4-Plex Listings & Sales

1. Determine Property Type and Use

• ✅ Confirm zoning – check through the municipal land use bylaw (e.g., R-C2, R-CG, R-C4, M-C1, etc.) to ensure the use as a four-unit building is permitted.
  
  

• ✅ Confirm title – ensure the 4-plex is on one title (still residential) and not divided into four condominium units (which would change documentation and representation).
  
  

• ✅ Confirm utilities – clarify whether meters are separate or shared for heat, water, and power. This affects leases, expenses, and value.
  
  

2. Notice to Tenants (When Listing)

• Alberta’s Residential Tenancies Act (RTA) governs the rights of tenants during the sale process.
  
  

• Landlords (or their agents) may show a tenanted property to prospective buyers only with proper notice:
  
  

  • At least 24 hours written notice to enter.
    
    

  • Entry between 8 a.m. and 8 p.m.
    
    

  • Showings must be reasonable in frequency and respect tenants’ quiet enjoyment.
    
    

• You cannot take photos or video of tenant belongings without consent.
  
  

• Provide Notice of Entry to each tenant before showings.
  
  

• It’s good practice to introduce yourself (as listing agent) to tenants early to build cooperation — calm, clear communication reduces showing friction.
  
  

3. Lease Review and Income Documentation

Ask the seller for:

Required Documents

Purpose

📄 Copy of all current leases

Confirm rent, term, and tenant obligations

💰 Rent roll summary

Show total rental income and expiry dates

🧾 Deposit record

Amounts and where held (must be transferred on sale)

🏦 Utility responsibility breakdown

Who pays what

📈 Operating statement or APOD

Summarizes income, expenses, and NOI

APOD (Annual Property Operating Data)

Create or update an APOD using verified data:

• Gross scheduled income

• Vacancy allowance

• Operating expenses (taxes, insurance, maintenance, management, utilities)

• Net Operating Income (NOI)

This helps buyers assess value and lenders underwrite the file.

💰 Understanding Cap Rate, NOI, and Income Analysis for a 4-Plex

When representing a buyer or seller on a 4-plex, understanding income-based valuation is critical.
While it’s still residential real estate, investors evaluate it using commercial analysis principles like Net Operating Income (NOI) and Capitalization Rate (Cap Rate).

🔹 Step 1 – Gather Income Data

From the seller, obtain:

• Current rents for each unit

• Lease terms (monthly vs. fixed)

• Vacancy or rent arrears history

• Other income (parking, laundry, storage)

🏘 Example: Rental Income Breakdown

Unit #1

• Monthly Rent: $1,600

• Lease Term: Month-to-month

• Other Income: –
  
  

Unit #2

• Monthly Rent: $1,550

• Lease Term: Month-to-month

• Other Income: –
  
  

Unit #3

• Monthly Rent: $1,500

• Lease Term: Fixed to December 31

• Other Income: –
  
  

Unit #4

• Monthly Rent: $1,400

• Lease Term: Month-to-month

• Other Income: Coin Laundry $50

Total Gross Scheduled Income:
$6,100/month × 12 = $73,200/year

🔹 Step 2 – Apply Vacancy Allowance

Most lenders and appraisers use 3–5% of gross income for vacancy.

Example:
$73,200 × 5% = $3,660
Effective Gross Income (EGI): $73,200 – $3,660 = $69,540

🔹 Step 3 – Deduct Operating Expenses

Operating expenses include costs required to maintain the property (not mortgage payments or income tax).

💡 Example: Operating Expenses Breakdown

Property Taxes – $6,000/year
Insurance – $3,000/year
Maintenance / Repairs – $4,000/year
Utilities (common/shared) – $3,000/year
Property Management (optional) – $3,500/year

Total Operating Expenses: $19,500/year

🔹 Step 4 – Calculate Net Operating Income (NOI)

NOI=Effective Gross Income−Operating Expenses\text{NOI} = \text{Effective Gross Income} - \text{Operating Expenses}NOI=Effective Gross Income−Operating Expenses

$69,540 – $19,500 = $50,040 (NOI)

🔹 Step 5 – Determine Cap Rate or Market Value

Cap Rate (Capitalization Rate):

Cap Rate=NOIPurchase Price×100\text{Cap Rate} = \frac{\text{NOI}}{\text{Purchase Price}} \times 100Cap Rate=Purchase PriceNOI​×100

