A multifamily home is any residential property that contains more than one dwelling unit, such as a duplex, townhouse, or apartment complex. If a property owner decides to live in one of their multifamily units, it is considered an owner-occupied property. The definition of multifamily housing is a residential property that has 5 or more housing units where more than one family can reside, such as an apartment complex. Often, the owner of the property lives in one of the units, which is known as “owner-occupied property.” A multifamily property, or multi-dwelling unit (MDU), is a residential building with two or more units under one roof.
It can also be several buildings within a complex. The most common examples are duplexes, townhouses and some types of condominiums. Each unit tends to have its own living room, a separate kitchen, and a bathroom. A multifamily property will generally consist of owning the property and land in a registered deed.
In some cases, it may be owned by one or more parties. If done well, multifamily properties can be a source of excellence for passive retirement investment. Investing in rental properties is the preferred investment strategy for investors who want an additional source of monthly income along with a slow but steady appreciation of the value of their portfolio. JM Littman, director of web design agency Webheads, suggests that “when used in conjunction with cost segregation, investing in multifamily properties provides the benefit of additional depreciation.
For those considering taking the plunge and investing in multi-family or single-family properties, it's important to understand which investment vehicles do what. Multifamily homes up to 4 units are particularly good investments for beginning investors because they are more easily financed than other rental properties. They are in such demand because, instead of spending time and energy to purchase 4 or more separate units, busy investors can buy a property with several units inside and spend time and energy researching the property. They can also be a smart choice for multigenerational families interested in buying a property together while having their own dedicated space.
Location is of paramount importance to real estate investors, even more so when investing in multi-family properties. Whichever way you decide to invest in a multifamily property, this investment can be a great wealth creation tool. As a type of investment property, multifamily units are in high demand among real estate investors who like to use the buy-and-hold investment strategy. Instead of buying one property at a time, these investments allow you to purchase several properties within the same building.
While they are the least common type of residential buildings, investing in multifamily properties is an immensely favorable strategy among investors thanks to their additional source of monthly income, along with a slow but steady appreciation. Investors just starting out can also use a popular real estate investment strategy called “house hacking,” in which someone buys a multifamily property, lives in a unit, and rents the rest, reaping the financial benefits of both homeownership and real estate investment.