Should you start with a duplex or go straight to a 20-unit apartment complex? The choice between small and large multifamily fundamentally changes your financing, management, and return profile.
Small Multifamily (2-4 Units)
Financed as residential real estate — qualifying for FHA, conventional, and VA loans estimate your mortgage payment at low down payments. Easier to manage, lower entry price, owner-occupied options available. However, concentration compare cap rates between properties risk is high: losing one tenant on a duplex means losing 50% of income.
Large Multifamily (5+ Units)
Financed commercially — typically 25-30% down, debt-service coverage ratio underwriting, shorter amortization periods. Valued based on NOI rather than comparable sales, giving you the ability to force appreciation through operational improvements. Professional management becomes economically viable at scale.
The Sweet Spot: 10-30 Units
Many investors find 10-30 unit properties hit an ideal balance — large enough for a property manager, small enough to finance without institutional capital, priced below most institutional buyers’ radar ($1M-$5M range).
Value-Add Multifamily
The most popular apartment investing strategy: buy a property with below-market rents, improve units (new flooring, appliances, counters), raise rents to market, and refinance at the new, higher valuation. BRRRR — Buy, Rehab, Rent, Refinance, Repeat — allows recycling capital into additional acquisitions.