Market Value (based on Cap Rate):

Value=NOICap Rate\text{Value} = \frac{\text{NOI}}{\text{Cap Rate}}Value=Cap RateNOI​

Example:
If similar 4-plexes in the area sell around 5.5% cap rate:

50,0400.055=$909,818 (Approx. Market Value)\frac{50,040}{0.055} = \$909,818 \text{ (Approx. Market Value)}0.05550,040​=$909,818 (Approx. Market Value)

🔹 Step 6 – Buyer ROI & Financing Check

If financing 75% loan-to-value at 6% interest:

• Down payment: $227,500

• Annual mortgage payments ≈ $49,000

• Annual cash flow ≈ $1,000 before tax

This shows why NOI, expenses, and cap rate matter — even small rent or cost changes can shift investment returns.

🔹 Quick Tips for Realtors

✅ Always verify rents and expenses with documents (leases, tax bills, insurance).
✅ Don’t rely on seller “estimates.” Build your own APOD (Annual Property Operating Data) sheet.
✅ Use NOI and Cap Rate as discussion tools, not appraisals — CMAs still apply.
✅ Encourage buyers to compare income performance vs. market value trends.

4. Property Information to Verify

• Building size and unit sizes (RMS-measured)

• Age of structure, renovations, and permit history

• Basement development, common laundry, storage areas

• Parking configuration (garage, stalls, alley access)

• Common area vs. private area delineation

• Safety compliance – smoke detectors, carbon monoxide alarms, fire separations, egress windows

• Insurance – seller should maintain property insurance until possession

• Property taxes and utilities – obtain recent statements
  
  

5. Disclosures and Representations

• The seller must disclose:

  • Material facts affecting value or desirability.

  • Any known defects (roof leaks, foundation, heating systems).

  • Whether tenants are in arrears or any disputes are ongoing.

• Agents must avoid giving rental guarantees unless verified by written lease or estoppel.
  
  

6. Buyer Considerations

When representing a buyer:

• Confirm financing: some lenders treat a 4-plex as residential only if owner-occupied or ≤4 units. Otherwise, it can fall into small commercial lending.

• Review leases carefully – buyers assume existing tenancies.

• Security deposits transfer to the buyer at closing (make sure the contract specifies this).

• Review inspection reports for each unit if accessible.

• Recommend buyers:

  • Review the RTA to understand landlord responsibilities.

  • Obtain rental estoppel certificates from tenants confirming rent paid and term.

  • Budget for vacancy and maintenance reserves.
    
    

7. Contract and Offer Tips

Add special clauses such as:

• "The Seller represents that all tenancies are lawful and in good standing as of possession."

• "The Seller shall provide copies of all leases, rent rolls, and security deposit records within X days of acceptance."

• "Security deposits and any accrued interest shall be transferred to the Buyer on or before possession."

• "This contract includes all fixtures, appliances, and common area items as viewed unless otherwise excluded."
  
  

8. Possession and Handover

• Provide buyer with:

  • Copies of leases and deposits confirmation.

  • Tenant contact info (where authorized).

  • Utility and key details.

• Notify tenants of ownership change using the prescribed form under the RTA (includes deposit transfer details and new landlord contact information).

• Ensure insurance transitions properly — buyer coverage starts on possession.
  
  

9. Compliance and Smooth Transaction Tips

• ✅ Use clear communication with tenants and other agents.

• ✅ Schedule group showings when possible to minimize disruption.

• ✅ Keep detailed notes of all notices given.

• ✅ Use RTA forms for tenant notices and security deposit transfer.

• ✅ Recommend legal review if seller or buyer is unsure about tenancy continuation.

• ✅ Encourage buyers to order a building inspection that covers all units.

• ✅ Review fire code compliance — some older 4-plexes are non-conforming but grandfathered.
  
  

10. Optional Attachments (for Training Page)

Optional PDF's You Can Use:

• 📎 4-Plex Seller Checklist PDF
  
  

• 📎 APOD Template
  
  

• 📎 Notice to Tenants (RTA-compliant form)
  
  

• 📎 Security Deposit Transfer Form
  
  

• 📎 Tenant Introduction Script (for listing agents)

• 📎 RTA Entry/Showing Notice Form (PDF) — for proper notice before showings.
  
  

• 📎 Quick Reference Chart comparing single-family vs. multi-unit (4-plex) representation responsibilities.