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July 7th, 2023 at 11:00 am

The American dream of homeownership can take many forms. For most of us, it’s the allure of owning and living in a detached single-family house that you can decorate and landscape to suit your personal lifestyle.

For others, owning a multifamily structure–or multidwelling unit (MDU)–is more appealing for a number of reasons:

Whatever your motivation, it’s important to know the different types of multi-family properties for sale should you decide to become an owner and enjoy the benefits of owning a home. Multi-family dwellings are typically considered commercial real estate, so working with an experienced commercial agent is a great way to get to know what’s available in your area. Also, feel free to connect with Ron Sanford, our Commercial Division vice president.

What is a Multi-family Home?

According to realtor.com, multi-family housing is a building with more than one unit where people can live, each with their own separate kitchens, living rooms, utility bills, patios, and so on. MDUs are typically found in densely populated areas such as cities where space is at a premium. As mentioned, they can be rented, owner-occupied, or act as investment property for landlords to collect rent from tenants.

How many MDUs are there?

As of 2016, there were approximately 4 million multifamily dwellings nationwide, compared with about 90 million single-family homes. While living in close quarters with neighbors might not be ideal for privacy or noise, people in multifamily homes generally pay less than those in single-family homes. They also don’t have to deal with a lot of maintenance issues because a property-management company is often responsible for repairing the building’s exterior, landscaping upkeep, pool care, and maintaining other common areas.

Types of multifamily homes

Multifamily homes come in all shapes and sizes. Some of the more common designs include:

Why invest in a multifamily home vs. a single-family home?

Buying a multifamily home to rent to tenants, or where you live in one unit and rent out the others, can be a wise financial strategy, especially in a tight housing-inventory market. Why? Homeownership in many areas has been declining, dipping two years ago below the 66.6 percent historical average. People need a place to live, so an MDU could be a good long-term investment for the owner. If you take care of a rental property for 20 years, it will take care of you for life, a popular real estate saying goes.

Who is a Multi-family Home For?

Multi-family housing presents a unique opportunity for individuals, families, and investors alike. Here, we’ll explore who multi-family homes are ideally suited for and why they have become a popular choice in the world of real estate.

The Savvy Investor

If you’re an investor looking to maximize your returns, multi-family properties can be a goldmine. A multi-family investment property offers multiple units under one roof, allowing you to generate rental income from multiple tenants simultaneously. By diversifying your investment across several rental units, you spread the risk and increase your chances of a stable cash flow. Multi-family real estate investing provides an opportunity to build wealth through passive income and potential property appreciation.

Growing Families

For families seeking a spacious living arrangement, multi-family homes can be an excellent choice. With multiple units or floors, these a multi-family unit provides ample room for growing families to live comfortably while still maintaining some privacy. The separate units can accommodate extended family members or be used as additional living spaces for older children, providing a sense of togetherness while preserving individuality.

Homeowners Seeking Rental Income

Owning a multi-family investment property allows homeowners to exploit the rental market. By living in one multi-family housing unit and renting out the others, homeowners can offset their mortgage payments or even generate additional income. This arrangement can be particularly beneficial for first-time buyers who want to enter the real estate market while minimizing their financial burden.

Community Builders

Multi-family housing plays a vital role in fostering vibrant and diverse communities. These properties bring together individuals from various backgrounds and demographics, creating a sense of unity and shared experiences. Living in a multi-family building offers opportunities for social interactions, neighborly support, and the chance to build lasting relationships with like-minded individuals.

Real Estate Enthusiasts

If you have a passion for real estate and enjoy the challenges of property management, a multi-family home may be an ideal fit. Managing a multi-family property requires skills in tenant screening, lease agreements, maintenance coordination, and financial management. For the real estate investor eager to dive into the world of real estate, multi-family properties offer a dynamic and rewarding experience. However, before diving in, it’s important to learn about the reasons to use a real estate agent instead of doing things on your own.

Pros of Owning a Multi-family Home

Rental Income Potential

One of the significant advantages of owning a multi-family home is the potential for rental income. With multiple units, you have the opportunity to rent out the additional spaces, generating a steady stream of cash flow. This income can help offset your mortgage payment and even provide a profit.

Diversified Investment

Investing in a multi-family home allows you to diversify your real estate portfolio. By having multiple units, you reduce the risk of vacancy and income loss. Even if one unit becomes vacant, you can still rely on the rental income from the other units, ensuring a more stable investment.

Property Management Efficiency

Managing multiple units in one location can be more efficient compared to managing multiple single family homes spread across different areas. With a multi-family property, you can centralize property management tasks such as maintenance, repairs, and tenant screening. This centralized approach can save you time, effort, and resources.

Potential for Appreciation

Multi-family housing, especially in desirable locations, has the potential for appreciation over time. As the value of the property increases, so does your overall investment. This appreciation can result in significant returns if you decide to sell the property in the future.

Cons of Owning a Multifamily Home

Increased Responsibilities

Owning a multi-family property means taking on increased responsibilities compared to owning a single family home. You’ll need to manage multiple tenants, handle maintenance and repairs, and ensure compliance with regulations and laws governing rental properties. It’s crucial to consider whether you have the time, resources, and willingness to handle these added responsibilities.

Higher Initial Investment

Acquiring a multi-family real estate often requires a higher upfront investment compared to a single family property. You’ll need to secure a larger mortgage, provide a substantial down payment, and potentially cover higher closing costs. It’s essential to assess your financial situation and determine if you have the means to handle the initial investment.

Regulatory Considerations

Owning a multi-family property comes with additional regulatory considerations. You must familiarize yourself with local housing laws, tenant rights, and building codes. Staying compliant with these regulations is essential to protect your investment and maintain a positive relationship with your tenants.

Make sure it’s the right move for you

If you do want to invest, be sure you’re ready to deal with the unexpected: inconsiderate renters, repairs, and upkeep are just a few of the issues you’ll probably have to face. Consider these factors before investing.

Are you ready to find your perfect? Whether you’re looking for a single-family home or investment property, any one of our dedicated real estate professionals is ready to help.

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