An FHA fourplex house hack works because owner-occupant first-time buyer financing covers one, two, three, or four units — the same 3.5% down that buys a single-family house buys a small apartment building. Kenny Karunda bought a four-unit in Boston’s Dorchester neighborhood for $395,000 with $17,500 down. He still owns it, still carries the original 3.75% note, and the building is worth roughly $1.1 million today.
But the down payment was never the interesting part of that deal. The building came with tenants paying about $750 a unit in a market renting at $1,100. Kenny spent roughly $2,000 per unit on carpet, paint, and broken fixtures, pushed rents to $1,200–$1,250, and lived in the fourth unit with his mortgage and bills covered by the other three.
Below: the actual numbers, how he screened for that rent gap before ever touching a property, what he buys now that he’s past 200 units across the Southeast, and the one underwriting question he still asks on every deal.
Key takeaways
- Owner-occupant first-time buyer financing applies to 1–4 unit properties, so a fourplex can be bought with the same low down payment as a single-family home — occupancy and credit requirements apply and vary by lender and program.
- The return came from the rent delta, not the financing: $750 in-place rents against $1,100 market rents across four units, closed for about $2,000 per unit in carpet, paint, and fixtures.
- Screen for that delta before you tour anything. Kenny prices current market rents using comp sites — not pro formas, not historical rents — and calls pro formas "fantasies."
- Instead of targeting a 4–5% return, ask how fast your down payment comes back: $250,000 into a $1M deal, is it two years, five, or eight? That framing forces you to weigh opportunity cost across many deals.
- A 3.75% note is an asset in itself. Kenny was quoted 6.25% to refinance the Dorchester fourplex and left it alone because the new payment would have eaten the cash flow.
From the Real Estate Pros Show
This article draws on an interview with Kenny Karunda of Investor Your Future on the Real Estate Pros Show, hosted by Issa Hanna.
Why 1-4 Units Is the Loophole in Owner-Occupant Financing
The rule most new investors miss: residential owner-occupant loan programs don’t stop at one house. They cover one, two, three, or four units. That means the lowest-down-payment financing available to an individual buyer can be pointed at a small apartment building instead of a starter home.
Kenny found this the way a lot of people do — researching how to buy real estate without a large down payment, and discovering the FHA program had a 3.5% option. The banker’s first condition wasn’t about the property. It was credit.
He said, yep, you have to get your credit at a certain level and you can put down 3.5% down. And I realized this is the hack. The first-time homebuyer program allows you to buy either one, two, three, or four units.
Two practical constraints come with it. First, credit has to qualify before anything else matters, which for some buyers means a six-month detour to fix it. Second, these are owner-occupant loans — you have to actually live in one of the units for a required period. The specific term, along with reserve requirements, self-sufficiency tests on 3-4 unit properties, and mortgage insurance, depends on the program and the lender. Get those confirmed in writing by a loan officer who has actually closed a fourplex before you write offers.
What doesn’t change is the math advantage. Four doors under one roof, financed on residential terms, with three tenants contributing to a payment you’d otherwise carry alone.
The Dorchester Fourplex: The Actual Numbers
Purchase price: $395,000. Cash down: $17,500. Search time: about six months in Boston’s Dorchester neighborhood. The building came with tenants already in place.
The down payment came out of an old 401(k). Kenny had left a job at a Boston medical device company and the balance was sitting idle, so he emptied it and put it into the building. That is a decision with tax consequences that depend entirely on your situation and age — talk to a CPA before you copy it. The point worth taking is that he treated dead capital as capital.
What the deal looks like now: the building is worth roughly $1.1 million, and he still carries the original 3.75% note. He hasn’t sold it and hasn’t refinanced it.
Notice what the six-month search bought him. He wasn’t slow because he couldn’t find a fourplex — Boston has plenty. He was slow because he was waiting for one with the specific characteristic that made the deal work, which had nothing to do with price per square foot or the condition of the roof.
The market rents were about $1,100, but the rents being charged were around $750. So we’re talking about a $400, $500 difference. That’s where the money is really made — you buy low enough, you add that value.
— Kenny Karunda, Investor Your Future
The Rent Delta Is the Deal, Not the Down Payment
In-place rents at the Dorchester building were about $750 a unit. Market rents in that neighborhood were around $1,100. That’s a $350–500 gap per door, on four doors, available to anyone willing to do about a week of work per unit.
That gap is what Kenny was screening for during those six months. Long-term owners drift below market — they keep good tenants, skip increases, and after a decade the building’s income statement has nothing to do with what the units would actually rent for today. That’s not a problem to fix after closing. It’s the thing you buy.
The screening method matters more than the concept. He prices current rents from comp sites before looking at a property, and he does not accept the seller’s numbers:
I don’t even really like pro formas. I like actuals. I look at the actual comps in the area, in terms of what the rentals are currently — not what they were. I have a bunch of sites I use to make sure everything’s coming up right.
Three different rent figures will be handed to you on a small multifamily deal: what tenants pay now, what the seller projects, and what the units would rent for today if vacant and cleaned up. Only the first and third are real. The seller’s pro forma is a marketing document.
Run the third number yourself, on comp sites, before you schedule a showing. If current rents and market rents are the same, the building may still be fine — but the deal has no engine in it.
Turning the Units for About $2,000 Each
The renovation scope on the Dorchester units was deliberately thin: carpet, paint, faucets, and anything visibly broken. About $2,000 a unit. Rents went from $750 to roughly $1,200–$1,250.
That is the entire playbook when rents are the problem rather than the building. A unit renting $400 under market usually isn’t under market because it needs a new kitchen. It’s under market because nobody has touched it in years and the last owner never raised the rent. Fresh paint, new floor covering, working fixtures, and a clean unit get you most of the way to a market rent — and anything beyond that starts eating the return you’re chasing.
