The Beginner’s Guide to Buying Your First Multifamily Property

15 min read
Brandon Turner

Brandon Turner is an active real estate investor, entrepreneur, writer, and podcaster. He is a nationally recognized leader in the real estate education space and has taught millions of people how to find, finance, and manage real estate investments.

Brandon began buying rental properties and flipping houses at the age of 21. He started with a single family home, where he rented out the bedrooms, but quickly moved on to a duplex, where he lived in half and rented out the other half.

From there, Brandon began buying both single family and multifamily rental properties, as well as fix and flipping single family homes in Washington state. Later, he expanded to larger apartments and mobile home parks across the country.

Today, Brandon is the managing member at Open Door Capital, where he raises money to purchase and turn around large mobile home parks and apartment complexes. He owns nearly 300 units across four states.

In addition to real estate investing experience, Brandon is also a best-selling author, having published four full-length non-fiction books, two e-books, and two personal development daily success journals. He has sold more than 400,000 books worldwide. His top-selling title, The Book on Rental Property Investing, is consistently ranked in the top 50 of all business books in the world on, having also garnered nearly 700 five-star reviews on the Amazon platform.

In addition to books, Brandon also publishes regular audio and video content that reaches millions each year. His videos on YouTube have been watched cumulatively more than 10,000,000 times, and the podcast he once hosted, the BiggerPockets Real Estate Podcast, is the top-ranked real estate podcast in the world, with more than 75,000,000 downloads over 350 unique episodes. The show also has over 10,000 five-star reviews in iTunes and is consistently in the top 10 of all business podcasts on iTunes.

A lifelong adventurer, Brandon (along with Heather and daughter Rosie and son Wilder) spends his time surfing, snorkeling, hiking, and swimming in the ocean near his home in Maui, Hawaii.

Brandon’s writing has been featured on,,, Money Magazine, and numerous other publications across the web and in print media.

Instagram @beardybrandon
Open Door Capital

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My first rental property was a small two-unit property, a duplex, that I bought when I was 21. Later I bought another duplex, a triplex, some fourplexes, some apartments, and some mobile home parks. Now I have more than 2,000 rental units across a dozen states—almost all multifamily. This allows me to live where I want, pay all my bills, give generously, and work far fewer hours than most.

That’s the power of multifamily real estate.

Investing in multifamily properties can change your life, whether you want just a few small deals or a real estate empire. It’s similar to investing in single-family houses, but instead of shopping at Walmart, you’re at Costco. You’re buying in bulk, and can quickly scale up your passive income and net worth faster than you think possible. And hey, it’s a lot of fun!

Simply stated, multifamily properties are one of the easiest ways to climb your way to millions of dollars in real estate and give you the life you’ve dreamed of.

And the great thing is that anyone can invest in multifamily, regardless of your location, income, credit, experience, or bank account—if you know what you’re doing.

What is a multifamily property?

To put it simply, a multifamily home is any residential property that features more than one housing unit.

These could be duplexes, triplexes, fourplexes, apartment complexes, or really anything that involves multiple tenants living in occupied units on one property. Owners can live in any of these units as well, which would make it an owner-occupied property—something we call “house hacking,” which is typically done with residential multifamily properties with two, three, or four total units.

Properties with more than four units are deemed commercial, while four and below are deemed residential. This distinction is important for lending purposes, as the lending rules for residential multifamily differ from the lending rules for commercial investments.

In addition to the lending distinction, larger multifamily properties may also have different methods for finding, analyzing, financing, and managing the property. For this reason, most investors getting into multifamily start with small residential properties and move into the larger multifamily deals once they’ve gained some experience.

Now, let’s go over how amazing these properties are and why you need them in your portfolio.

The power of the multifamily property

I love multifamily for a lot of reasons. But since you don’t want to spend the next three hours reading while I lay them all out, let me just give you four good ones.

1. Cash flow

Cash flow is the name of the game in real estate investing. When trying to get the most bang for your buck, purchasing multifamily homes is a great course to take. Why? Because multifamily properties are designed for cash flow.

Think about it. When someone builds a house, what’s usually the purpose? For someone to live in for themselves.

