Multifamily Myths: 5 Reasons People Think Multifamily Investing Is Easy (& Lucrative!)


I used to watch this show on the Discovery Channel where two special effects experts test the validity of rumors and myths. In one episode, the guys tested whether frozen chickens cause more damage than thawed chickens when shot at an airplane’s windshield. This is very important to know if you are ever flying along and encounter a frozen chicken. As a pilot myself, I can appreciate this.

It’s easy to wonder how odd rumors and myths get started or how they become entrenched in our belief systems. Maybe it starts because “a friend told me” or because an author wrote it in a book or a blog post like this one. (Moral: don’t believe anything I say until scientifically proven.)

Download Your FREE guide to evicting a tenant!

We hope you never have to evict a tenant, but know it’s always wise to prepare for the worst. Navigating the legal and financial considerations of an eviction can be tricky, even for the most experienced landlords. Lucky for you, the experts at BiggerPockets have put together a FREE Guide to Evicting Tenants so you can protect your property and investments.

Click Here For Your Free Tenant Eviction Guide

Multifamily and Your Road to Wealth

It’s always entertaining to read books, articles and posts on the topic of investing in multifamily properties. After all, this is how you win Monopoly — trade four houses for one hotel. This is what I did. I exchanged two houses for a 16-unit apartment complex and thus began my journey into the multifamily business almost 15 years ago.

Newer investors dream about investing in large apartment complexes and see it as hitting the big time. Seasoned investors see multifamily as the next natural step. Passive investors see multifamily as a way to earn great returns by investing passively with experienced multifamily operators. In other words, there is a lot to like about this business, and it offers something for everyone. But are there any myths, half-truths or outright lies about this business? And if so, do you know which are true and which aren’t? And are you right?

Related: Anatomy of the Grand Slam: How I Made $800,000 on One Multifamily Flip

Here are five myths and rumors that tell you why you should get started in multifamily investing right away. All of these reasons are ones that I’ve read in books, heard at REIA meetings and even seen in blog posts and Forums on BP, so they must be credible. I like to under-promise and over-deliver so instead of five myths, why not give six?

  1. Multifamily is easy to value. The formula is simple. Net Operating Income divided by Cap Rate equals value. Presto! There is never any confusion about what the property is worth. For all of you left-brain analytical thinkers, this type of investing is made for you.
  2. Economy of Scale applies. You only have one roof to fix, one lawn to mow and when one tenant moves out, you aren’t 100% vacant (contrary to single-family homes). Since none of us like risk in our investments, redundancy of income makes multifamily investing completely risk-free.
  3. Multifamily is easy to buy and finance. Owners of multifamily are advanced in their real estate investing careers so most of them are ready to retire. When they sell, they’ll want to loan you the money to buy it. They’ll probably even want to give you 100% financing or at least carry back your down payment or just simply give you a master lease so you don’t even have to get a loan.
  4. Find a good deal and the money will find you. People love to invest in big deals. All you have to do is syndicate the deal, and you can buy as big of a building as you want with no money out of your own pocket.
  5. Everybody needs a place to live. If the economy takes a turn for the worse, tenants might stop paying their other bills, but they won’t stop paying the rent, and there is always demand to fill your units.
  6. You are in control of the value. When investing in single-family homes, you have to sit around waiting for the market to appreciate to realize a higher value. With multifamily, you are in control. If you want the value to go up, all you have to do is raise rents and / or cut expenses. You’ll sometimes hear this called “forced appreciation,” and it’s so easy even a kid can do it.

Related: 4 Real Estate Myths Many Investors Embrace as “Eternal Truths”

I’ll Share Some Secrets

So I have to ask, if this is so easy (and lucrative), why isn’t everyone doing it? Why aren’t you? In this series of articles, I’ll break down each of the six myths. Stay tuned next week for the truth on valuing multifamily real estate.

Investing in multifamily isn’t as easy as some make it seem, but it is lucrative. Just don’t count your chickens before they are hatched. And whatever you do, don’t shoot them at my plane.

