What is a multi-family home?

There are many opportunities to make money in the world of real estate; investing in multi-family homes is one of them! For first-time investors, purchasing a multi-family home and renting out the units can be a simple way to break into the game and earn a little extra income on the side.

But what is a multi-family home, anyway? This article will cover that plus give you a few reasons as to why you should consider investing in one of these properties. 

What is a Multi-Family Home?

A multi-family home is exactly what it sounds like: a standalone structure built with the intention of housing more than one family. There are several different types of multi-family properties, but some of the most popular include: 

Apartments - These properties contain large residential buildings with multiple units for renters. They tend to come in apartment complexes, which is where you'll find them. There's a lot of diversity when it comes to apartments, especially in terms of their location and what features they have.

House - House properties are those that contain multiple houses instead of just larger buildings. Oftentimes these will be duplexes or triplexes, but there are other sizes too! There are many different types of houses, and they can sometimes be found in gated communities.

Multi-family house

Tenplex - A tenplex is a type of multifamily property that contains ten separate living units for rent. This can include everything from duplexes to fourplexes and more! These properties are great if you're looking to make some extra income.

Commercial/Retail - Commercial properties are multifamily units that contain commercial areas, which can include retail and office spaces. Having a commercial area at one of your properties is great because the tenants will have convenient access to it. One thing to keep in mind with these type of properties is that they'll usually cost more than other options, but you'll have a lot of potential to make money from them!

While each property will be unique, there are a few main factors to consider if you're thinking of investing in multi-family home:

  • Number of Units – Buyers can choose between single-unit homes and complex buildings that have multiple units. The price per unit will depend on how many you're purchasing. 
  • Condition – Since these types of properties are often used, they can come in a wide range of conditions. Some may need to be completely gutted, while others can be purchased as is with only a few cosmetic repairs. 
  • Cost – Just like anything, you're going to pay more for something of better quality. Higher-quality properties can be worth the money since they will likely attract higher potential renters and bring in more income.

Multi-family homes are a great way to earn some extra money, and purchasing one doesn't mean you have to rent out the entire building. It's completely legal to purchase a multi-family home and live in one of the units while renting out the other units for additional income. 

So, why should you consider investing in this type of property? Here are 7 reasons:

1) Multiple Rental Income Streams

Multi-family homes are fantastic investments because they provide both diversity and stability in terms of income. This is due to the fact that multifamily homes offer many different types of living spaces for tenants, which means they can pay higher rents without having any decrease in quality. 

Although the most common type of income you'll find with multi-family properties is rent, there are some other types too. The more spacious your property is, the higher your income can potentially be--and that's what makes investing in a multifamily home worth it!

Rent - The main type of income you'll find with a multi-family property is rent. This is money that your tenants will pay to live at your property, and it's one of the best sources of income because there isn't any risk involved! You won't have to do much to get this money, and it's the most reliable type of income too!

Return on Investment - When you buy a multi-family property, you will be able to make more money over time when your tenants pay rent. This is because a good property in a great area will always give you a solid return on investment (ROI). By paying attention to your property, you can raise the rent and get a lot of money over time.

Gross Income - Gross income is another type of income that comes with having a multi-family home, and it's basically how much money the property makes minus any expenses. This can mean different things for each property owner, but it should always be a part of your plan!

2) Easy to Finance 

Multi-family homes are a great way to build your credit, especially if you're new to the real estate game. It's possible to finance these properties so that you only have one payment per month rather than multiple. Because of this, they typically require less in terms of cash outlay. You can even take out a loan for the down payment, which is something you won't be able to do with most other investment properties. Because they are considered income-generating properties, banks are typically more willing to work with these types of deals and put less emphasis on your credit score and/or cash reserves.

Financing a Multi-family Home

Because multi-family homes tend to be more expensive than small properties, you can earn a high rate of return on your investment. If you're looking for long-term investments with limited work involved, then this may be right up your alley. Of course, if you are willing to put in some work and make repairs and upgrades, the earnings potential is even greater! 

3) Renters Pay on Time 

Some tenants might be slow when it comes to paying their rent. With multi-family properties, this is not a problem because there's always other tenants who'll make up for the one who's late on payments. In addition to this, tenants also have an incentive to pay on time because it's easier to get evicted from a multi-family home than a single-family one.

