The U.S. Census Bureau reports that multifamily real estate makes up about 31% of America’s total housing market. Economic downturns make many investors question which properties can best protect their portfolios. People tend to rent more during recessions because banks tighten their lending rules and job security becomes shaky. This pushes more demand toward multifamily properties, though not every multifamily investment performs well in tough markets.
Fourplexes offer better structural benefits than duplexes to protect your real estate portfolio during recessions. Market data shows prime multifamily markets grew by 2.7% in the fourth quarter of 2024. The sector’s strength continues to draw record levels of institutional money in 2025. The U.S. needs 4.6 million new apartment units by 2030. This creates interesting opportunities since multifamily construction starts will drop 74% below their 2021 peak by mid-2025.
This piece explains why fourplexes give you better protection than duplexes during market downturns. You’ll learn about cash flow stability and operational efficiencies that boost your bottom line. These insights will help you make smarter investment choices in any market condition, whether you’re just starting with multifamily real estate or looking to improve your existing portfolio.
Unit Count Advantage in Downturns
Fourplex investments offer better protection than duplexes because of simple math. This advantage becomes even more valuable when markets turn south.
Vacancy Risk: 25% vs 50% Income Loss
Your investment returns face their biggest threat from vacant units during tough economic times. Fourplexes give you a clear edge here – an empty unit in a fourplex only reduces your rental income by 25%. A duplex with one empty unit cuts your revenue by half. This mathematical buffer could mean the difference between making money or losing it when the economy slows down.
Tenant Turnover Buffer: 4 Leases vs 2 Leases
Tenant turnover risk spreads naturally across more units in fourplexes, which makes operations run smoother. Tenants often see fourplex units as stepping stones to single-family homes, so they tend to move out more often. Yet this turnover doesn’t hurt as much. Four separate leases instead of two means your rental dates are staggered, which reduces the chance of multiple units sitting empty at once and destroying your cash flow.
Cash Flow Stability in Recessions
Fourplexes keep bringing in steady income even during recessions. People often put off buying homes when times get tough and look for places to rent instead. Multifamily properties hold up better than other types of real estate investments when the economy struggles. More people searching for affordable rentals helps fourplexes perform well during market downturns.
Your investment strategy becomes more stable with multiple tenants in a fourplex. Four separate rental checks are more reliable than just two, which leads to steadier income. This spread-out risk helps protect you when the economy looks shaky and tenants’ financial situations become less certain.
Operational Efficiency and Cost Savings
Fourplexes have more operational advantages than duplexes that become valuable during economic downturns. Your bottom line benefits directly from these advantages when market conditions get tough.
Shared Maintenance: One Roof, Four Units
Fourplexes create immediate maintenance efficiencies due to their combined structure. You can reduce per-unit maintenance costs by having one roof that covers four income-generating units instead of two separate buildings. Owners save money by streamlining building tasks like pest control, landscaping, and major repairs. A single lawn to maintain and one roof to repair saves substantial time and money compared to managing multiple properties.
Property Management Costs: Per Unit vs Per Property
Property management expenses are one of the biggest costs for multifamily real estate investors. Management fees usually range from 4% to 10% of gross rental income, or about 7-10% for full-service management. The costs in fourplexes distribute more efficiently because:
- One property management contract supports four revenue streams
- More units share administrative costs
- Maintenance visits and inspections happen at a single location
This advantage of cost distribution becomes more important as property management becomes essential during market downturns that need hands-on tenant management.
Utility and Insurance Bundling Benefits
Fourplexes shine in utility and insurance cost efficiency. You can manage multiple units with one utility policy instead of separate accounts. This combined utility management offers vital advantages since 27% of households face energy insecurity—with 40% of renters experiencing this issue.
Insurance costs for multifamily properties typically range between $1,000 and $3,000 per million dollars of coverage, about $150 to $650 per unit yearly. Fourplexes benefit from bundled policies that cover multiple units under one premium structure. Most fourplexes stay under favorable residential insurance rates because the five-unit threshold often determines commercial versus residential classification.
