types for multi-unit properties
You can finance multi-unit properties using different mortgage paths:
- FHA loans – great low-down payment option for 2–4 units when you live in one unit (often 3.5% down)
- Conventional investment property loans – higher down payments (15–25%), tighter standards
- Portfolio loans – bundled financing for multiple units or multiple properties
- VA loans – in rare cases, can be used for multi-units if the veteran occupies one unit
Each program has
different qualification rules, especially around rental income and DTI.
Actionable tip: If you
intend to own and rent a multi-unit property, ask lenders early about whether they’ll allow rental income for qualification and which program will maximize your purchasing power.
3) Rental income you can use (the 75% rule)
Most lenders won’t count 100% of expected rent because they anticipate:
- Vacancy
- Repairs
- Turnover
- Non-payment risk
They typically use
75% of gross rent when qualifying you.
Example:- 2-unit property rent (per unit): $1,800 + $1,700
- Total potential rent: $3,500
- Qualifying rental income: $3,500 × 75% = $2,625/month
This $2,625 can help offset part of your mortgage when calculating
Debt-to-Income (DTI) and overall capacity.
Actionable tip: Use
current, verified rent comps from your local market when estimating income—not Zillow guesses or unrealistic top-end rents.
4) Debt-to-Income (DTI) with multi-unit properties
Traditional DTI is:
[\text{DTI} = \frac{\text{Total monthly debts + proposed mortgage}}{\text{Gross monthly income}}] For multi-units, lenders will include:
- Your existing debts
- Your primary mortgage payment (if you own one)
- The proposed mortgage payment for the multi-unit home
- Net rental income credits (often at 75% of rent)
Example: Assume:
- Gross monthly income: $9,000
- Existing debts: $800
- Multi-unit payment estimate: $2,150
- Rental income credit: $2,625 × 75% = $1,969
DTI calculation:
- Effective housing cost considered by lender: $2,150 − $1,969 = $181
- Total debts: $800 + $181 = $981
- DTI = 981 ÷ 9,000 ≈ 10.9%
That’s a
strong DTI—but this depends critically on how rental income is documented and allowed.
Actionable tip: Some lenders cap rental income credits or require reserves even if rent covers the mortgage. Always ask what
documentation they require to verify rents (leases, tax returns, comps, etc.).
5) FHA vs conventional when buying multi-units
FHA multi-unit loans
- Down payment as low as 3.5%
- Must occupy one unit as your primary residence
- Rental income can be used but may require documentation
- Works well for house hacking strategies
Example: 2-unit purchase price: $350,000
Down payment (3.5%): $12,250
Loan amount: $337,750
Conventional multi-unit loans
- Higher down payment (often 15–25%)
- Rental income typically can be included at 75% net
- Stricter credit and reserves required
Actionable tip: If your credit score and income are strong and you
don’t mind a larger down payment, conventional financing may give you better long-term cost even if FHA has a lower entry barrier.
6) How to stress-test your investment math
To ensure the property can tolerate market shifts, run scenarios:
- Vacancy stress: Assume 1–2 months without rent annually
- Maintenance shock: Budget at least 5–10% of rent per year for unexpected repairs
- Higher rates: Model +0.5–1% interest increase for future refinancing or new loans
Example stress test: Projected rental income credit: $2,625/month
Vacancy factor (−1 month rent): effective annual rent reduced
Maintenance reserve: $200/month
New effective income credit: $2,625 − $200 = $2,425
This reduces your rental offset and increases your effective housing cost.
Actionable tip: If your deal doesn’t work with
realistic stress adjustments, it’s not a good deal—even if the base numbers look fine.
7) Closing costs and upfront cash consideration
Multi-unit properties often require:
- Larger down payments
- Higher PMI (if <20% down)
- Higher insurance premiums
- More reserves
Budget before offer:
- Down payment
- Closing costs (often 2–5% of purchase price)
- Reserves (often required for multiple mortgage payments)
- Inspection & repairs
Actionable tip: Don’t forget financing costs like
loan origination, appraisal, title, and inspection fees, especially since multi-unit appraisals can be more expensive.
Conclusion
Multi-unit properties offer a powerful path to homeownership that
pays you back through rent—but only if you understand the math behind mortgage qualification, rental income treatment, and risk adjustments. In 2025, lenders use conservative rental income credits (typically 75%), and your ability to qualify depends on how well the rental income offsets your debt obligations in
DTI and DSCR calculations. By using real rental comps, stress-testing vacancy and maintenance scenarios, and choosing the loan program that fits your financial quality, you can build a multi-unit strategy that’s both smart and sustainable.
FAQs
1) Can I use rental income to qualify for a multi-unit mortgage? Yes—most lenders use about
75% of projected gross rent to account for vacancy and expenses. Documentation (leases, comps) is often required.
2) What’s the minimum down payment for a duplex using FHA? FHA loans for 2–4 units can have down payments as low as
3.5% if you live in one of the units as your primary residence.
3) Are interest rates higher for multi-unit property loans? Often yes—both conventional and investment loans for multi-unit properties typically have higher rates than primary single-family loans because lenders view them as riskier.
4) How does vacancy affect rental income credits? Lenders account for vacancy by using a net rent figure (usually 75% of gross rent), implicitly including vacancy and maintenance risk.
5) Should I buy multi-units as my first investment property? It depends on your finances and experience. Multi-units can make sense if the rental income comfortably covers housing costs and you understand the underwriting requirements.
