What is a multi-family home? Is it for you?
Top blog articles
If you’re interested in making a real estate investment, buying a multi-family house can be a good option. So, what is a multi-family home? It’s a type of property that has more than one living unit. The good thing is if you decide to buy a multi-family home, you can rent it out to separate tenant families and generate passive income. However, such a property could have certain challenges as compared to single-family homes. And, of course, there are advantages too. Let’s learn more about what is a multi-family home and its pros and cons for a first-time investor.
What is a multi-family home?
A multi-family home, also known as a multi-dwelling unit or multifamily property, is a type of residential building that can accommodate many separate housing units within a single structure. That is to say, it can have multiple families or individuals living independently while sharing common spaces, amenities, and walls. Keep in mind that each housing unit typically has its own entrance, kitchen, bathroom, and living spaces for the residents.
It’s worth noting that the term “multi-family home” can also refer to a single building or structure that is divided into separate units, such as an older house that has been converted into several apartments or condominiums.
A building or a multi-family home with more than four living units is considered a commercial property. Clearly, its purpose is not a residential one but a business to generate rental income.
If you’re a multi-family homeowner, you can either live in one of the units and rent out the rest, or lease them all out. The rental property will give you a solid cash flow on a regular basis.
Multi-family vs. single-family homes: What is the difference?
Multi-family homes and single-family homes are two distinct types of residential properties. Single-family houses are standalone dwellings designed to accommodate a single household or family unit. Single-family homes offer a greater sense of independence, as the property is owned and maintained solely by the occupants. They often feature private yards, driveways, and amenities, providing a more spacious living environment.
On the other hand, multi-family homes are residential structures divided into multiple independent units. Each is designed to house separate families or households. These can include duplexes, townhouses, apartment buildings, or condominiums.
Multi-family homes allow for shared infrastructure, such as common areas, parking spaces, and recreational facilities, which can foster a sense of community and provide cost-sharing benefits. Each unit in a multi-family property may be individually owned or rented, offering more flexibility in terms of occupancy and investment opportunities.
Read more: What is GLA in real estate?
What are the types of multifamily homes?

There is a wide range of multifamily housing available, each offering unique layouts and living spaces.
Duplex/Triplex
A duplex refers to two connected homes or units that share a common wall, floor, or ceiling. Similarly, a triplex consists of three connected units. Each unit in a duplex or triplex has its own separate entrance, and they may also have individual yards and garages.
Condominium or condo
A condo is an individually owned unit within a building or community that comprises other individually owned units. Condo owners typically pay monthly fees to a homeowners association, which cover maintenance costs for amenities and sometimes include building or community insurance.
Townhome
Townhomes, like duplexes, are attached homes that share a common wall. They usually have two or three stories and offer more space than apartments. Townhomes generally require less maintenance and upkeep compared to single-family homes.
Semi-detached house
Semi-detached houses also share a wall with another home, similar to townhomes. However, semi-detached houses are typically larger in size. They can be more affordable than freestanding single-family homes and may have lower maintenance costs, as the owners often share upkeep expenses.
Read more: Detached accessory dwelling unit
What are the pros and cons of multi-family homes for an owner?
Pros
- It’s a more affordable housing option for potential homeowners or tenants, as the cost of the building and land is shared among multiple units.
- From an investment standpoint, multi-family properties can generate rental income from multiple units, making them attractive to real estate investors.
- A multi-family property’s rental income can help offset the cost of its mortgage, property taxes, homeowners insurance costs, and maintenance expenses.
- Investing in rental properties is an intelligent strategy to diversify the investment portfolio and earn a consistent income.
- If it’s an owner-occupied property it’s easier to tackle home repairs and regular upkeep.
- A significant portion of the home maintenance costs can be considered a deductible business expense.
- Multi-family homes also promote community living and social interaction among residents.
Read more: Can you run business from your home?
Cons
- Buying a multi-unit building with a number of units is more expensive than purchasing a single-family home.
- Being a landlord is not easy. You need to commit your time and money in a big way. What’s more, you’ll have to screen tenants, negotiate lease terms, and manage all tenant issues such as overdue rent, noise complaints, damage to the property, or eviction issues.
- You’ll be responsible for paying the mortgage even when any of the units remain vacant for a long time.
- You’ll need a good amount of emergency funds to cover unexpected repairs or emergency home maintenance. And, you’ll have to be a hands-on property manager.
- Selling a multi-family property with tenants is not easy. You’ll have to coordinate showings and home appraisals with the tenants.
Who is the ideal owner of a multi-family home?

Buying multi-family real estate is best for:
- Multi-generational families who want to live close to each other.
- People who want to invest in real estate to generate wealth and a passive stream of income.
- Those who are ready for the responsibility and time commitment of being a landlord.
Read more: What is subleasing?
What is the best way to finance a multi-family property?
Financing a multi-family property depends on whether the owner intends to reside there or not. If the owner doesn’t plan to live in the property, they are considered an investor. In such cases, they may utilize the anticipated rental income from the property to qualify for a mortgage and potentially secure a higher loan amount.
On the other hand, if the owner intends to live in a multi-family building, the process of obtaining a loan is similar to that of a single-family home. They will need to undergo a credit check and have a credit score of at least 640. Additionally, they must meet specific criteria, including the debt-to-income ratio thresholds set by the prospective lender. In some cases, an appraisal may be required, and certain lenders might request rent rolls and a letter of intent to determine the projected income.
Once the property is owned, it is advisable to adhere to the 50% rule of investing. This rule suggests that property owners should allocate half of the total rental income received to cover property-related expenses, while the remaining half can be retained as profit.
Read more: Why do appraisals come in at sales price?
How can you find a good multi-family home for sale?
Multi-family properties, just like single-family homes, can be found for sale on real estate search platforms. If you’re looking for investment opportunities in your area, a real estate agent specializing in residential or commercial properties could assist you. It’s important to conduct thorough research on multi-family home prices in your market and have a clear understanding of what you can anticipate paying before starting your house hunt.
Read more: Comparable home sales
Your opinion matters, leave a comment