In real estate, Multifamily refers to multiple dwelling units in one building or several buildings in a complex in which several tenants or owners reside. There are several types of Multifamily properties, but first, here is the distinction between Single Family and Multifamily residences and how they are categorized in the real estate industry.
Single Family Residence (SFR)
The SFR is one dwelling unit in which one owner or tenant resides, but may include several inhabitants of one family. In the industry, an SFR falls in the category of Residential real estate. Residential real estate includes 1-4 unit dwellings.
Residential real estate of 2-4 units are Multifamily dwellings and are often referred to as Income properties. Any dwelling that is 5+ units is an Apartment, but Multifamily is the common term that refers to 2-4 unit dwellings and 5+ dwellings. Apartments buildings of 5+ units fall into the industry category of Commercial.
There are several Multifamily dwelling types, and while this is not the complete list, these are the most common today:
For simplicity sake, here’s how to make the distinction:
Single Family Residence, 1 unit, Residential
Multifamily Residence, 2-4 units, Residential
Apartment Residence, 5+ units, Commercial
As an investment type, Multifamily is one of the most sought after assets for new and seasoned Investors seeking to realize regular cash-flow and high profits for a short hold period. And this still holds true during volatile events that impact economic and market conditions, like the global Covid-19 pandemic of 2020.
While the pandemic has effectively changed the economy: businesses stopping operations, individuals being furloughed and turning to unemployment for some financial relief, and the government providing stimulus bills to support those businesses, individuals, and the economy from complete devastation, investing in Multifamily real estate is still viable because many investors are choosing to exit certain markets or retire from investing altogether.
These investors were not prepared for the loss of income due to unemployment of their tenants, and did not have the reserves to weather the storm. Without the means to cash-out refi due to lending not taking on the risk of low annual profits, sellers choose to sell. And in some cases they are offering seller financing.
For the Investor with sizeable capital of their own and their partners, these opportunities are prime. While the rental income may be an initial challenge, it will only last for so long, and negotiating with existing tenants is a means for helping them to keep a roof over their heads in the interim until a set deadline, at which time they will have to cure back rent or end their lease. Now, this must follow the existing rules and regulations of eviction moratorium laws, but it also helps the Investor. By having an agreed plan with a firm tenant exit contingency in place, the Investor can force equity by making improvements to the vacant unit(s). Effectively, acquisitions in this current market will most likely require substantial reserves and a projection of two years before an asset is stabilized at market rents. For the well-positioned Investor, this is a feasible strategy.
To find out more about Multifamily and investing in this asset, visit my Blog. If you are a new, Sophisticated, or Accredited Multifamily Investor and are seeking representation, guidance, and support with your Multifamily Investing Plan & Strategy, contact me today at or email@example.com.
Multifamily Investing Tip
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