Deciding to purchase a MULTIfamily home is an exciting endeavour. There are so many options when it comes to this style of home, whether you're hoping to purchase the entire residence and act as landlord or you're simply looking for a unit to buy, MULTIfamily homes are a diverse and exciting investment.
However, there are many questions that will run through your mind as you consider purchasing a MULTIfamily home. These questions and more can often lead to confusion and frustration. However, we're helping take the guesswork out of owning a MULTIfamily home and compiled a list of the most frequently asked questions, as well as answers.
1. What is a MULTIfamily home?
A MULTIfamily home is any form of residence that consists of more than one living space. This can include duplexes, triplexes, or fourplexes. This refers not only to housing arrangements but also to the ownership of those homes.
Some examples of MULTIfamily houses include:
- Apartment - Residential units in a building, separated by walls which act both as their own individual space and the divider between other tenants. Apartments are typically rented for a fixed period of time, typically six months or twelve months at a time, with the option to renew at the end of the rental term.
- Duplex - A MULTIfamily home which contains two units. Each unit is typically its own home and each has a separate address, but the building as a whole is one structure and they share some common areas such as a yard and storage space.
- Triplex - A MULTIfamily home with three units. It's commonly seen in larger cities where the housing demand is high.
- Townhouse - A type of stand alone MULTIfamily home that's actually attached to another unit. Typically, each townhouse will have its own yard space and mimics the design of a single family home, with some including basements or garages.
- Mixed-Use Building - A property that contains both office and residential spaces. It's typically used for business professionals who work in the building but also want to take advantage of living in an urban area.
As you can see, there are plenty of options to consider when you're looking to purchase a MULTIfamily home. If you’re hoping to break into the world of real estate investment, you’ll definitely have a great variety to choose from. If you’re just starting out with your first investment, you’ll likely want to keep it small by purchasing a duplex or a set of townhouses. More experienced investors can take on larger scale MULTIfamily dwellings such as apartment buildings or condos. Whatever your level of investment, there are plenty of MULTIfamily listings to look through to find the perfect opportunity for you.
2. What is considered a MULTIfamily home?
Consider a MULTIfamily home anything that allows you to earn income from more than one property in the same building. This could be in the form of an apartment complex, but it could also be a triplex or even a townhome. These properties usually come with added benefits too, such as shared facilities and common spaces.
It's important to understand that a MULTIfamily home is not simply limited to a certain number of units. These homes can contain two to hundreds of units, be it a charming townhouse or a trendy, high-rise condo building.
3. How much does it cost to build a MULTIfamily home?
There's plenty to consider if you're looking to build a MULTIfamily home. To get an idea of how much it will actually cost to build the home, you'll want to understand the difference between hard and soft costs.
Hard costs - These are the costs for things like construction materials, labor, and taxes. In general, anything to do with the actual structure of the building would fall under this category including the foundation, roofing, and landscaping.
Soft costs - These are expenses you'll need to factor in, but which won't necessarily be considered when calculating your total cost. This includes interest rates on loans and potential carrying costs like insurance fees.
There are plenty of expenses to factor into your budget when thinking about building a MULTIfamily home. Here are a few more costs that may have slipped your mind:
- Land cost
- Architecture fees
- Contractor fees
- Painting crews
- Electrical work
You'll also need to take into consideration the location of your MULTIfamily home. Up-and-coming neighborhoods that are set to build a collection of new amenities such as coffee shops, restaurants, and grocery stores, will be more expensive to build in than older, more rural areas of town.
4. What is a single-family home vs a MULTIfamily home?
Single-family homes and MULTIfamily homes are two completely different types of homes. The difference can easily be explained by the title of the home: A single-family home houses just one, single family. A MULTIfamily home can house multiple families.
Single-family homeowners typically own the land that the house was built on. MULTIfamily homeowners, if they don't own the entire residence but just one unit, do not own the property that the house is built on. This is the reason that MULTIfamily homes tend to be less expensive than single-family homes. They are simply not as valuable because they don't have their own property.
If you're looking to invest in real estate, you could purchase either a single-family or a MULTIfamily home, although for the most part, MULTIfamily housing is more popular. Owning a MULTIfamily home can be an excellent way to generate additional income by renting out the units.
5. What is a rental in a MULTIfamily home?
A rental in a MULTIfamily home is an apartment or other dwelling space that you can rent out to tenants for income. This income can help pay your mortgage payment every month, but it's also important to note that monthly rental income might not cover all of your costs.
There are also different types of rentals when it comes to MULTIfamily homes. Apartments are usually rented out by room, meaning one person will pay for a room and share a bathroom or kitchen with other apartment dwellers. Duplexes work similarly but they have two separate units: one on the top floor and one on the bottom floor. Live-work lofts, townhomes, and triplexes are also popular rental options.
Owning a MULTIfamily home is an excellent investment opportunity. You can generate extra income by renting out the other homes, and you'll always have tenants to help cover your mortgage payment. Be sure to factor in all the costs before making any decision about owning a MULTIfamily property; there are many differences between single-family and MULTIfamily homes that may not be apparent at first glance. Take the time to do your research into what type of area you want to build these buildings on as well as how much it will cost for materials, labor, taxes etc., so that you know what's involved with getting started! Creating a budget now will save you from financial troubles down the road when unforeseen expenses arise. It can be an incredibly rewarding experience to own a MULTIfamily home, and with the proper research and preparation, you could join the ranks of MULTIfamily homeowners.