Investing in a multi-family house has become increasingly popular over the past few years – and understandably so. There are many advantages a multi-family home offers that a single-family home does not. That’s not to say though that buying a multi-family house is right for everyone. Single-family homes are still a strong investment in many cases, and remain one of the most popular choices for homebuyers. Real estate investment is a big step, and it’s important to carefully analyze the advantages and disadvantages of single and multi-family houses before making a decision. But how do you even start to make that decision? How can you make sure you’re making the right choice for your specific circumstances? How can you tell if a multi-family home is actually right for you?

Luckily, those are exactly the questions we can help you answer. Below, we’ve gathered the things you need to know so you can make the right decision for you. We hope this article will serve as go-to guide for the prospective multi-family house investor and help make a confusing, complex decision a little bit easier.

What is a Multi-Family House?

Put simply, a multi-family house is a residential building with multiple units, each inhabited a group of people or individual. Multi-family houses can be one building, or multiple buildings within the same complex. There are many types of multi-dwelling units other than what are classically thought of as a multi-family house. Apartment buildings are technically multi-family homes, as are condominiums. Condominiums are similar to apartment buildings, but are frequently owned by someone who lives in the building rather than a common owner who leases the apartments.

Duplex houses, semi-detached houses, townhouses, mixed use buildings, and apartment communities are all classified as “multi-family homes” as well. However, keep in mind that each of these categories has unique benefits and drawbacks (such as variance in price range, ownership, comfort, and so on). Therefore, if you decide to invest in a multi-family house, you should first decide which style of multi-family home suits your needs best.

When is a Multi-Family House the Right Choice?

There are multiple instances where multi-family houses make for great investment options. Because there are many diverse multi-family home options that fulfill a wide range of tastes and needs, it is likely that you will find something for you.

A multi-family house is usually a smart choice if…

·       You want a safer investment. Although you can never predict with 100% certainty that a particular type of investment will offer less risk, in general that multi-family homes tend to be safer bet. This instead of relying on one tenant/family (as you would if buying a single-family house to rent out) you will be able to rely on multiple sources of income. This will most likely increase your cash-flow and help become more profitable more quickly. Furthermore, if you want to renovate a unit, you will be able to continue receiving rent from the other tenants. Multiple paying tenants also mean that you will be able to cover the renovation costs more easily.

·       You want to live in the house you invest in. in many cases, the owner of an apartment building or condominium lives in the same building as his/her tenants. A small suggestion though. If you do this, make sure to use it to your advantage and treat your tenants as you would treat your neighbors. Sometimes, being friendly and approachable is a surprisingly effective way to attract good tenants. As long as you can maintain the balance between the “neighbor” and the “landlord”, everything will turn out great.

·       You want to invest in a building with its own “culture”. For example, if you want to be an eco-friendly home owner, you could invest in a multi-family house and create an entire culture around the idea of environmental-friendliness. This serves to draw tenants with similar interests and gives you a chance to own a building that truly represents your interests and personality.

·       You want to invest in a house located in a vibrant, urban environment. In general, multi-family houses are more common in urban areas, while single-family houses are usually found in suburban/rural environments. Though you may be able to find multi-family houses in suburban and rural areas, the increased number of options in the city mean you have a much higher chance of finding the perfect property for you.

When is a Multi-Family House Not a Good Choice?

Many people think of multi-family homes as lower-priced and lower quality. This is not entirely accurate. In fact, there are an increasing number of examples of luxury multi-family homes that offer high-end technology, beautiful architecture, and excellent amenities. For example, Intercontinental Real Estate Corp and Security Properties has recently acquired a single luxury multi-family house in Napa, California for more than $58 million!  

There are, however, several instances when a multi-family house may not be a very good choice.  Multi-family houses are usually not a smart choice if…

·       You are not willing to spend a lot of time administering multiple units and don’t necessarily want to hire an administrator to do this for you. Because there are multiple tenants, you might have to spend a bit more time taking care of all the paperwork and of all the needs tenants may have. If this seems like a deal breaker, multi-family homes might not be for you.

·       You want a real estate investment that will appreciate as quickly as possible. In general, single-family houses tend to appreciate faster than the multi-family ones. Although the difference in how the two appreciate may not be that large, it may be a turn off for investors looking to make money very quickly.

·       You want a simpler and more straight-forward financing option. Generally speaking, financing for multi-family homes tends to be a bit more complex than that for single-family homes.

In Conclusion

Multi-family houses can be a fabulous option for many people. However, before you invest in anything, you should first make sure you are aware of what buying that type of property truly means. Talk to people who have made similar investments, and ask about their experiences. Talk with a real estate professional about the options in your area. Thorough research is one of the best ways to increase your odds at making a really successful investment. It may take some time, but it will pay off tremendously in the long run.