A single-family home is not designed for cash flow, but for comfort (yes, single-family homes can still cash flow—it’s just harder because they aren’t designed for it). Multifamily, on the other hand, is generally built and sold for investment purposes. In other words, it’s designed to make cash flow.

Be careful, though. Just because it’s a multifamily property doesn’t mean it’s going to cash flow. There are many different factors that determine one’s monthly cash flow. There’s the mortgage payment, insurance costs, property taxes, utilities, repairs, management, saving up for replacing big items (which we call “CapEx” in the real estate world), and more.

2. Quick portfolio expansion

Wealth is not built by purchasing a property, but by building a portfolio. In other words, it’s not one deal that’s going to get you the wealth and freedom you want, but the collection of many rental units.

Sure, you can buy a house every year or two, but that’s a slow path toward generating enough cash flow to quit your job, travel the world, buy a Tesla, or whatever your goal is. Multifamily properties, on the other hand, can automatically add numerous rental units to your portfolio at once, helping you scale fast.

3. Reduced risk

When you own a house and that house goes vacant, you’re 100% vacant, earning no money from that unit. But if you own multifamily properties, if one unit needs repairs or is vacant, you have other units that can carry its slack for the time being. That makes multifamily units a very powerful asset, especially for a beginning investor.

4. Potential for house hacking

Finally, there’s the power of house hacking, the process by which you’ll live in one unit and rent the other units out. Multifamily makes this possible!

For example, let’s say you buy a triplex and your monthly mortgage payment for the property as a whole is $1,500. You rent out two of the units for $650 and keep one for yourself. Your individual mortgage payment is $200 per month. That’s a bargain!

Finding multifamily properties

The first step in finding multifamily properties is to clearly define what type of multifamily you want. In The Multifamily Millionaire, I break down this step into something I call your “crystal clear criteria,” which includes defining the following.

  • Property type: Small multifamily? Medium-sized? Large?
  • Location: Where can you build expertise about an area?
  • Condition: Do you want a project or something already finished?
  • Price range: Is this a $200,000 property or a $200,000,000 property?
  • Profitability: What kind of financial return are you looking for?

Once you’ve defined exactly what you’re looking for, you can better hunt for those deals.

However, this is where we need to look at another difference between small multifamily and large multifamily.

Small multifamily deals are usually sold through real estate agents. You can search for them on websites like or Zillow, or even better, get yourself a rock star real estate agent who understands real estate investing to help you get those leads automatically.

It’s also possible to find these small multifamily deals off-market, meaning you directly market to owners of multifamily properties in the hopes of convincing them to sell you their property before they list with an agent. There are numerous off-market deal-finding strategies, but the most common are direct mail marketing, driving for dollars, and networking with owners or wholesalers.

When it comes to larger multifamily properties, while the same off-market strategies do exist and can work, most of the sales happen through commercial real estate brokers.

These brokers are constantly networking with multifamily owners. When an owner decides to sell, the brokers will put together a fancy sales packet and attempt to find a buyer for that deal through their buyer clients. If they can’t find a buyer directly through their personal network, they may list the property for sale online through a commercial real estate sales portal such as Loopnet or Crexi, which you can visit as well to look through potential deals.

The key to finding multifamily properties is creating a consistent funnel of leads to pursue, and then running the numbers to find out just how much you can afford to offer. But how do we “run the numbers?”

Build your wealth with multifamily houses

Learn how to become a millionaire by investing in multifamily houses! In this two-volume set, The Multifamily Millionaire, Brandon Turner and Brian Murray inspire and educate you into becoming a millionaire.

Analyzing multifamily properties

I often say that deal analysis is the number one most important skill an investor can have. When you know how to do the math, you’ll avoid buying bad deals, have an easier time using other people’s money to buy those good deals, and achieve your financial goals faster with far less risk.

But not everyone likes math, and understandably so. It can get really complicated, especially with multifamily.

Unfortunately, however, it’s hard to make good investments without crunching numbers. After all, investing is just one big equation. Rather than saying, “I don’t know how to do the math, so I’ll just wing it,” let’s take the time to learn.

