A 4-plex (four self-contained units on one title) qualifies as residential real estate under CMHC and most lenders β meaning standard residential financing applies.
However, these properties often have tenancies, revenue, and operational aspects that resemble commercial deals.
Agents must be prepared to handle both residential disclosure and income property analysis requirements.Β
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Confirm zoning β 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.
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Confirm title β ensure the 4-plex is on one title (still residential) and not divided into four condominium units (which would change documentation and representation).
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Confirm utilities β clarify whether meters are separate or shared for heat, water, and power. This affects leases, expenses, and value.
Albertaβs 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 tenantsβ quiet enjoyment.
You cannot take photos or video of tenant belongings without consent.
Provide Notice of Entry to each tenant before showings.
Itβs good practice to introduce yourself (as listing agent) to tenants early to build cooperation β calm, clear communication reduces showing friction.
Ask the seller for:
Required Documents
Purpose
π Copy of all current leases
Confirm rent, term, and tenant obligations
π° Rent roll summary
Show total rental income and expiry dates
π§Ύ Deposit record
Amounts and where held (must be transferred on sale)
π¦ Utility responsibility breakdown
Who pays what
π 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.
When representing a buyer or seller on a 4-plex, understanding income-based valuation is critical.
While itβs still residential real estate, investors evaluate it using commercial analysis principles like Net Operating Income (NOI) and Capitalization Rate (Cap Rate).
From the seller, obtain:
Current rents for each unit
Lease terms (monthly vs. fixed)
Vacancy or rent arrears history
Other income (parking, laundry, storage)
Unit #1
Monthly Rent: $1,600
Lease Term: Month-to-month
Other Income: β
Unit #2
Monthly Rent: $1,550
Lease Term: Month-to-month
Other Income: β
Unit #3
Monthly Rent: $1,500
Lease Term: Fixed to December 31
Other Income: β
Unit #4
Monthly Rent: $1,400
Lease Term: Month-to-month
Other Income: Coin Laundry $50
Total Gross Scheduled Income:
$6,100/month Γ 12 = $73,200/year
Most lenders and appraisers use 3β5% of gross income for vacancy.
Example:
$73,200 Γ 5% = $3,660
Effective Gross Income (EGI): $73,200 β $3,660 = $69,540
Operating expenses include costs required to maintain the property (not mortgage payments or income tax).
Property Taxes β $6,000/year
Insurance β $3,000/year
Maintenance / Repairs β $4,000/year
Utilities (common/shared) β $3,000/year
Property Management (optional) β $3,500/year
Total Operating Expenses: $19,500/year
NOI=Effective Gross IncomeβOperating Expenses\text{NOI} = \text{Effective Gross Income} - \text{Operating Expenses}NOI=Effective Gross IncomeβOperating Expenses
$69,540 β $19,500 = $50,040 (NOI)
Cap Rate (Capitalization Rate):
Cap Rate=NOIPurchase PriceΓ100\text{Cap Rate} = \frac{\text{NOI}}{\text{Purchase Price}} \times 100Cap Rate=Purchase PriceNOIβΓ100
Market Value (based on Cap Rate):
Value=NOICap Rate\text{Value} = \frac{\text{NOI}}{\text{Cap Rate}}Value=Cap RateNOIβ
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)}0.05550,040β=$909,818 (Approx. Market Value)
If financing 75% loan-to-value at 6% interest:
Down payment: $227,500
Annual mortgage payments β $49,000
Annual cash flow β $1,000 before tax
This shows why NOI, expenses, and cap rate matter β even small rent or cost changes can shift investment returns.
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Always verify rents and expenses with documents (leases, tax bills, insurance).
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Donβt rely on seller βestimates.β Build your own APOD (Annual Property Operating Data) sheet.
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Use NOI and Cap Rate as discussion tools, not appraisals β CMAs still apply.
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Encourage buyers to compare income performance vs. market value trends.
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 β smoke detectors, carbon monoxide alarms, fire separations, egress windows
Insurance β seller should maintain property insurance until possession
Property taxes and utilities β obtain recent statements
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.
When representing a buyer:
Confirm financing: some lenders treat a 4-plex as residential only if owner-occupied or β€4 units. Otherwise, it can fall into small commercial lending.
Review leases carefully β 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.
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."
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 β buyer coverage starts on possession.
β Use clear communication with tenants and other agents.
β Schedule group showings when possible to minimize disruption.
β Keep detailed notes of all notices given.
β Use RTA forms for tenant notices and security deposit transfer.
β Recommend legal review if seller or buyer is unsure about tenancy continuation.
β Encourage buyers to order a building inspection that covers all units.
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Review fire code compliance β some older 4-plexes are non-conforming but grandfathered.
Optional PDF's You Can Use:
π APOD Template
π RTA Entry/Showing Notice Form (PDF) β for proper notice before showings.