Small Multifamily
Duplexes, triplexes, and fourplexes — multiple units, residential financing.
Small multifamily (2-4 unit) properties are the natural step up from SFRs. You still qualify for residential financing (vs. commercial loans on 5+ units), but multiple rents under one roof diversifies vacancy risk and typically delivers better rent-to-price ratios than buying the same total square footage as separate single-family homes. Many investors use small multifamily as their bridge into bigger multifamily down the road.
- 1Acquisition
Find a 2-4 unit property — often a converted older home, a purpose-built duplex/triplex, or a small apartment building. Older multifamily often comes with deferred maintenance; budget accordingly.
- 2Lease-up
Each unit needs its own tenant, lease, and turnover. Stagger lease end-dates so you don't face simultaneous vacancies.
- 3Operations
Multiple rent checks, multiple toilets, multiple HVAC systems. Higher gross income but more touchpoints. Property management starts to pay for itself faster than on a single SFR.
- 4Exit (or refi)
Sell to another investor or owner-occupant (a buyer who'll live in one unit and rent the rest). At 5+ units the buyer pool shrinks to commercial — staying at 2-4 keeps liquidity high.
Sum of all unit rents. The base of every other metric. Vacancy risk is spread across units — if one is empty, the others still pay.
Purchase price ÷ number of units. Quick way to compare 2-4 unit deals against each other and against the local price-per-door average.
Same definitions as SFR — applied across the combined property. Small multifamily often hits these metrics easier than SFR because you're getting more rent per dollar of building.
Critical for refinancing. Lenders look hard at DSCR on multifamily. ≥1.25x is the goal — and the more cushion the better when rates change.
Combined monthly rent ÷ purchase price. Multifamily often clears 1% in markets where single-family barely hits 0.6%. That's the rent-density advantage.
- You're scaling from SFR and want better cash flow per dollar invested.
- You like the diversification of multiple tenants under one roof.
- Owner-occupied financing fits your situation (live in one unit, rent the rest, qualify with 5-10% down).
- Your market has demand for smaller rental units (1-2 bedrooms) that fit working-class and student tenants.
- Older buildings with deferred maintenance — older multifamily was often built decades ago and has aging mechanicals.
- Tenant management complexity — more units = more turnovers, more wear-and-tear, more tenant interactions.
- Neighborhood quality. Cheap multifamily is often cheap for a reason. Drive the block at night.
- Per-unit utility metering. If utilities aren't separately metered, you eat the bill — model this carefully.
- Zoning surprises. Some "3 unit" properties were illegally converted from a duplex. Verify with the city.