Experienced multifamily investors typically favor the term “underwriting” instead of “analysis.” They are basically the same concept, but underwriting is the industry term so be sure to use it if you want to look smart.

Underwriting really involves two distinct parts.

  1. The collection of data (income, expenses, etc.)
  2. The actual mathematical analysis.

Collecting the data

When I say “collecting the data,” what I’m referring to is getting a solid understanding of what exactly you are dealing with. 

  • What’s the location like?
  • How many units are in the property?
  • What do those units rent for?
  • Are there other sources of income, like laundry machines or rented storage?
  • Which utilities are paid by the landlord, and which are paid by the tenants?
  • What’s the condition of the property?
  • How much are the property taxes—and how much will they be after closing?
  • How much will insurance cost?
  • What other expenses will the landlord be responsible for?

Most of these data points can be learned by talking with the broker involved in the sale, or by asking pointed questions of the seller. Additionally, at least for on-market, listed properties, the broker will assemble this data ahead of time and place it into the sales document. But be warned—these sales documents are meant to sell you on the deal, so never trust them. Verify each point to be sure it’s not an overly optimistic estimate or flat-out lie.

The key to data collection is wrapping your head around the entire project so you can make the best-informed underwriting. You wouldn’t want to buy a multifamily property only to find out later that the city has a special monthly fee that’s going to cost you thousands of dollars a year.

In just a moment, we’re going to be analyzing a hypothetical multifamily deal, so let’s go ahead and create some hypothetical data points now.

  • Property address: 123 Main Street, Anytown, USA
  • Number of units: 10
  • Average monthly rent: $750
  • Other income: $200/month for coin-op laundry
  • Utilities: $1,000/month for water, sewer, garbage, and electric
  • Condition: Okay, needs about $30,000 in signage, landscaping, and paint
  • Property taxes: $1,200/month
  • Insurance: $2,200/month
  • Other expenses: 10% of rent for property management and $200 a month for landscaping
  • Asking price: $1,000,000

Mathematical analysis

Next, you’ll be using the data you collected to determine several key financial metrics for the property. While it’s possible to do this by hand, I’d highly recommend using the BiggerPockets Rental Property Calculator, which allows you to accurately and efficiently analyze a property in under five minutes. Doing an analysis by hand or using some random spreadsheet from the internet is a good way to lose a lot of money by making small mistakes.

(Note: The BiggerPockets calculators are ideal for properties between one and 30 units. Above 30, you’ll want a more exhaustive tool like Michael Blank’s Syndicated Deal Analyzer.)

Let’s go ahead and run the numbers on the hypothetical 10-unit multifamily property I outlined above on the BiggerPockets Rental Property Calculator.

First, we’re going to enter the address and upload a photo:

rental property calculator

Next, we’ll enter the proposed purchase price, closing costs, after-repair value, and repairs costs. (And hey, if you are using the BiggerPockets calculators and are unsure of how to fill out any form, just click on the blue help links on the right side.)

rental property calculator 2

Next, we’ll choose our loan amount. In this case, 70% will mean our down payment is 30% of the purchase price. We’ll also include some details about the loan, which you will be able to get from your lender.

rental property calculator 3

Now, include the rent and other monthly income.

rental property calculator 4

And finally, include all the expenses for the property. I usually assume between 5% to 10% for repairs, but this can vary depending on the age and condition of the property, as well as other compensating factors.

rental property calculator 6 1

That’s it for inputs. Now, let’s look at the results.

rental property calculator 7 1

What are we looking at here? Well, when investing in multifamily deals, there are several key metrics I look for.

  • Cash flow. This is the amount of profit the property produces after all of the expenses have been considered, including the mortgage. As a general rule of thumb, I like to see $100 per month, per unit, on a multifamily property. But this number is not as important as…
  • Cash-on-cash return (COC). This is the percentage your investment has made you in a given year. To determine this, simply divide annual cash flow by total capital invested. As a general rule of thumb, I aim for 8% to 12% COC on a real estate investment, but this can vary wildly depending on the deal. For example, I might take a smaller COC if I believe the value of the property can go way up over time and I’ll make more of my profit when I someday sell.
  • Average annual return. This number gives us a general look at the lifetime success of the property, knowing that over time we will pay off some of the loan and the property will also likely increase in value. Average annual return says, “If we account for all of that, what will our investment return be, on average, each year?” As a rule of thumb, I like this number to be at least 14%, and preferably a lot higher, on a five-year hold.

