Learn what a Multifamily Property is and why it's important to you and your portfolio!
We’re hearing more and more about Multifamily Real Estate from all of the people who want or need you to invest your money into this market sector, either because they’re a broker, lender or investor… when it comes down to it, everybody’s got a stake in the market and needs the continued interest, growth and investment of other to continue to raise the prices for attritions sake. (a rising tide raises all boats)
But buyer beware is still the leading caveat we need to learn, know, and perform thorough due diligence when buying these assets, because with big investments, comes big risks and potentially big losses. Before investing in multifamily you should know all the potential risks and downsides no one ever tells you, if you can’t say 12 from the top of your mind, you’re probably not qualified to invest at all.
So, what is Multifamily Real Estate? Technically there are several different types of Multifamily Real Estate; from multiple homes on a single lot (detached) to multiple apartments under a single, or multiple roofs, on a single, or multiple adjoining lots… how the structures and lot are configured had a lot to do with the municipal zoning at the time of construction, also market trends, (wants and needs) which determine what people build plays a major role in what is available.
Over time, the most popular types and styles are determined by A. which is the most profitable to the investors, and B. which is the most comfortable for the renters. Somewhere in there is a convergence of those two, and it’s often a tug of war between them that established the marketplace.
Multifamily Real Estate can be either residential or commercial. A residential Multifamily property is known as anything with only 2-4 units, and a commercial Multifamily property is known as anything with 5+ units, even though people are living there. This will affect the types of lending you get for these properties, the different HUD laws that govern the tenants [and owner] and the zoning you can be in.
The styles may vary too. There is a Garden apartment, which is a one-level box and regardless of the number of stories only occupies a single level and is either accessible from the exterior [ground level or staircase] or interior [elevator or stairwell]. These can be in a one-story development (ranch style) or a high-rise.
There is a Townhouse, which is two or sometimes three stories high, and are usually set in developments where all the units are attached side by side in rows. An attached unit is one that is attached on both sides and a semi-detached unit is one that is attached only on one side. This is usually the end unit and demands a great rent price for the addition light/windows and lower neighborly disturbances.
*These have occasionally been in High-rises but are most typically found in side-by-side developments with no neighbors above or below them.
Multifamily Real Estate with fewer than 8 units may find the owner living in one unit on premises doing all the maintenance, collections, management, etc. Whereas larger Multifamily properties almost always have separate management companies handling all the tenant relationships and more often than not, the owners are collectives [also known as syndicates] who own the property from out of state.
To get a thorough introduction to the wonderful world of Multifamily Real Estate, pick up a copy of the book, “An Introduction to Multifamily Real Estate” available soon at www.MultifamilyRealEstate.com
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