✏️ Editor’s Note: Realtor Associations, agents, and MLS’ have started implementing changes related to the NAR’s $418 million settlement. While home-sellers will likely save thousands in commission, compliance and litigation risks have significantly increased for sellers throughout the nation. Learn how NAR’s settlement affects home buyers.
A Multi-family home refers to properties where more than one family lives together. These can include both, houses with two separate homes in one building or small apartment buildings in one place.
The cost of multi-family homes dropped after the 2008 recession. However, the total value of these buildings in the US was more than $110 billion in 2021. It’s predicted to go up even more by 2025. Buyers might make money as property values go up in the future.
What Is a Multi-Family Home?
Multi-family housing (also known as multi-dwelling units, or MDUs) are properties with more than one living space. These buildings typically have four units but can vary based on the property type. Individuals, investors, or real estate development companies can own multi-family homes.
Multi-family homes share common areas like hallways, stairwells, pools, gyms, and sometimes outdoor spaces. The property owner or a homeowners association (HOA) manages these places.
Mutli-family home: A Brief
- Benefits: Multi-family homes accommodate multiple households and can encompass different property types with shared spaces and amenities.
- Pros and Cons: Multi-family homes offer rental tax benefits and income potential but come with increased responsibilities and potential disturbances.
- Pre-evaluation: Before you buy a multi-family home, research its location, condition, income potential, management, and legal issues, and consider advice from real estate professionals.
Types of Multi-Family Homes
There are five types of multi-family homes:
Duplex/Triplex:
A duplex contains two units in one building. They share a common wall but have separate entrances and yards.
Condominiums:
Condominiums are the most common type of multi-family homes due to their popularity and widespread availability. Each family living in a condo owns their own living space.
Townhouse:
A townhouse consists of multiple units attached side by side. They often have two or three stories with separate entrances.
Semi-detached house:
Semi-detached houses resemble two separate homes within a single building. Each with its own entrance, and they share a common boundary. They are larger than townhomes and have their own owner.
Apartments:
Apartments are big buildings with lots of separate units, sometimes as many as hundreds. Each apartment has its own bedrooms, bathrooms, and kitchen. However, the residents share things like parking and yards.
Find Homes For Sale by Home Type and Style
The market offers a wider range of homes than ever before. But don’t get overwhelmed! Knowing your preferred style can help you narrow your search. Here are some options to target your search by home style:
Pros and Cons of Multi-Family Homes
Here’s a list for you:
Pros
- Enhanced affordability: Multi-family homes are often cheaper than single-family houses. They are helpful for buyers in the present competitive housing market.
- Rental Income Potential: If you own a multi-family house, you can rent out extra spaces to earn money. Moreover, they can help you offset your multifamily mortgage and even make a profit.
- Easier to Manage: It’s simpler to manage multiple units within a single location than to oversee numerous separate single-family houses. You can maintain and repair multi-family homes more efficiently.
- Tax Benefits: Multi-family housing units have many tax benefits. Generally, you can write off certain expenses, like repairs and mortgage interest with a multi-family home.
Cons
- Increased Responsibilities: A multi-family property owner has to manage multiple tenants. Additionally, they have to take care of repairs and follow rental property rules.
- Face Disturbance: A larger number of residents in multi-family buildings can result in increased noise levels.
- Difficult to Resell: It is a complicated process to sell a multifamily property with tenants in place. Because you’ll need to coordinate visits with potential buyers and keep tenants informed.
- Responsible For All Repairs: The property owner has to take care of it single-handedly, which can be costly and time-consuming.
Single vs. Multi-Family Home
Each type of home has its own set of characteristics and considerations. You can compare both of them based on:
1. Occupancy:
Single-family homes are for one family with separate personal entrances and amenities.
Multi-family homes are for many families with separate spaces. But sometimes they use shared entrances, areas, or boundaries.
2. Ownership:
Single-family homes are typically owned by one family either for their own use or to rent to another family.
Multi-family homes are usually owned by individuals, investors, and companies. Generally, they usually buy it for rental income.
3. Privacy:
You can enjoy enhanced privacy in single-family homes as you don’t share spaces with other families.
The presence of shared spaces in multi-family homes, like hallways and laundry facilities, can result in a loss of privacy.
4. Maintenance:
In single-family homes, the owners are responsible for the whole maintenance. They handle yard care and repairs themselves.
In multi-family homes, the owner or a management company takes care of shared areas.
5. Zoning:
Single-family homes are in residential areas as per the federal housing rules.
Multi-family homes are mainly in mixed-use zones. These rules allow the total number of units a building can have in an area.
How to Find a Multi-Family Home?
It’s important to do your research as a buyer when you visit a house. You can research multi-family home prices in your area and the potential expenses involved.
You can check various real estate websites and can also use filters to find your desired multi-family homes. Also, you can contact any local real estate agents. They might know about unadvertised multi-family units owned by prominent builders.
Things You Should Look For Before Buying a Multi-Family House?
Consider these factors about a property when dealing with multifamily housing:
- The location of the property should be in a desirable neighborhood.
- The physical condition of the property should be perfect.
- The building should have income potential through rent, vacancies, and market rates.
- The property’s expenses include maintenance, taxes, insurance, and utilities.
- Evaluate the property’s management setup and your capacity to efficiently oversee it.
- Assess the potential legal or zoning issues with the property and its potential future impact.
- Seller’s profile insight and history of the building.
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Frequently Asked Questions
Is a townhouse a multi-family home?
Yes, townhouse is a part of multi-family homes. They have separate entrances but share a common wall.
How many multi-family properties are there in the US?
As per the latest 2019 survey conducted by the American Housing Survey and the U.S. Census Bureau, about 31.4% of U.S. housing (43.9 million residences) were multi-family. These are apartments, condos, and townhouses.
What is the cost of building a Multi-family Home?
As per the National Multifamily Housing Council, the average cost per unit to build a multi-family unit is $85,000. Therefore, a four-unit multifamily home costs around $340,000 to construct.
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