Is It Advisable To Start REI Journey With Multi-Family?

Question

for newbies who are just starting out in REI, is it advisable to start the REI journey from the Mult-Family category of things, or is it a smoother lift cutting your teeth first with single-family residentials?

Joshua Christensen · Answer

Hey Robert,

This is a hard question to answer. WE could go generic as many have. The reality is that the best way to start is where you feel most confident. Open your eyes all the way and get past the newness of investing in REI and the excitement of the potential for your future.

Realize that investing in RE is a business and you need the 'business' mind to treat it as such. Prepare youself for the pitfalls and upsides. Best advice I ever received was Prepare for the worst and hope for the best.

Calling yourself a "Newbie" is one place to start. You are a "Start Up" RE Investor looking for the best outcomes in your new venture.

You'll show up how you see yourself. Find your footing, educate yourself, then make a sound business decision.

The other option is to "feel good" about your new adventure. Test the waters and dabble. Set yourself up for losses as many "newbies" do, unfortunately.

Don't skip your education. Being educated in your new business is the sure fire way to avoid mistakes before there is real money involved. Real Estate is a high-cost game and the mistakes can be quite costly.

Define your Gaps and look for ways to fill them.

1. What don't you know?

2. What do you know?

3. What type of capital do you have to invest?

4. Can you survive a loss it if you make the investment (of course plan not to lose it...lol)?

5. Are you bankable on your investment - can you get financing - Why??

6. Would you invest with you based on your current confidence and knowledge level?

Food for thought.

Jonathan Klemm · Answer

@Robert Ok - It's okay if you're okay with it!

I think for most people who aren't familiar with the real estate industry, starting with a single-family house feels lighter, and since the commercial multi-family space is quite a bit more sophisticated, it can feel heavy to jump in there.

In my opinion, you could do either, depending on your knack for learning and networking. I found it challenging to put myself out there in the Chicago real estate world, but it has eventually gotten easier over time and will for you, too!

Kristin Flores-Brockman · Answer

There are a lot of things to consider. I like the house hacking idea for 2-4plex. That helps you generate income and build your portfolio. I am located in Fort Worth. Reach out if you'd like to discuss different options.

Thomas Franklin · Answer

@Robert Ok

Below are some things that you might want to consider between Single Family Residences (SFRs) and Multifamily Residences (MFRs). SFRs

If you are using a Realtor, he/ she will suggest purchasing a property using a FHA Loan, to reduce your out of pocket money. If the property requires rehab, the Realtor and/ or Mortgage Broker will suggest applying, for a FHA 203k Loan. A FHA 203k Loan is where the purchase price and rehab costs are rolled into a single loan.

Assuming you have a respectable FICO you can buy, with a FHA Loan (3-5% down, a 30 year amortization schedule, and a residential loan rate). There are downsides:

1. Because you have less than 20% down payment, you will have to pay Principal Mortgage Insurance which will add approximately $150 extra per month, to your Mortgage Payment.

2. If you loose your tenant, you yourself will be responsible, for all Property Expenses including having Marketing and Advertising Expenses.

3. What happens if one of your tenants has a slip and fall, on your property, or something else happens to them? You are on the hook and can be personally sued, for everything you own that is in your Personal Name. Some people will say, "Take out a quality Insurance Policy and you will be protected." Ambulance chasing attorneys know their way around and can legally navigate around Insurance Policies.

4. You have no Asset Protection.

5. The above are just a few downsides.

You may be asking yourself what can I do? Locate a Motivated Seller that will consider Seller Financing. You may have to put more money down (10-15%), but you can close, in a LLC, with no worries about banks. I have a lengthy Legal Opinion, from my seasoned Legal Team regarding this matter.

MFRs

As with SFRs, assuming you have a respectable FICO you can buy, with a FHA Loan because these properties (2-4 units) are still classified Residential Properties. Everything mentioned above is also applicable to MFRs including seeking owners willing to consider Seller Financing. For Lender Financing, Commercial Properties are six plus units and have different Lending Terms, but allow you to close in a Corporate Entity.

ANALYZING MULTI FAMILY PROPERTIES

In your analysis, you should include Management Fees (10% of the Gross Income, Attorney Fees, and Advertising/ Marketing, to your list of expenses. In addition, you want to include Capital Reserves in your list of expenses. As a general rule, your Capital Reserves should be equal to 10%, of the Property's Fair Market Value (FMV). These Capital Reserves are to cover Capital Expenditures (Cap Ex) such as Major Roof Repairs or replacement, Major Electrical Repairs, Major Plumbing Repairs, or other Big Ticket Repairs.

