Definition:
Multifamily properties are residential buildings that contain more than one housing unit. They include duplexes, triplexes, fourplexes, and larger apartment complexes.
Example:
Michael purchases a triplex—a building with three separate living units. He lives in one unit and rents out the other two. Because the property has multiple units under one roof, it’s considered a multifamily property.
Explanation:
Multifamily properties are a popular option for both homeowners and real estate investors. They can range from small two-unit homes to large apartment buildings with dozens or even hundreds of units. Each unit has its own living space, including a kitchen, bathroom, and entrance, and can be rented out individually.
Multifamily properties are typically classified as:
- Small multifamily: 2 to 4 units (eligible for traditional residential financing)
- Large multifamily: 5 or more units (usually financed through commercial loans)
Buyers of small multifamily properties can often qualify for conventional, FHA, or VA loans. If they live in one of the units, they may even be able to count projected rental income toward their loan qualification—this is known as "house hacking."
These properties are attractive because they generate rental income, help build equity, and offer tax advantages. However, they also require property management and maintenance, especially when multiple tenants are involved.
Why is Multifamily Properties Important in Real Estate Transactions?
Multifamily properties are important because they provide affordable housing options and offer buyers a path to generate income and build wealth. For first-time buyers, living in one unit while renting out the others can offset mortgage costs. For investors, they’re a cornerstone of rental income strategies. Sellers benefit from strong demand, especially in high-rent or urban areas.