Multi-unit: duplexes, triplexes and fourplexes

A property with two, three or four units can be financed with a residential mortgage. Five units and above is commercial lending, with different underwriting and different terms. This page stays inside the two-to-four range for that reason.

Living in one of the units opens up owner-occupant options. FHA, VA and conventional loans all have owner-occupied programs for two- to four-unit properties, each with its own occupancy requirements and down payment rules. FHA adds a test for three- and four-unit properties that compares the property’s rental income with the mortgage payment.

Lenders also have rules for how much of the existing or expected rent they will count toward qualifying, and those rules differ by loan type. Settle how they apply to the specific building with a lender early. The figures they need come from the leases, which is one more reason to ask for the leases first.

A building with three kitchens and three front doors is not necessarily a legal triplex. The unit count that matters is the one the city’s zoning allows and its permits record. A basement apartment added without permits, or a house divided into units decades ago, can look finished and still not be a lawful unit.

Three records answer it between them: the zoning of the parcel, which says what is allowed there now; the building permit history, which says what was approved; and the county assessor’s record, which shows how the property is classified. Where they disagree, ask the city before you rely on the rent from the unit in question. A use that predates the current zoning may be allowed to continue, and what happens if it stops or the building is rebuilt depends on that city’s code.

Lenders and appraisers look at this too. A unit that is not legal may not be counted, which changes both the appraisal and the income a lender will credit.

Existing leases generally survive a sale. The buyer takes the building subject to them: the same tenants, the same rent, the same end dates, and the security deposits the seller is holding, which Colorado law requires the seller either to transfer to the buyer, with notice to the tenant, or to return to the tenant.

Ask for a copy of every lease, a rent roll, and a record of the deposits held. Having each tenant confirm their rent, deposit and lease terms in writing, often called an estoppel, is how you check that the paperwork and the reality match.

Colorado’s landlord-tenant law has changed substantially in recent years, including limits on ending many residential tenancies without a reason the law recognizes. If your plans depend on a unit being vacant by a particular date, including so that you can move into it, confirm with a Colorado real estate attorney what the current leases and the current law allow before you write the offer.

Denver requires a license to rent out residential property, and getting one involves an inspection. If you are buying a Denver building with tenants in place, ask whether the current owner holds the license. It does not transfer with the sale: a new owner applies for their own.

Short-term rental is more restricted. Denver requires a short-term rental to be the host’s primary residence, and requires a separate short-term rental license. In a duplex where you live in one unit, do not assume the other can be rented by the night: ask the city how the primary-residence rule applies to it.

Aurora and Lakewood make their own rules for long-term and short-term rentals. Check with the city the property is actually in rather than carrying Denver’s answer across the boundary.