What is a Multi-Family Home? Simply Explained for Beginners
A multi-family home is a property, also known as real property, with a single structure that contains more than one residence (or dwelling).
In this post, I'll simply explain the basic differences between residential and commercial multi family real estate.
Residential multi-family real estate
Residential multi-family property can range from a duplex, which consists of two dwellings, to a small apartment building with 4 or less units or dwellings.
Residential multi-family real estate qualifies for conventional financing, FHA financing, or VA financing. A conventional investment loan is required if at least one of the four dwellings is your primary residence.
Commercial multi-family real estate
Buildings with more than 4 units are considered commercial properties, but still considered multi-family homes or apartments.
Commercial multi-family real estate requires commercial financing, which is often available from private lending or local banks financing commercial real estate.
Multi-family properties can have multiple buildings on one lot. If there’s more than 4 units on one lot, it’s considered commercial real estate. For example: If a lot has 2 buildings, and each building has 3 separate units, it's considered commercial since there's a total of 6 units.
Sometimes separate buildings could be plotted on separate lots. This could give you an opportunity to buy each building and it's designated lot as separate real estate transactions. This could be considered as separate residential purchases if each lot has less than 4 units.
Multi-family real estate investing
Passive income can be generated from Multi Family investments. Securing rental tenants such as
Yearly rental tenants that pay rent monthly
Executive, temporary, or transitional housing rentals
Vacation rentals and short term rental investments
Seasonal resort or vacation rental markets have a lot of opportunities for Passive income investing with multi-family homes by securing short-term vacation rental tenants or guests.