What Are Multi-Family Homes? (2024 Guide)

Did you know that 36% of families in the United States live in a rental property? Most rental units are defined as “multi-family homes.” Plenty of other people own condos or townhouses, which are also multi-family homes.

If you’re interested in property management, it’s smart to invest in apartment complexes and other properties with more units. Multifamily properties are an excellent real estate investment because:

1. It helps you earn passive income
2. You protect yourself against market downturns because it diversifies your income. 
3. It’s typically more affordable for renters and homeowners.

Due to the high demand, property values are rising quickly, and owning them will increase your cash flow. But you can’t make an informed decision about real estate investing until you learn about owning multiple units. So what are multi-family homes exactly? 

Defining “Multi-Family Home” 👪 👪

Due to the high demand, property values are rising quickly, which means investing in multi-family homes is a very lucrative decision. A multi-family home is when a property has more than one unit. You will have multiple tenants, renting to more than one family. Each unit will have its own entrance. Here are the different types of multi-family homes:

Types of Multi-Family Homes

• Duplex: Two units.
• Triplex: Three units.
• Quadplex: Four units.
• Apartment complex: Apartment buildings are designed to house a large number of people in a smaller space, meaning they’re more cost-effective for renters than single-family homes. Plus, by renting an apartment property, renters can avoid mortgage payments.
• Townhouses or townhomes: Townhouses are typically smaller than single-family homes and have fewer bedrooms. They can be located in either a stand-alone building or in a cluster of other townhouses.
• Semi-detached house: A single-family home sharing a wall with another.

Selling a Multi-Family Property for Ownership

Condominiums are another type of multi-family home, except residents own their units. Condos are typically built like apartments, but they tend to be more expensive. A homeowner may be attracted to a condo because they can have some of the benefits of owning an apartment—like no lawn care or shoveling—while still owning their property.

Multi-family homes can be found in urban areas where there are high concentrations of renters. Due to the high demand, property values are rising quickly, which means investing in multi-family homes is a very lucrative decision.

Multi-Family Homes: What to Look for

Not every residential property is created equally. If you want to invest in multi-family real estate, you need to know what to look for.

1. A Great Location

Most renters and owners want to live in an area that is generally aesthetically pleasing. Your location doesn’t have to be next to a waterfall, but it shouldn’t be next to a huge landfill if you can avoid it. The location should definitely be top of mind before you take on this business expense.

2. Potential Rental Income

Realistically, what can you make from this investment property? Take a look at what other apartment buildings are charging in the area. This should give you a great idea of what you can earn.

3. The Amount You’ll Need to Invest

If it’s an old property, you may have a lot of investments to make moving forward. Take into account how much you’ll need to invest into the multi-family home, and compare that to how much you can earn. Will you really have more cash flow?

4. Amount of Units

If you’re purchasing commercial properties and offering property management services, you need to know how many units you’re willing to deal with. If you don’t want as many tenants, go for a property with fewer apartment units.

5. Maintenance Costs

Because these properties are shared between multiple owners, they require regular upkeep and maintenance which can increase your expenses over time. However, if done correctly, this can be an opportunity for increased profits down the road when you’re selling.

6. Comfortable Living Conditions

Make sure each unit has its own kitchen, living space, and bathrooms so that tenants don’t need to share. They should also have separate entrances.

Benefits of Owning Multi-Family Home Properties ✅

Diversify Your Income

Multi-family homes are a great way to diversify your portfolio. If you only have one property, you’re at risk of losing everything if something goes wrong with that property. But if you diversify your portfolio by investing in multiple properties, then even if one of them struggles or fails, you won’t be left with nothing.

Increase Your Income

You can increase your income by renting out the units in the building at different rates. For example, if one unit is larger than another one on the same floor plan, you could charge more rent for it to offset some of your costs (like mortgage payments).

Build Wealth

Multi-family homes are perfect for investors who want to build wealth through rental properties. However, if you want to invest in real estate, then it’s important that you know what makes a good investment and how much risk is involved with each type of investment before deciding which one is right for you.

Make Sure Everything Is Perfect: Build Your Own Multifamily Home

If you want to make sure your multifamily property is perfect for your real estate portfolio, consider partnering with the design/build team at APX Construction Group. We can build your entire property in Minnesota, just the way you want it. We’re experts at keeping you on budget, wrapping up the project on time, and being responsive with communications.

We’ll help you plan and construct a great multifamily property. Get in touch with us today.