Multifamily Real Estate Investing: The Pros And Cons

Multifamily Real Estate Investing

Ready to diversify your investment portfolio? Investing in real estate can be an exciting opportunity; adding properties to your portfolio is a great way to reduce risk, generate more cash, and grow your wealth. Since you are looking for a fantastic investment opportunity, a multifamily real estate will be the perfect fit for you! Here’s why.

What Is A Multifamily Home?

A multifamily property is a residential property that has more than one housing unit. Apartment complexes, duplexes, triplexes, condominiums and townhouses are all common examples of multifamily homes. Often considered a great wealth-building tool, multifamily properties can be excellent additions to your investment portfolio.

Pros Of Multifamily Property Investing

Cash Flow

One of the benefits of investing in multifamily homes is the cash flow they generate. Since such properties have multiple residents paying rent, if one or two units remain vacant, you’ll still be getting rent from the other units. Also, vacant units can be re-leased to ensure stable cash flow year in, year out.

Tax Benefits

There are several tax benefits when you invest in a multifamily real estate. Following are some of the many deductions you can make:

  • Mortgage interest
  • Maintenance and operation costs
  • Property management fees
  • Repairs and renovations expenses
  • Marketing costs

Also, even if a multifamily property has appreciated in value, it can be depreciated over a 27.5-year period. That’s a win-win situation if you ask us!


Investing in multifamily real estate helps investors gain the ability to scale their portfolio quickly and easily. It’s much harder to scale your investment portfolio when investing in properties such as single-family rentals or shops or hotels or strip malls.

Passive Income

Multifamily real estate is a great way to generate passive income. You won’t even have to lift a finger! And if you are new to the whole real-estate investing landscape, you can just hire property management experts who can take care of the property and its residents for you.

Easy To Finance

Because of their guaranteed cash flow, banks don’t find multifamily properties too risky. The chances of a foreclosure on an apartment complex are not high, especially when compared to single-family rentals. These factors can result in lending institutions providing a more competitive interest rate to you.

Owner-Occupied Real Estate Investment

Owner-occupied real estate investment is an investment where you can buy a multifamily property, reside in one unit, and rent out the other units. Collecting money for paying the mortgage never looked this easy!

Cons Of Multifamily Property Investing

More Expensive

The cost to buy a multifamily home will be significantly higher than the cost to acquire a single-family home. For example, a single-family home could cost you as little as $65,000 in a city like San Diego. In the same city, the cost of a multifamily home can cost you anywhere between 500,000 to 10 million.

Competitive Market

Because of the several benefits associated with multifamily real estate, more serious and experienced investors scoop up multifamily properties for sale within days! Some of these investors even buy in cash and are often willing to waive off purchase contingencies, all for making the deal more appealing to sellers.

Higher Maintenance Costs

Due to their nature and structure, multifamily properties incur higher maintenance costs and new investors should be ready for potentially large repairs and renovations costs.

Tougher To Manage

Managing multiple rental units can become overwhelming. Not only is it a huge responsibility, but it also is time consuming. This is where property management organizations like BFPM can help.

With Beach Front Property Management experts by your side, you can be assured of the fact that your investments are in good hands.  From maintaining your multifamily homes, responding to resident concerns and resolving their issues, to helping you market vacant units, we’ll be with you every step of the way. For further information on our services, please book a quick 15-minute consultation call.


Trevor Henson

Trevor Henson is an experienced entrepreneur (10+ highly-successful start-ups) and property investor with a demonstrated history of building and leading teams in investment property management environments, maximizing returns for property owners, and optimizing properties through construction management and re-positioning. He…
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Frequently Asked Questions(FAQs)

For a multifamily property, a good ROI can be over 10%. However, these numbers are subject to change depending on the local real estate market and level of risk you are willing to take.

Definitely. Fourplexes prove to be excellent investments for beginners because of their relatively low barriers to entry. They are also a good way to generate a steady cash flow, are easier to manage and maintain and can be purchased with a residential loan.

Multifamily properties have one of the lowest average cap rates due to their decreased risk. A good cap rate for multifamily properties is often between 4% – 10%

Here’s a step-by-step guide to help you buy your first multifamily property:

  • Decide your budget Check out the various multifamily properties that fall within your budget.
  • Conduct thorough research on various neighborhoods and then shortlist one.
  • Narrow down your search to one single multifamily property in the shortlisted neighborhood.
  • Estimate your profits and losses. An expert would be able to help you here.
  • If you need a loan, choose your lender and get a pre-approval letter from them.