If you're worried about your tenants not paying on time, just have a conversation with them about it and make sure they realize that there are consequences for their actions. Most people don't want to get kicked out of their home, so they'll do anything to avoid being evicted and losing all their money invested into a lease. They'll be more likely to pay you on time if they know that it won't just be your loss, but theirs as well.

If you're looking for a low-maintenance investment that will keep the cash flowing in, then this may be the investing type of property to consider. It's easy to collect rent on a multi-family home because you simply wait for the tenants to give it to you. There are no repairs to make, no vendors to pay out of pocket, or anything like that. This means you get money without having to do much in return!

Real estate photo

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4) Multi-Family Properties Offer Tax Deductions 

Another major benefit of investing in multi-family properties is the tax deductions, which are easy to claim! The IRS lets you claim depreciation on your investment, which means that by the time you sell the property, you'll have lowered your income tax bill to almost nothing. Your personal losses and expenses can also be deducted when calculating your taxes, which makes it good for both types of properties. Also, there's the option of being able to deduct interest on your mortgage. 

If you own a single-family home, it can be a pain keeping track of all of these expenses and collecting the necessary paperwork each year. However, with multi-family properties it becomes much easier because they don't take up as much time. Plus, it's much harder to mess up your taxes with a multifamily property because it has so many deductions and benefits. 

Tax Deductions on Multi-Family Home

5) Multifamily Properties Appreciate Over Time 

If you don't foreclose on your properties, they'll eventually increase in value over time. This is especially true if you invest in great locations that people want to move into! Over time, the property will also get more expensive as it's upgraded and refurbished. If the tenants treat it well, then you can sell it for a lot of money when you're ready to sell!

On top of all that, multi-family homes offer a way to diversify your portfolio. If you're going to be doing real estate investing, then owning both single family properties and multifamily is a great way to start out. You can work on learning the ropes with the former while gaining more experience, and then you can move onto multifamily properties for a higher return. 

As long as you keep your property well-maintained, there's no reason why your multifamily home won't appreciate over time. There are many things that affect how much it will go up in value, including the condition of your neighborhood and even just simple demand. 

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6) Large Pool of Tenants 

Another great benefit of multi-family properties is the large pool of tenants you have access to. This will let you increase your rental income by renting multiple units at the same time. When you do this, it means that a single unit can cover all of your costs! 

If you're worried about having to pay for too many maintenance issues, don't worry! This is not a problem because you'll always have other units to help pay for the repairs. The more properties you own, the more money will come in each month and even all year round! 

Having Tenants Helps Pay For Repairs

Having a large pool of tenants can give your property a lot of flexibility and makes it easier to get new tenants if you need to replace someone. It also makes it easier to raise the rent if you need to because you'll have more people who can pay for it. As long as your property is well-maintained, there's no reason why having a large pool of tenants won't be beneficial! 

7) Blanket Insurance Policies 

Blanket insurance policies, which will help cover you in the event that something happens to your property. For example, if someone sets fire to one of your buildings, then all of them should be covered for any damages. This means that they'll all be fixed up and ready to rent out again at a lower cost. Blanket insurance policies help cover the most expensive part of owning properties: the cost to fix or replace them if something bad happens. 

If you're worried that something will happen to your property, then blanket insurance policies can help protect you. Of course, this only works if the properties are in good shape and maintained! 

Multi-family homes provide many benefits compared to regular properties. They're a great investment because they diversify your portfolio and can bring in some passive income over time! If you need to pay for minor repairs or have no place to stay, then you should rent one of the units from the owner! 

If you're looking to get into the world of real estate investments, multi-family homes are an excellent way to enter this market. With so many different options and configurations out there (including duplexes and triplexes), it's possible that one of these properties will fit your needs perfectly. Plus, you know how expensive housing can be; being able to rent out some units could provide additional income which is always nice! Multi-families come with their own set of challenges too -- things like management issues and HOA fees -- so make sure you understand what those might entail before buying one. 

The team at getMULTIfamily.com are experts when it comes to multi-family real estate and have worked with numerous buyers and sellers over the years. Specializing in duplexes, triplexes, fourplexes and other multifamily homes, Get Multifamily is the obvious choice when considering your next purchase or sale. 

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