These operational benefits make fourplexes a strong investment choice, especially when economic conditions worsen and managing costs becomes vital to maintain positive cash flow in your multifamily investment strategy.
Financing and Tax Benefits of Fourplexes
Fourplexes offer better financial advantages than duplexes, and these benefits become more valuable when market conditions worsen.
Loan Qualification: Residential vs Commercial Thresholds
Fourplexes hold a unique position in multifamily investing. They represent the highest number of units that still qualify for residential financing. Properties with 1-4 units typically fall under residential classification, while buildings with 5+ units require commercial lending. This key difference brings many benefits:
Residential loans come with lower interest rates and require smaller down payments. Buyers can put down as little as 3.5% for FHA loans, compared to commercial loans that need 20-30% down. Residential multifamily properties can also access competitive financing through Fannie Mae and Freddie Mac programs that offer longer amortizations and terms.
Depreciation and Cost Segregation Opportunities
The tax advantages of fourplexes shine through smart depreciation strategies. Multifamily properties usually depreciate over 27.5 years, but cost segregation studies can speed up these benefits.
Cost segregation helps reclassify certain components for faster depreciation. Appliances, carpeting, and electrical systems can qualify for 5-7 year schedules. Landscaping and parking areas fit into 15-year periods. This approach could double your first-year depreciation deductions.
Favorable Cap Rates in Larger Multifamily
Fourplexes deliver more stable and attractive cap rates than duplexes, especially during tough economic times. Cap rates vary by location—some markets see rates between 3.5-4%—but fourplexes provide better income stability because they have more units.
Tax benefits go beyond depreciation. You can deduct mortgage interest, write off property management expenses, and use 1031 exchange opportunities to grow your portfolio.
Scalability and Long-Term Investment Strategy
Fourplexes give you strategic advantages that go far beyond immediate cash flow, which helps position you to build wealth faster in any economic climate.
Portfolio Growth: 4 Units at Once vs 2
Buying fourplexes speeds up your investment timeline because you double the unit acquisition rate compared to duplexes. You build equity faster with more units at the same time. Smart investors use fourplexes as stepping stones and leverage equity from one property to scale up to larger multifamily investments. Compared to duplexes, you need twice the number of transactions to reach the same portfolio size, which increases both time and acquisition costs.
Exit Strategy Flexibility: Sell as One or Convert to Condos
Fourplexes give you unique exit options that duplexes can’t match. You can sell the complete property, or use condo conversion as a powerful strategy to turn rental units into individually-deeded properties. This method leads to much higher per-unit sales prices. On top of that, you can sell units one by one as market conditions change, which opens up a broader buyer pool that includes first-time homeowners.
Appeal to Institutional and 1031 Exchange Buyers
Institutional investors now control about 40% of the multi-family market, which makes larger multifamily properties attractive acquisition targets. Fourplexes attract 1031 exchange buyers who want to defer capital gains taxes while keeping residential financing advantages. This wider buyer pool creates good selling conditions even in tough markets.
Conclusion
Fourplexes beat duplexes as multifamily investments during economic downturns. The math is simple – you lose only 25% of rental income from a vacancy instead of 50%. This built-in safety net protects you when markets get shaky.
Running a fourplex makes even more sense in tough times. You can spread your maintenance costs, property management fees, and insurance premiums across four units instead of two. This cuts down your per-unit costs right when you need it most.
The financing perks of fourplexes are a big deal. These properties still count as residential, so you get better loan terms, lower rates, and smaller down payments than commercial loans. You also get tax benefits through cost segregation that duplexes can’t match.
Think about scaling up your wealth too. Buying four units at once speeds up your portfolio growth and gives you more exit options, like turning units into condos. This makes fourplexes attractive to big investors and 1031 exchange buyers, which means more potential buyers even in slow markets.
Both property types work well, but fourplexes give you more protection against market risks. They handle vacancies better, cost less to run per unit, come with better financing, and scale up faster. These advantages make fourplexes your best bet to build wealth in real estate while staying strong through economic ups and downs.