You want to obtain the Rent Rolls, for the past 12 months; and at a minimum, the T12 (the last 12 months of Income and Expense). I prefer 24 months. Once you have this data, look for Red Flags such as Property Insurance missing, Property Taxes missing, Management Company Fees missing (if you know one is in place), etc.

Another thing that you want to do is, if there is a Management Company in place call them and try to ascertain if there is any Deferred Maintenance, the current state of the Property’s Condition, and what are the current rents being charged. Being able, to talk with the Property Manager will give you a good feel, for what is going on with the property.

A downside is if you close personally, you loose the certain advantages, of the Federal Tax Code, by not closing in the name of a Corporation Entity plus the downsides listed under the SFR Section above.

PMI

1. Mortgage Insurance known as Principle Mortgage Insurance (PMI) is required when the Loan To Value (LTV) is greater than 80%. In other words, if the property has 20% of equity or greater, one is not required to pay PMI. Having 20% or more of equity can be a combination of a down payment and buying the property below the property's value, or you putting a 20% down payment. However, if a FHA Loan is obtained, you will have to pay PMI, for the life that you have this loan.

2. Principle Mortgage Insurance only benefits a bank.

3. Principle Mortgage Insurance will increase you monthly Mortgage Payment approximately $150+ per month.

4. Interest paid, on a mortgage is the only thing that is tax deductible. Principle Mortgage Insurance is NOT Tax Deductible meaning Principle Mortgage Insurance cannot be used, as a legitimate Business Expense.

I hope the above information helps you, to confidently move forward.

Mike Rutherford · Answer

Hey @Robert Ok

Great question! It really depends on your goals, risk tolerance, and how hands-on you want to be.

Single-family rentals (SFRs) are often seen as the “easier” entry point—lower price per door, simpler financing, and easier to exit if needed. But they come with challenges, like vacancy risk (one tenant = 100% vacancy if they leave) and slower scalability.

Multifamily (2-4 units or even 12+ units) can actually be a better long-term move. More doors under one roof means lower vacancy risk, better economies of scale, and in many cases, stronger cash flow. The biggest hurdle is financing—lenders look at multifamily differently, and it often requires more capital upfront.

That said, if you’re looking to scale your portfolio quickly and build real wealth through REI, multifamily is a solid starting point. I’ve seen plenty of investors start with duplexes, triplexes, or small apartment buildings and never look back.

Curious—are you looking at residential (2-4 units) or commercial multifamily (5+ units)? We’re working on some 12-24 unit developments in emerging markets with strong demand, so if you’re thinking bigger, happy to connect!

Cheers,Mike

Robert Ok · Answer

ohh, I see. So the heavy lift for the multi-family route for newbies is the extra capital needed. I'm correct on this?

Aristotle Kumpis · Answer

If you are talking about 2-4 units, then it's really no different in my opinion. You just need to have more reserves set aside compared to a single family. However, if you may experience more appreciation in the home compared to a 4-plex. But this will depend on the area that you are buying in.

Wale Lawal · Answer

@Robert Ok

Choosing between single-family homes (SFH) and multifamily properties depends on your budget, risk tolerance, and long-term goals. SFHs are easier to finance and manage but have limited cash flow and scalability. Multifamily properties provide higher rental income and lower vacancy risk, but they require higher upfront costs and more management. If you're just starting out, house hacking a duplex or SFH with an ADU can be a great way to reduce living expenses while building equity. Need help deciding which strategy fits your situation? DM me, and I’ll point you in the right direction!

Good luck!

Robert Rixer · Answer

You could conceivably start with a 50-story high-rise development. You're only limited by your beliefs.

Practically speaking though, 2-4 unit multi is very very doable starting out, especially if you are willing to owner occupy. I would even say it's easier than SFH because you have in-place cashflow.

Amir Khan · Answer

@Robert Ok yes you can. One good way (if you are open to it) is to house hack a duplex. Simply means that you live in one side, and rent the other side to help (or totally) pay off your mortgage. This could make your housing cost $0 if done right. It will also teach you how to be a landlord. Anything larger than that I would not approach without a bit more experience...

Is It Advisable To Start REI Journey With Multi-Family?

Is It Advisable To Start REI Journey With Multi-Family?

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