Multifamily Property
A residential building containing two or more housing units — from duplexes to large apartment complexes.
Definition
Multifamily property refers to residential real estate containing two or more separate housing units. Small multifamily (2–4 units — duplexes, triplexes, quadplexes) can be financed with residential mortgages and often qualify for owner-occupied programs. Large multifamily (5+ units) is classified as commercial and requires commercial loans.
Multifamily is popular with investors because it provides multiple income streams from a single property, reducing the impact of any one vacancy. It also allows 'house hacking' — living in one unit while tenants pay the mortgage — a powerful wealth-building tool for beginners.
Larger apartment complexes are valued based on income (using cap rates), not comparable sales like residential. This means investors can create value by increasing rents, reducing expenses, or adding amenity revenue. A $50/month rent increase across 20 units = $1,000/month NOI increase — capitalized at a 6% cap rate, that's $200,000 in added value.
Related Terms
Cap Rate
Capitalization rate — the ratio of a property's net operating income to its market value.
Net Operating Income (NOI)
A property's total income minus all operating expenses, before mortgage payments and taxes.
Value-Add
A property investment strategy that generates returns by improving the property to increase its income and value.
DSCR (Debt Service Coverage Ratio)
A property's net operating income divided by its annual debt service — measures ability to cover loan payments.
Cash Flow
The money left over each month after all property-related income and expenses are accounted for.
Related Article
How to Analyze a Small Multifamily Property (Duplex to 8-Unit)
9 min · Multifamily
Also in "M"
Market Value
The price a property would sell for in a competitive market between a willing buyer and seller.
Maximum Allowable Offer (MAO)
The highest price an investor can pay for a property and still achieve their target profit.
Mortgage
A loan used to purchase real property, secured by the property itself as collateral.