Multifamily investment refers to the purchase of multifamily properties, such as apartment complexes, condominium buildings, or duplexes that offer multiple spaces for rent. Because of its ability to improve investor cash flows and increase net operating income, it is a popular form of real estate investment. 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.
In a nutshell, a multifamily home is any residential property that has more than one dwelling unit. A multi-family property in an attractive area could offer investors enormous benefits, so naturally, there are likely to be several investors interested in a given property. Instead of buying one property at a time, these investments allow you to purchase several properties within the same building. Some may even employ the owner-occupancy strategy initially, as a way to “really live the property management lifestyle before investing in larger multifamily properties.” Investors can depreciate their multifamily property to offset a large portion of the rental income they collect from the property each year.
Sometimes an investor buys a multifamily property without the landlord occupying it or hiring a property manager, which can make management more time consuming, requiring the owner to visit the unit in person to make repair and maintenance requests. However, a multifamily property generally generates enough income to allow investors to hire a property manager to handle day-to-day operations and take care of necessary repairs. Two- to four-unit multifamily properties are a great way for first-time investors to immerse themselves in the waters of rental properties, as they are typically financed by banks in the same way as single-family homes. Investors should look for high-growth, high-yield areas where properties are in high demand and well-maintained neighborhoods when investing in multifamily properties.