Are any of these myths true? Do you have any other multifamily investing myths?

Leave your comments below!

About Author

Brian Burke

Brian Burke has raised tens of millions of dollars from accredited investors and family offices during his 25+ year real estate investing career. His focus is on residential real estate but has also done development, self storage, and commercial deals. Brian has completed more than 500 single family flips and has acquired nearly 1,000 residential rental units comprised of large apartment complexes all the way down to single-family homes.


  1. Stephen S.

    So what was the chicken versus windshield conclusion? I would think that a frozen chicken would be worse as a solid object would concentrate the force being applied to the windshield at impact. Whereas a softer object would spread and dissipate the applied force at impact over a larger area. The pressure per each square surface area would be less.

    But what did the testers conclude?

    • Alex Chin

      I think for “damage”, you would also need to take into account the…organic debris…that would be splattered all over the windshield from a thawed chicken encounter. I would imagine that your vision would be a lot more impaired by this than the frozen bird.

    • Brian Burke

      The myth was that a frozen chicken would penetrate further. After the test the myth was declared to be untrue. However, some months later they re-tested the scenario and reversed their conclusion, declaring that the frozen chickens penetrated further.

      Reminds me of real estate. Things that are believed to be true can be proven both true and untrue…there are just so many variables that a single answer doesn’t always apply.

      • Ahh, temperature. I have an apartment complex in Fresno. I used to keep a car at the airport and fly down there to check out my apartments. Fresno can be warm in the summer. I remember one day I saw a thermometer on the wall reading 113 degrees! In the shade! You can bet I got outa dodge fast that day. We’re talking
        a really SHORT runup :).

        Anyway, I remember climbing out on days like that, keeping one eye one the engine temperature, another eye on the outside temperature, and wondering why I wasn’t feeling cooler.

        • Brian Burke

          That sounds all too familiar…I used to fly to Redding a lot, and in the summer it’s a very similar story! Probably 125 degrees in the cockpit during taxi. My next plane will have AC!

        • Instead of just visiting you should try living in Fresno … or Bakersfield like I do.

    • Brian Burke

      I hope you find it helpful, Brian! Small Multifamily properties are pretty simple and are a natural expansion from single family. Large apartment complexes, however, are a whole different ball game. Hopefully this series of articles demystifies it a little.

  2. Jay Orlauski

    I broke my teeth on multi-family investing and its still where I plant my flag today. Not sure I ever head any of these myths myself – but I put two and two together early on and realized that I could spread my efforts and risk over a multiplex for accelerated cash flow. I know from first hand experience that it does require a little more homework up front and some realistic cash flow calculations – but I’m a firm believer in multi-family. I will be interested to read your forthcoming articles on the subject.

    • Brian Burke

      I am a firm believer in Multifamily too, Jay! I’m also a firm believer that it has to be done right. So far, every apartment complex I’ve bought came from an owner that did it wrong. That creates great opportunity for me, but if I can help prevent my BP family from being one of those future “motivated” sellers I can feel as if I’ve made a contribution to this forum. Being a future motivated seller is usually the result of making mistakes on the acquisition. Maybe these articles will help a few folks. Let me know what you think of the follow-up articles!

  3. Aleks Gifford

    Myth 7 You can not use FHA’s to buy a series of multi-family properties. You can use/retain multiple FHA’s if your series of property purchase are progressively bigger than the unit you are living in or you are moving to a new city. Typically you must live in it for 1 year before getting a new FHA Mortgage. I typically look at square footage of the unit you intend to live in and compare it to your current residence. I have closed FHA’s in which the borrower was carrying two other FHA’s as the units got bigger progressively or because they switched cities for work purposes. Aleks GiffordNMLS # 157855 1st Signature Lending LLC NMLS # 27820.

  4. I started in small multifamily, and I see certain benefits it has in my market over single family. For example I bought a 4 Plex for $150,000 here and it gets $2400/month in rents. A $150,000 house will only get $1000/month in rents. Even with higher repair costs and capex, there is no comparison for cash flow.

