Duplex Depot - Duplex and Multi-Family Real Estate

What is the difference between multifamily and duplex properties?

August 17th, 2009 Jacquie Cliff - Real Estate Broker Posted in Duplex | 1 Comment »

What is the difference between multi-family, duplex and 4-plex properties?  I have been asked this before and it does seem logical that they should all be lumped in to the same group.  After all a duplex does house multiple families so it seems logical that it would be a multi-family property.  But that is not how things are classified.

The convention is in lending that multi-family properties are those with more than 5 units and as such are considered commercial properties.  Properties with less than 6 units are classified as residential properties and loaned on just like you would a single family home.  The difference being on how they are valued.

DUPLEX & 4-PLEX = COMPARABLES APPROACH
MUTLI-FAMILY PROPERTIES = NOI & CAP RATE VALUATIONS

Doesn’t make much sense does it when they generally bought as income producing properties does it?  The one caveat to this is that because two and four unit properties are counted as residential homes, you can purchase them with FHA loans and live in one of the units.  As I have discussed before, buying a duplex or 4-plex as a first home is a great way to get started in real estate investing.

There are some other tricks that can be applied to rental properties because of the differences in how they are valued as well.  If you are in the Seattle area and thinking of investing in a rental property or twenty call me and we can discuss some of your options!