VA Loan or FHA Loan to Construct 4 Unit/ 4-Plex

[Shanelle Jones]

I am interested in using either a VA Loan or an FHA Loan to construct 4 unit/ 4 plex. While this is allowed by both the VA and FHA, I am having a difficult time finding a lender willing to do this. I live in Virginia. Has anyone had success constructing a 4 unit with a low down payment loan?

[Jaysen Medhurst]

Hi @Shanelle Jones, you're going to have a VERY difficult time making this happen. I assume you have never done anything like this before, so getting a bank to take a chance on you with so little equity in the deal is going to be next to impossible.

There's  reasons you don't see a lot of new 4-plexes going up. In many places they have been "zoned out" of local cities, meaning the town won't allow any more to be built (unless a replacing existing). More importantly, the finances are very hard to make work. With land prices comparatively much higher than when most 4-plexes were built, the numbers just don't work out.

This is why when you do see new rental units being built they tend to be large (40+ units) and class A. The developers need both economies of scale and top-end rents to make the numbers work.

Post some more details, location and your financial breakdown, and the community will help you walk through whether this is actually a viable plan.