    I had a short time when two of my units on one property were vacant last year at the same time, and the other two tenants paid enough to still cover mortgage/insurance/taxes/property management.

    Certain markets like my hometown of Kansas City have cheap single family housing $30-50,000 that rent for $800-1000/month in decent areas. Well here in Tucson, there is almost no housing that cheap, and if you do find it, will probably be located in a warzone (or trailer park) and rent for under $500/month.

    I like multifamily, but if I lived in an area like KC again I would probably invest in single family.

    • Brian Burke

      You’re right, Anthony, that there are advantages and disadvantages of single family and Multifamily. I can’t argue a position for which is better because it depends on the stage of the investor’s career, their experience and resources, and the fundamentals in the area in which they are investing. I think your examples speak to this very well.

      But what happens as your experience, resources, and knowledge grow? I found that large apartment complexes were a great venue for me and my investors. My intent in this and the articles that follow is to illustrate honestly how the transition to buying apartment complexes isn’t what a lot of people purport it to be. Hopefully I can accomplish that. One thing I could never accomplish is to say which asset class is better…there’s no single argument to be made in that regard, despite attempts to do so by many people.

    • Brandon Phillips

      I have 3 multiunits in the greater Pittsburgh area and I’ve found that the cash flow does go way up for the same price as a single family home. I’m getting $2300 in rent for a 135K 4-unit. However, I’ve also notice that the more and more tenants I add to my collection the more and more work I accumulate. Sometimes I wish I only had one family to worry about; instead of 1 family that keeps quiet, 1 family that is always complaining about something, 1 family that pays rent, but always late and with some intervention, and 1 family that insists that I come pick up the rent in cash and won’t stop talking to me. Ideally you would find 4 perfect tenants that all love each other and only call you for emergencies and relevant things. My experience is that when you give tenants your phone number they will use it for just about any stupid thing.

      • Brian Burke

        I think you’ll like the article on economy of scale, Brandon. It’s article #2. I think you’ll relate to it because I’ll touch on how expanding the number of units requires additional staff which is an additional cost…all of the above works against the thesis that increasing the number of units increases the income. Only partially true–to a point!

  5. Michael Woodward

    Thanks for the article Brian (…or at least part of an article…. the suspense is killing me).

    I’ve read books from top real estate minds that promote multi-family as the ultimate goal. All of my experience is with single family renovate & resell (I refuse to use the word “flip”) but since I know that some people have been very successful with multi-family, I keep my radar on all the time for current market information. I would have had to track this market for many years to know how much it’s changed since the market collapse but it appears (from my limited perspective) that there’s something of a stampede toward multi-family and rentals in general. When I see the “herd” running in a specific direction, my instinct is to step to one side and let it go by. I’m sure I’ve missed some good opportunities that way but I’m not comfortable running with the crowd when there’s too many people running in the same direction. Do you see an over-saturation of rentals (multi or SFR) happening now or in the future?

    Is myth #7…. There’s plenty of room in the market for more competition?

    • Brian Burke

      I respect your contrarian approach, Michael. I’ve been somewhat of a contrarian myself in many ways and it’s worked for me too. I’ve also tried swimming with the current and, properly done, that also works well.

      I think that anyone could have bought an apartment complex in 2010 and regardless of how bad the acquisition was, come out smelling like a rose in 2015. Nowadays you have to be much smarter or you’ll sustain serious injury. My goal here is to help contain the inevitable damage such that only people that don’t read the BP blog get hurt by the market.