In the case of our example property at 123 Main Street, we can see that this property is projected to produce more than $200 per month, per unit in cash flow (which is above my metric goal), 7.46% cash-on-cash return (which is just slightly below my minimum), and a five-year annualized annual return of 16.85%, which is above my goal.

Now, if I want to achieve all three of these metrics, I have a choice: I can give up and go back to the drawing board, since this property only works for two of the three, or I can simply lower my purchase price slightly to determine at what price I will achieve my goal.

This is how underwriting works. You find the number that works, and you go after it. You keep out the emotion. You stick to the math. And you pursue the deal based on the metrics you’ve defined as important.

Now, let’s move onto another aspect of multifamily underwriting, and that’s determining what a property “should” be worth. How would someone know?

What is a multifamily property worth?

Now that is a loaded question.

First, as with all things in a capitalist society, something is worth what someone else is willing to pay for it. But that’s a lame answer, so let’s go deeper.

What’s it worth to you?

In other words, what price can you pay to make your deal pencil out to a solid investment for you? For example, if your goal was an 8% cash-on-cash return, the deal above should pencil out above that number at a purchase price of $970,000. But is it actually worth $970,000?


Well, let’s go one step further in terms of valuing a multifamily property and look at how an appraiser would evaluate the property.

First, this is another distinction point between small and large multifamily. Smaller, two- to four-unit properties are generally valued the same way single-family houses are: by looking at what similar properties have sold for. An appraiser would look at recent sales (“comps”) and assume that the target property will be worth around the same amount,

Now, when we’re talking about larger multifamily properties (five units or greater), appraisers have a much different way of determining value.

Because it’s hard to find identical properties to compare one’s large multifamily to, appraisers instead look at the profitability of the investment and compare that to other commercial real estate investments in the area. This concept alone is enough to write a whole chapter on, but simply stated, the value of a large multifamily property can be determined using the following formula:

Net Operating Income (NOI) / Cap Rate = Value

  • Net operating income (NOI) is the profit a property would make in a year, not including any debt payment or capital expenditures (CapEx).
  • Cap rate is the expected cash-on-cash return investors typically want to see in a similar investment, assuming they paid all cash.

So, if a property’s NOI is $500,000 per year, and the normal cap rate in an area is 5%, then:

$500,000 / .05 = $10,000,000

Now, does that mean you should only pay $10,000,000 for this property? Not necessarily. Maybe the property needs to be improved. Maybe you can get it cheaper. Maybe you can increase rents right away, so overpaying might make sense in the grand picture. Remember, regardless of these cap rate and NOI formulas, the property is worth what makes it a good deal for you. So, work backward, stick to the math, and buy a great small multifamily deal.

Financing a multifamily property

There are plenty of loan types that you can get to finance your multifamily property. Here’s a quick list of the most common ones.

  • HUD loans and other government-backed mortgages for house hackers who plan to live in a one- to four-unit property for at least one year.
  • Conventional mortgages (most common), typically 20% to 30% down. Most banks or lenders can do these.
  • Portfolio loans. Usually small, local community banks that lend their own money, rather than the government’s, and therefore can be more flexible.
  • Hard money loans. Granted by private individuals or firms with higher rates/fees than traditional lenders and much shorter terms. Usually only ideal for fix-and-flip projects or for buying a nasty property, repairing it, and then refinancing it with a more traditional loan.

In addition, there are many creative strategies that can allow you to invest in real estate with significantly less money, even no money. Perhaps the most common no/low money down strategy is that of utilizing partnerships, where one partner brings most (or all) of the down payment and the other partner handles the rest (such as finding the deal, negotiations, offers, due diligence, closing, and managing) and profits can be split however the two parties choose–often 50/50.

