Multifamily

Multifamily is a classification of housing property, in which multiple housing units are accommodated in the same building, or multiple buildings in the same complex.

What Is Multifamily?‍

Multifamily is a real estate term that denotes a residential property where multiple housing units are made on the same land. It can be a single building with multiple apartments or multiple buildings constructed in the same complex. 

In a multi family housing property, multiple families are allowed to rent out single units for living. They share a common parking space and community space and other resources. The owner of the multi-family property usually maintains uniformity in rent and maintenance charges and each of the family is responsible to pay this amount each month.

Generally the owner of a multi family residential property lives in one of the units to help maintain it and collect rent on time. Additionally, buildings with more than one unit are considered commercial properties. 

What Is the Difference Between a Multi Family and Single Family Home?‍

The fundamental difference between a multi family property and a single family property is the number of units. Any property that has more than one residential unit is considered multi family while a property that has only one dwelling unit is known as single family property. 

If we look at this in terms of investment, then investing in a single family property is cheaper than investing in a multi family property. This is because the land acquired for multi family dwellings are larger and require more resources and have higher maintenance costs. 

What Are the Types of Multi Family Homes?‍

There are various types of multi family homes, all with distinct features in terms of layout and living space. Most notable types of multi family homes are:

• Duplexes, triplexes and fourplexes
• Condos
• Townhouses
• Apartment buildings (including high-rise buildings)
• Bungalow courts

What Are the Advantages of Investing in Multi Family Real Estate?‍

For investors, there are many benefits of investing in a multi family property. Here are the most attractive ones:

1. Investing in a multi family property is a great way to diversify the investment portfolio. 
2. It guarantees constant, steady income from all the rent generated from different tenants. 
3. Of all the different real estate properties, multi-family is considered to be the least risky. 
4. With multiple tenants giving rent, the owner gets steady income even if one or two units are left vacant or a tenant decides to move out. 
5. It is easy to scale a multi-family property which means the owner can construct more units whenever he wants.
6. A multi family real estate property promises higher returns in the future as compared to single family properties. 

How Can You Finance a Multi Family Project?‍

If an investor does not wish to use his savings or his own money to invest, he can go for financing options from lenders. For this, the investor needs to consider his credit score and debt-to-income ratio. Here are the different types of financing options available:

• FHA loans - These are government insured loans and typically have longer terms with lower interest rates. 
• CMBS loans - CMBS or conduit loans are commercial real estate loans that are secured by a first position mortgage on a commercial property. Once a CMBS loan is issued, it is pooled together with other similar loans, securitized and then sold to other investors in a secondary market. 
• Bank loans - These loans are backed by banks and offered to investors at an interest rate with monthly payments towards principal and interest. There are stringent conditions for getting a bank loan. 
• Bridge loans - These are short term loans that are often taken by investors to bridge a gap while they wait for an approval for a larger and more permanent loan.

Conclusion‍

A multi family property is home to multiple tenants and is constructed on a large piece of land. Families living in these residential units often share a common wall that divides the space in two separate homes. They also tend to have less privacy than single family homes. 

Having said that, multi family properties are very popular now as they can accommodate more people at reasonable rent prices. Investors looking to invest in multi family homes must be prepared to manage the property well and provide all amenities to the tenants that are required.