MULTIFAMILY INVESTING

Multifamily property ranges from two-to-four unit buildings, typically financed with residential mortgage products, to larger garden-style and high-rise apartment communities of five or more units, generally financed through commercial and agency mortgage products such as Fannie Mae or Freddie Mac multifamily loans.

Because income comes from many separate leases rather than a single tenant, the vacancy or nonpayment of any one unit affects only a small percentage of total property income, unlike a single tenant commercial property where tenant default eliminates the entire income stream.

Massachusetts eliminated local rent control statewide through a 1994 ballot initiative, though rent regulation policy has continued to be periodically discussed at the state and local level. An investor should confirm the current status of any applicable ordinances with a real estate attorney before finalizing rent growth assumptions.

Yes, when held for investment or business use. Multifamily property is like-kind real property and is a common exchange target both for investors seeking diversified tenant risk and for investors exchanging out of multifamily toward a more passive alternative.

Multifamily property with five or more units is generally eligible for agency financing through Fannie Mae or Freddie Mac multifamily programs, which can offer more favorable terms than conventional commercial financing for well-located, stabilized properties compared to typical single tenant commercial debt.