The outcome on that first deal: Kenny lived in one unit, and the three rented units covered the mortgage and the bills. He was housed for free while holding an appreciating asset he’d bought for $17,500 out of pocket.
One sequencing note. You’re working around occupied units, so the turns happen as tenants leave or as leases roll. That’s slower than a vacant flip, but it also means rental income never fully stops while the work is happening.
The discipline is knowing what not to do. Every dollar above the cosmetic scope needs to produce rent, and past a certain point in a working-class rental market, it won’t.
What Happens After You Move Out: Buying Where the Numbers Work
Once the occupancy requirement is satisfied, the question becomes where your next dollar buys the most door. For Kenny, that answer stopped being Boston almost immediately. He bought in Indiana, Florida, and Texas, and now operates out of Atlanta, buying across Georgia and the Southeast because the cost per unit is materially lower.
His current buy box, at 200-plus units:
- Under $5 million per deal
- Multifamily primarily, with some self-storage and mobile home parks
- Occupied only — nothing vacant; it has to have existing occupancy
- Clustered geographically, ideally in one state rather than scattered across several
- Seven to ten year hold, capturing cash flow, depreciation, and appreciation, then ideally 1031 into something larger
A representative deal he was reviewing: 16 units at about $1.2 million, fully rented, in the right submarket, with a seller looking to retire. The work on that one was negotiating the price per door down, not repositioning the asset.
Two things carry over directly from the fourplex. He still buys occupied buildings, because occupancy means real rent rolls to underwrite instead of projections. And he still sizes up rather than out — the 1031 at the end of a seven-to-ten year hold is the same move as trading one fourplex into a portfolio, just at larger denominations.
He’s also willing to sell. He liquidated most of his Indiana and Texas holdings and about half of Florida when those markets made it worth doing.
The Underwriting Rule He Carried Forward: Speed of Capital Return
Kenny doesn’t underwrite to a percentage. He underwrites to a clock.
A lot of people think, oh, I want a 4% return, 5% return. No — I’m looking at how fast is my original capital going to come back. If it’s a million dollar deal and I’m putting down $250,000, how quick am I going to get my $250,000 back? Two years, five years, eight years?
The reason is opportunity cost. Every $250,000 committed is a no to some other deal, which is why he looks at volume: roughly 60 agents send him listings from across the Southeast, and he runs each one through a calculator that returns green (proceed), red (pass), or yellow (dig further). That’s the bulk of his workday. Green deals get a call to the agent the same morning.
It’s a useful reframe for a first house hack too. On the Dorchester deal, three units covering the mortgage and bills meant the $17,500 was effectively returning through housing costs he no longer paid — a very short clock, which is exactly why the deal worked.
The same discipline shows up in what he chose not to do. Sitting on a 3.75% note against a building now worth about $1.1 million, he looked at refinancing and was quoted 6.25%. The higher payment would have consumed the cash flow, so he left the loan in place. He described the general problem the same way for deals he underwrites today: financing kills otherwise good deals when the payment eats the spread.
Frequently asked questions
Can you really buy a 4-unit with a first-time homebuyer loan?
Yes. Owner-occupant first-time buyer programs, including FHA, cover properties of one to four units, so a fourplex qualifies for the same residential financing as a single-family house. Kenny Karunda used exactly this to buy his first building in Dorchester.
The conditions are that your credit has to meet the lender’s threshold and you have to occupy one of the units for a required period. Programs also apply additional tests to 3-4 unit properties that don’t apply to single-family purchases. Confirm the current requirements with a loan officer who has closed small multifamily, not a general purchase lender.
How much cash do you actually need to close a fourplex house hack?
On a $395,000 fourplex, Kenny put down $17,500. That’s the down payment only — closing costs, reserves, and the renovation budget sit on top of it.
In his case the rehab was about $2,000 per unit for carpet, paint, and fixtures, and the units were turned as they came available rather than all at once. Budget for the down payment plus closing costs plus enough working capital to turn at least one unit, and ask your agent to negotiate a seller credit toward closing costs.
Is it worth using retirement funds for the down payment on a house hack?
Kenny emptied a 401(k) from a former employer to fund his $17,500 down payment, on the reasoning that the money was sitting idle and the building would put it to work. Sixteen years of hindsight on a property now worth roughly $1.1 million makes that look obvious.
It is not a general recommendation. Early withdrawals carry tax consequences and penalties that depend on your age, account type, and income, and there are other structures for using retirement money in real estate. Run the specific numbers with a CPA before liquidating anything.
How do you find a small multifamily with below-market rents?
Price current market rents for the neighborhood yourself, on comp sites, then compare that to the actual rent roll. Where the gap is $300 to $500 a door, you have a deal worth touring. Where the rents already match market, the building has no built-in upside.
Do this screening before you look at properties, not after. Kenny searched about six months in Dorchester specifically because he was filtering for this condition rather than buying the first fourplex he could afford. He also refuses to underwrite off seller pro formas — only in-place rents and independently verified current market rents.
Should you refinance a low-rate house hack to pull equity out?
It depends entirely on what the new payment does to cash flow. Kenny looked at refinancing his Dorchester fourplex, which carries a 3.75% note, and was quoted 6.25%. The higher payment would have wiped out the cash flow, so he left the loan alone despite substantial equity in the building.
Underwrite the property at the new rate before you apply. If the post-refinance payment eats the spread, the equity is worth more sitting in place than converted to cash at that cost.
The bottom line
Before you shop for a fourplex, get your credit to a qualifying level and pull current market rents for the two or three neighborhoods you’d actually live in — the gap between those rents and what in-place tenants are paying is the only number that tells you whether a house hack is worth six months of searching.