      I don’t advocate that anyone should buy multifamily properties, and I don’t advocate that they stay away, but I do advocate that caution and a focused and educated approach is how you win the day, contrarian or not. 🙂

  6. Ken p.

    I’m looking forward to reading your upcoming series. My wife and I have invested in a few SFRs and are now cutting our teeth on a small MF property (22 units). We purchased the MF and turned it around, with the thought that within 5 years we’d be ready to move on to an apartment building complex large enough to support onsite management and maintenance. We didn’t want to go directly to something larger, particularly a situation where we would be raising money from others, without a solid track record that would give both us and any potential investors confidence we know what we’re doing. We’re about half way through the 5 year plan, so your article couldn’t come at a better time

    • Brian Burke

      Excellent discipline Ken. Some people think that they can jump straight from SFRs to 100 unit complexes. Well, you can, but doing so comes with a higher risk of failure than if you were to grow organically. Congrats to you for taking a measured approach. I hope the upcoming articles are helpful to you as you make the move. Best of luck!

  7. I am always on the search for MF opportunities that make sense. I have contracted on a few small deals in the past year (20-25 unit deals). When I do my diligence, I also evaluate SFR comps and cap rates. I have had to walk from the MF deals I have had under contract. If I can buy 10 SFR units that offer a better cap rate, and are priced below replacement costs (vs. buying a MF 10 plex), I opt for the SFR. It does not make sense to me to buy MF at a lower cap rate than SFR. Maybe I have it wrong? There is so much competition for MF in multiple markets and cap rate compression. You really have to know how to buy it right and be accurate with your diligence. What happens to your exit sales price in MF when rates go back to 6-8% and you want to sell? In a balanced market, you would typically see higher effective cap rates on MF, but with the surge in demand I am finding better yield in SFR right now for nicer homes in working class neighborhoods. I will keep looking though for that MF needle in the haystack and when I find the right deal, I will buy it.

    • Brian Burke

      All of those points are ones that I hope the readers of this article take to heart, Andy. Everything you said matters, it’s just too bad that it can’t be evenly applied across all markets. Investors need to evaluate the opportunities in their market the way you have evaluated them in yours and decide what works best for them just like you did.

      I agree that finding a multifamily property worth buying is hard. I know this because I had to underwrite 160 properties between my last acquisition and the one I closed on last month. Finding the right property to buy is like looking for a needle in a haystack. The problem I see with most newer buyers is that they don’t know what the needle looks like or even why they are looking for it. Hopefully I can help with that.

      I think you’ll like the next article, Andy, because I speak to the valuation of income property and talk about cap rate. I think that cap rate is a tool that is commonly misused by buyers when they evaluate opportunity. Deciding what to pay for a stream of income and comparing one acquisition to another is a three-dimensional process and cap rate lives in a two-dimensional world. If you don’t look beyond cap rate you miss a whole world that you didn’t even know was there.

      Agreed that cap rates are likely to decompress as interest rates rise. I think it’s unlikely that they will track in parallel, however. The spread between treasuries and cap rates is historically wide at the moment and current levels of demand will help contain the increases to a point. But, they will still track up, and future demand is an unknown. Plan for higher caps on your exit…I’ll go over that too in the future articles.

  8. Aleksandar P.

    Brian, I am looking forward to your follow up articles.

    I am also interested in smaller MF and I am looking actively in my area. However, I have to echo Michael Woodward statement about “herd” running into MF buildings at this moment. As a stock investor for many years, one of the lessons I learned is when you see the “rush” into certain asset class you have to give yourself a pause and take a think twice before you pull the plug. In most cases, I stay on the side and wait for inevitable correction in that asset class or chose another one with a reasonable valuation and appropriate long term IRR.

    Interestingly enough, I found out recently, that my coworker’s family, who never had experience in RE, are looking to buy a 24-units building in NW Indiana. I quickly check the numbers and see absolutely no value in that deal. When I asked him how he/they value this property I was amazed to find out that they have no clue about MF valuations whatsoever. How are you going to finance it, I asked? He gave me one of those “what??” looks and said: we are buying it for cash. Finally, when I asked what is the point of this purchase, he said that they just want to “park” the money in most secure investment?!?
    And I have to compete with these kind of buyers in the market? Good luck!

    • Brian Burke

      Funny story, Aleksandar! All you can do is watch and shake your head. But unfortunately it’s the reality today. There are so few places to “park” capital and multifamily is a favored asset class for people seeking to do just that. And there’s no way to compete with them nor would you want to if your goal is to actually make money. Their goal is to stuff cash in a mattress.

