What’s the Difference between Multifamily Properties and Apartment Buildings

In Multifamily & Apartments by Tim DieselLeave a Comment

Apartment buildings and multifamily properties are sometimes used as interchangeable terms. But, in fact, are quite different. And, it’s not only about sheer size. There are real differences between the two. It’s a well-known fact that investing in real estate is a great way to build wealth through appreciating assets. The challenge, of course, is doing it in a smart and savvy manner to make the ultimate goal a reality. So, if you’re wondering what’s the difference between multifamily properties and apartment buildings, you’re probably exploring which is the right way to go.

About Multifamily Properties: Duplexes, Triplexes, and Quadruplex

Let’s begin with multifamily properties. Most often, these are residential homes with two, three, or four units in one structure. They are commonly referred to as duplexes, triplexes, and quadruplexes or fourplexes. The most typical are duplexes and triplexes or residential structures with two or three living units. These might include one or two bedrooms and one or two bathrooms.

Moving into the world of commercial real estate can be pretty intimidating. It’s a different world, but it’s a lot simpler than you probably think. That’s especially true of apartment buildings. If you can own a rental property, you can handle owning an apartment building. —The Motley Fool

It’s important to note that such properties are still residential. However, when there are more than four units under one roof, they become commercial properties. This makes a big difference because the laws and codes change dramatically between residential and commercial. Of course, this also changes things like taxes, maintenance, appreciation, management, and more.

About Apartment Buildings

Now, apartment buildings are commercial properties, which contain more than four units under one roof. These can also be more, such as six to twelve units under one roof. Additionally, apartments may also be comprised of more than one building on a single land complex. So, why do some people choose to invest in residential multifamily and others invest in apartment buildings? Well, there are several reasons. But, here are a few reasons why it’s usually better to invest in apartment buildings:

  • Collect a larger number of rents. Of course, the biggest reason to invest in apartment buildings is that there are several tenants. Because there are a good number of tenants, you collect a higher number of rents, rather than just two, three, or four.
  • Enjoy a higher rate of appreciation. Apartment buildings just experience a higher rate of appreciation precisely because they are commercial properties. Whereas residential properties appreciate at a slower and lower rate.
  • Periodic vacancies have minimal effect. Because there are so many units, if a few become vacant for a short period, it doesn’t really have a big impact. Conversely, if there are just two or three units and even one becomes vacant, that has a tremendous impact.

If you’d like to learn more about commercial real estate investment benefits and more about the process, please contact me.


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