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Thinking of a Multifamily Home?

thinking of buying a multifamily home in Brooklyn?

One of the first questions we ask prospective buyers is what type of property they’re interested in buying. Most of the time, this involves a discussion of condos vs. coops, and determining if one or both of these types of apartments would suit them. However, for some folks — particularly clients looking in Brooklyn, with a budget between roughly $800,000-$2,500,000 and an interest in exploring new neighborhoods — a multifamily home can be a financial boon. Here’s why.

More House for Less Money Each Month

When you own a multifamily home, the rental income offsets your total monthly carrying costs — so you can essentially get more house for less money each month. For example, $2,500 in rental income is equal to mortgage payments on a $500,000 loan. Not only can a multifamily owner thus afford more house due the rental income, the monthly carrying costs are almost always less since there are no building common charges which are often more than the ongoing expenses relating to maintaining the building. This means you could live in a large triplex apartment with a yard for less than a cheaper condo or coop in a higher-priced neighborhood.

Higher Value = More Appreciation

Appreciation on a $2 million property versus appreciation on a $1.5 million property will be more in absolute terms at the same rate of appreciation. In reality, the appreciation rates are rarely the same. These investments can carry more risk, but in recent years we have seen them appreciate far more rapidly than properties in neighborhoods with historically higher prices.

Long-Term Investment Potential

Like a condo, a multifamily owner can keep the property long after they decide not to live there in hopes of maximizing appreciation and generating income. Unlike a condo, however, a multifamily home will usually yield a much higher net annual income (CAP rate) than a comparably-valued condo. While the multifamily can be a more hands-on investment, we almost always see that the net monthly costs are lower and the combined rent combined rent on two apartments is higher.

If you’ve decided to explore multifamily homes, there are many considerations that will shape your search. For example:

“Out of Pocket” and The 5 Major Carrying Costs

  • First, buyers need to determine their ideal monthly “out of pocket” cost. This will help your agent determine which homes will work best for you based on their potential rental income and approximate carrying costs. Carrying costs can vary greatly depending on the type, size, and configuration of the home. There are five major expenses to keep in mind: 1) property tax, 2) mortgage payment, 3) homeowners insurance, 4) water & sewer costs, and 5) heating costs. Some of these are easier to estimate than others, but your real estate agent can help you with this.


  • When looking at a home with multiple units, it’s important to consider the size and type of rental units it contains. Depending on the neighborhood, some rental products (1 vs. 2 vs. 3 beds) may be far more desirable -- the configuration of the rental units (or the ability to easily reconfigure them to a more desirable layout) can significantly impact your future rental income.

Certificate of Occupancy

  • In NYC, it’s also important to know a house’s legal CO (certificate of occupancy). The CO determines how the property can be used - townhouse classifications include single, 2, 3, and 4 family, as well as single-room occupancy (SRO). These classifications determine how it is taxed, financed, and insured. Failure to comply with a home’s CO usually results in violations and fines from the city -- and a house with these sorts of outstanding fines and/or violations will be hard to finance.


  • One of the major differences when buying a house, as opposed to an apartment, is that all of the internal systems and structures will belong to, and will be managed by, YOU - not a co-op or condo board or management company. Having an experienced inspector do a thorough examination of your home before you sign the contract of sale is critical when purchasing a townhouse. Your inspector will examine the entire structure and should point out any issues or damages. They will also review the internal systems in place (heating, cooling, electric, plumbing) and can point out any immediate repairs that need to be made, as well as explain ongoing maintenance.

If you’re curious about a multifamily home and would like to learn more to see if it’s the right option for you, please don’t hesitate to reach out! Also check out our neighborhood spotlight of BedStuy, which has a large inventory of multifamily homes.

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