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January 23, 2020

Deep Dive on Multifamily Housing

Multifamily residential housing is technically known as multi-dwelling units or MDU. This classification represents multiple housing units within a single building or within several buildings in a single complex. Units are typically side-by-side or stacked on top of each other. For example, an apartment building and townhouse complex are both multifamily housing. These units may be owned or rented by the people living there.

Multifamily housing opportunities are considered strong investments by those looking to diversify their portfolio. Learn more about the different kinds of multifamily dwellings below.

Apartment Buildings

Apartment buildings usually contain several floors of multifamily apartments. Some residents may own their apartment, while other buildings belong to a corporate or individual owner who rents out the units for a profit. This is the best-known example of commercial real estate.

Condominiums

Condominiums are made up of multiple units owned by individual residents. There are often located in high-rise buildings but may also be found in lower-profile structures. Condos are an example of joint ownership of real estate. Specifically, common areas such as hallways and lobbies are co-owned by all the condo owners. Meanwhile, the interior units are individually owned. To cover the expenses of the building and common areas, condo owners may pay a monthly fee. 

Townhomes

Townhome owners share a wall or two with neighbors and are typically two-story residential structures. They closely resemble single-family housing in terms of ownership and appearance. Townhouse owners own the unit and land it sits on. Additionally, there’s usually a quarterly or annual maintenance fee for the upkeep of commonly held property, such as lawns, parking areas, and swimming pools.

Co-ops

Co-ops resemble condos, but the ownership structure varies greatly. Residents are “shareholders” of a real estate corporation and do not own the property outright. In return for shares bought in a housing corporation, they gain the right to live in a unit within the building. An elected board sets an operating budget each year and collects maintenance fees to fund the budget.

Duplex, Triplex and Quadruplex

A duplex is a building separated into two houses with separate entrances. Similarly, a triplex has three units and entrances, whereas a quadruplex consists of four units and entrances. A quadruplex is also known as a fourplex or quadplex.

Mixed-Use Building

Mixed-use buildings combine commercial, residential, cultural, and industrial uses in the same structure. These units are composed of one of the following configurations:

  • Commercial spaces take up the lower floors while residential spaces can be found on upper floors
  • Commercial spaces take up the front of the building, with residential spaces in the rear

The DiversyFund Approach

Multifamily real estate is considered to be a low-volatility asset. When you invest in multifamily structures, you are unlikely to see as many ups and downs as the stock market. There is greater cash flow in multifamily investing, which lowers risk.

For instance, if you invest in a 100-unit property with five unoccupied units, the ownership interest enjoys the continued cash flow of the 95 rented units. When you buy a single-family home and rent it out, as soon as your renters move out, your cash flow rolls to zero until new tenants are found.

Another attractive attribute for multifamily investing is the high demand for rental units in nearly any economic trend. In fact, a bad market often precipitates greater demand for multifamily housing.

At DiversyFund, we focus on multifamily properties with 200+ units. We look for strong population growth, proximity to colleges or major hubs, and other factors that tell us there is high growth potential in the property.

Find out more about how DiversyFund brings you access to invest in multifamily real estate assets.