Multifamily
Residential properties with multiple units, ranging from duplexes to large apartment complexes.
Definition
Multifamily refers to any residential property with two or more units. The category is commonly split into two segments: small multifamily (2-4 units) and large multifamily (5+ units). Small multifamily qualifies for residential financing, while 5+ units requires commercial loans. Multifamily properties benefit from economies of scale — one roof, one foundation, one lot — serving multiple income streams. They are valued based on income rather than comparable sales, giving investors more control over property value through operational improvements. Multifamily has historically been one of the most stable real estate asset classes due to the perpetual demand for housing.
How This Relates to DSCR Loans
DSCR loans for 1-4 unit multifamily use residential underwriting standards. The combined rent from multiple units typically produces stronger DSCRs than single family properties.
Related Terms
Duplex
A residential building with two separate living units, either side-by-side or stacked.
Fourplex
A residential building with four separate living units — the largest property still classified as residential.
NOI (Net Operating Income)
A property's total income minus operating expenses, before debt service and taxes.
Cap Rate
The ratio of a property's net operating income to its market value, used to estimate return potential.
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