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Investing in Multi-Family Properties


Residential multifamily properties (2-4 units) combine the financing and easy purchasing benefits of a single-family home. Bought properly, these can cash-flow quite well and there is often less competition than what you'd run across bidding on single family homes. Best of all, these properties can serve as both a solid investment as well as a personal residence for the smart investor. Another perk of the small multifamily property is the ability to take advantage of "economies of scale," as only one loan is needed to secure the 2, 3, or 4 units in the property. One of the things that make these investments so appealing is that most banks look at residential multifamily properties with four units or less with the same guidelines as a single family house, which can make qualifying for a loan much easier.

Investing in Small Commercial-Residential Buildings

Small Commercial-Residential buildings are made up of between 5-50 residential units. Though the line between small and large buildings is not set in stone, most investors typically draw the line between small and large apartment buildings at around 50 units.These properties can be more difficult to finance than single family homes or 2-4 unit properties, as they rely on commercial lending standards instead of residential ones. That said, these properties often provide significant cashflow for the investor that can deal with the more management-intense nature of the properties. Additionally, competition is generally seen on a lower scale for this property type, as they are too small for large, professional REIT’s to invest in (see more on REITs here) but too large for most novice real estate investors.

Instead of being priced based on comps, the value of these properties are based on the income they bring in. This creates a huge opportunity for adding value by increasing rent, decreasing expenses, and managing effectively. These properties are a great place to utilize on-site managers who manage and perform maintenance in exchange for free or decreased rent.

Investing in Large Commercial-Residential Buildings

This class of property “Large Commercial-Residential Buildings“ are the large complexes you might see all across the country that often include pools, work-out rooms, full time staff, and high advertising budgets. These properties can cost many millions of dollars to purchase but can produce stable returns with minimal personal involvement. Many large apartments are owned by "syndications" - which are small groups of investors who pool their resources.