      That said, the “herd” is the very reason why I grew my multifamily business to begin with. In 2005 there was a huge rush for inexperienced 1031 buyers in California and other coastal states buying apartment complexes in Texas. Unfortunately for them, they were undercapitalized because the 1031 comprised a significant portion of their assets and they were unprepared for the differences between owning a large apartment complex 1,000 miles away versus owning an SFR down the street in Long Beach. When the economy hiccupped, these buyers (who overpaid to begin with) were crippled, cashless, and lacked the ability to hold onto those properties and the resulting wave of REOs allowed me to acquire some properties at a nice discount.

      I see a different dynamic today. Sure, you’ll still find the same folks as before in the mix, but this herd is made up of a lot more sophisticated folks and deeper pockets. Take your example, where those guys were buying for cash. They have zero foreclosure risk, they can just hold on forever.

      I think that the fundamentals for multifamily are excellent, BUT there are some clear rules that people who are getting into the space to MAKE money need to follow. The most important rule is that you have to buy right or the “herd” will stampede you. I hope these articles help with that.

  9. Bart Sevin

    Brian, you tease!! I recently sat through a 1-day training even facilitated by Anthony Charra, who I think is on here somewhere. I also signed up for his 4-day event on investing in apartment complexes. He mentioned just about everything you mentioned above, so I look forward to your mythbusting on these 6. And not disparaging Anthony’s session, I found it helpful and his analysis maps nicely onto available resources like Frank Gallinelli’s Cash FLow book in terms of standard analysis metrics, etc.

    • Brian Burke

      I totally understand what you mean. Just be sure that you make the move to Multifamily because it’s the right thing to do, not just because SFR appears to be the wrong thing to do. I hope the articles help point you in the right direction.

  10. John Barnette

    Looking forward as one of those high equity sfr/condo investment property owners in San Francisco. Have the very good fortune of making good to great cash flow on my portfolio and also have enjoyed tremendous appreciation. However ultimately my ROE will continue to collapse as values increase. And all my mortgages are locked in between 3.625 and 4.5% So may be a “bite” to try to cash out refi several years down the road from now when rates will likely be higher.

    Will be 45 y/o at the end of the month…so still aiming for appreciation over cash flow within reason. However at some point in my life I will likely want to shift my strategy and reposition equity through 1031 into non-coastal cash cow multifamily. And don’t want to get caught in a bad position as you alluded to in your Texas REO buys.

    Looking forward to an education from the bigger pockets community.


    • Brian Burke

      Learning the ropes first is great self-defense against costly mistakes. Sounds like you’ve done all of the right things so far and now it’s just a matter of being careful not to make mistakes that wipe you out. There’s a point where you just don’t want to be forced to start over from scratch. This happened to a lot of people with circumstances very similar to yours when they exchanged into an unfamiliar asset class in an unfamiliar market. Glad you are checking in on the BP blog, I hope the articles help you! Thanks for commenting.

  11. Erik Nowacki


    Great topic! I hope I’m not responsible for creating too many of these myths…

    I’ve purchased multifamily with no money down, lease purchase, subject to and seller carried financing. I’ve forced equity by renovating and raising rents. It’s not easy, it’s difficult to find the right deal and sometimes negotiations can take a year or more.

    However, I did run into the “money will find you if you have a good deal” myth this summer. A great deal on an apartment complex in Memphis; gross rents at 3% of purchase price; light rehab and better financial management needed; took me 6 months and 3 lenders to get it done!

    I do like the cookie cutter approach to renovations since all units are usually the same. You can have one crew work on 4 units simultaneously, applying the same finishes all over. That’s harder to do with SFR.

    I’ve been buying, exchanging and renovating MFR since 1999 and I’m happy to have found my niche.

    Looking forward to your future articles and everyone’s comments and experiences.


Leave A Reply

Pair a profile with your post!

Create a Free Account


Log In Here