What Is A Multifamily Home And Is It Right For You?
Author:
Victoria ArajApr 25, 2024
•5-minute read
If you’re looking to get started as a real estate investor and considering different types of housing, a multifamily home can be a great way to generate passive income. Multifamily properties are in high demand primarily because they offer many potential financial benefits.
Let’s walk through what a multifamily home is and look at some pros and cons of using one as an investment property.
The Quick Answer: What Is A Multifamily Home?
A multifamily home is any residential property with more than one housing unit. A duplex, townhome or apartment complex is a good example of a multifamily home. And if the owner lives in one of the units, it’s considered an owner-occupied property.
Types Of Multifamily Homes
| Property Type | Property Description |
|---|---|
| Duplex |
A house with two separate units. Each household has its own entrance. |
| Townhouse |
A multistory dwelling that shares an interior wall with neighboring units. Buyers purchase each unit separately. |
| Apartment Complex |
A building with five or more housing units.Renters often share amenities, like aswimming pool, parking garage or playground. |
| Semi-Detached House |
A single-family home attached to another home. The home shares a wall with a neighboring home. |
You can finance many multifamily properties with a traditional mortgage, but some require a commercial loan. While Rocket Mortgage® doesn’t offer commercial loans, we can help you get a standard mortgage loan to purchase a two- to four-unit multifamily property.
Single-Family Vs. Multifamily Home Investing
Investing in a single-family versus a multifamily property involves a few key differences.
- Price: The biggest difference is the price. A single-family home is usually less expensive and may be more accessible to new real estate investors.
- Mortgage: Depending on the type of building you’re interested in, you may need a commercial real estate loan to purchase a multifamily property. Most lenders will require a 20% down payment, especially if you’re new to real estate investing. While Rocket Mortgage doesn’t offer commercial loans, we offer financing for multifamily properties with up to four units.
- Risk: Single-family homes are typically easier to sell than multifamily properties. If you recognize early on that your investment in a single-family property isn’t the right path for you, you can sell it.
- Scalability: It’s easier to scale and earn a higher monthly cash flow with a multifamily property than a single-family house. A multifamily property is more conducive to house hacking, a strategy that involves a property owner living in one of the housing units while renting the others out.