This strategy can be utilized on small deals or large deals. In fact, this is how I’ve been able to grow my portfolio to more than 2,000 units in the last few years. My real estate company, Open Door Capital, buys large apartments and mobile home parks by raising money from wealthy individuals (known as “limited partners”) while we do the rest. This can create a real win-win for everyone, as the limited partners get completely passive income while I’m able to scale my unit count into the thousands. This process is known as syndication and is the primary focus of Volume II of The Multifamily Millionaire.

In addition to partnerships, there are many other strategies that could work, such as seller financing, lease options, BRRRR investing, and more.

If you’re curious about more creative strategies, don’t miss my first full-length book, The Book on Investing in Real Estate with No (and Low) Money Down.

Making an offer

Now that you’ve figured out your financing route (usually it’s a good idea to do this before making offers so that you’re not wasting anyone’s time), and you know exactly how much you can pay for the property to make it worth buying, it’s time to make an offer and negotiate a deal.

If you’re using a broker, they can draw up all the legal documents and make sure all your i’s are dotted and t’s are crossed. If not, consider using an attorney to help make your offer.

The document you’ll use to make your offer is known as a purchase and sale agreement, or simply “the P&S.” However, when dealing with complex multifamily property transactions, it’s customary to first submit a document known as a letter of intent, or LOI. The LOI is a much simpler document—usually just one page—that spells out the important stuff, such as who you are, the amount you are offering, the date you’ll close, and how you’ll finance the deal. The LOI, although not legally binding, allows both parties to negotiate before spending thousands of dollars and weeks of time on the thousands of small items found in the P&S.

After making your offer, you may get a yes, a no, or a negotiation.

If competition is intense (which is often the case), you should do whatever you can to entice the seller to pick you.

One way to do this (beyond price) is to give a shorter closing time. Instead of the standard 30-45 days, offer to have the deal done in two weeks. This may put a lot of pressure on you as a buyer, since you’ll have to run through inspections and more during the due diligence period, but sometimes letting a seller know that their payday is in two weeks is enough to make them bend a little. But note that quick turnarounds on closing might eliminate financing options like conventional mortgages. Be aware of the risks.

You can also offer more earnest money. This is a percentage of the property’s price given as a deposit to show your seriousness about the purchase. More money can indicate more commitment. Typically, earnest money is between 1% and 3% of the purchase price, and is generally refundable if you back out for reasons outlined in your offer, up to a certain time period also defined by the offer.

Buyer’s due diligence

The due diligence period is a set amount of time before closing where the buyer can pick apart the property with inspections and tests to ensure that they want to make the purchase. It also gives time to finalize financing and ensure everything closes smoothly.

One of the most important things for you to do during this time is getting an inspection. This will help determine whether you’re making the right investment.

You’ll also use this time to dig into the financials of the investment, double- and triple-checking that your estimates for income and expenses are accurate. Insurance can be ordered during this time, management can be hired, financing is finalized, and lawyers or the title company will handle the legal paperwork and title searches.

Whatever else you decide to do during this period, make sure that you’re getting it done before it ends so that you don’t find something that ruins the deal later, when it’s too late to back out.

When your due diligence period is up, there’s only one thing left to do: Close on your new multifamily property!

Managing multifamily

When it comes to managing your multifamily, you have several options. With a smaller multifamily, you may choose to manage it yourself. Managing tenants is not an overly complicated process, but there are some vital legal and functional rules and processes you should follow.

But landlording is not for the faint of heart or weak of will. You will need to be professional, firm, and systemized. You must learn how to advertise vacant units, screen tenants, sign leases, and handle problems when they arise (and they will). If you plan to go this route, be sure to read some good books on managing tenants, such as the book I wrote with my wife, The Book on Managing Rental Properties.

If you choose not to manage the units yourself, you will need to engage a professional property management company. Typically, these companies charge between 5% and 10% of the rent collected as their payment, plus other leasing fees. However, this can give you a significant amount of your time back, allowing you more time to find other deals (or to lie on a beach). Just keep in mind that even if you hire a manager, you’ll still need to watch over the manager and make sure they are doing a good job–or you’ll need to replace them.

Congratulations! You’ve made it to the end. At this point, you should have a property going from the seller’s hands into yours—and producing great monthly cash flow and making you wealthier each and every month.