What Is a Multi-Family Property?
A multi-family property has multiple dwelling units owned by one or several parties. Apartment buildings, condos, and duplexes fall under this category, except that with duplexes, the land and the property do get recorded on one deed. With condos, the units are owned individually, and owners enjoy shared ownership of the common areas.
A property with four units or fewer is considered Multi Family building, and the investor may opt for a residential mortgage if they intend to occupy one of the units themselves.
A property with five units or more is considered commercial, and investors must follow stringent lending rules when financing one of these properties. One of the main reasons people invest in multi-family properties is because these properties generate a monthly income for each rentable space. Compared to single-family homes, where the investor only has one source of rental income, multi-family properties are a better investment because of cash flow from several sources.
Vacancies are less frequent and not as costly – even if one or two units become vacant, the investor will still generate income from the other units.
It’s also easier for investors to control the value of multi-family properties based on the individual units’ rental income.
