Let’s cut to the chase: you want to know what type of commercial real estate (CRE) prints money...
By Arun Gosh, CEO of Hutfin
Let me be direct with you: multifamily real estate is one of the most reliable paths to building serious wealth. Not because it's sexy or complicated, but because it works.
I've watched investors chase shiny objects for years. Crypto one month, NFTs the next, whatever's trending on Twitter. Meanwhile, the quiet millionaires are buying apartment buildings. Let me show you why.
What is Multifamily Real Estate?
Multifamily real estate is simple: it's any residential property with more than one unit. A duplex qualifies. So does a 200-unit apartment complex.
The defining feature? Multiple families living under one roof (or connected roofs). Each unit generates its own rent check. That's it.
Most people break it down into two categories:
Small multifamily (2-4 units): Duplexes, triplexes, fourplexes. You can usually buy these with a residential mortgage if you're living in one unit.
Large multifamily (5+ units): Apartment buildings, apartment complexes. These require commercial financing and are valued differently than single-family homes.
Why Smart Investors Choose Multifamily Properties
Here's what nobody tells you about single-family rentals: when your tenant moves out, you're at zero income. Full stop.
With a 10-unit building? One vacancy means you're at 90% capacity. You're still collecting rent from nine other units while you find a new tenant.
This isn't theory. It's math.
But the advantages go deeper:
Economies of scale work in your favor. One roof covering ten units costs less per unit than ten separate roofs. One property manager can oversee 50 units easier than managing 50 scattered houses across town.
Banks actually prefer multifamily deals. Why? Because the property's value is based on income, not comparable sales. If you increase the net operating income by improving management or raising rents to market rate, you literally create equity out of thin air.
Your tenants pay down your mortgage. Yes, this happens with any rental property. But with multifamily, you're building equity faster because you have multiple income streams working simultaneously.
The Numbers That Actually Matter
Most investors get lost in the weeds. They obsess over paint colors and granite countertops.
Here's what actually determines if a multifamily deal makes money:
Net Operating Income (NOI): This is your total rental income minus operating expenses. Not mortgage payments, those come later. This number tells you if the property operates profitably before debt service.
Cap Rate: Take your NOI and divide it by the property price. This tells you your return if you paid all cash. A 7% cap rate means a property generating $70,000 in NOI costs $1,000,000.
Cash-on-Cash Return: This is what you actually care about as a leveraged investor. It's your annual cash flow divided by the actual cash you invested (down payment plus closing costs).
I've seen investors get excited about a "great deal" with a 5% cap rate in a market where similar properties trade at 7%. That's not a deal. That's overpaying by 28%.
How Multifamily Properties Get Valued
This is where multifamily investing gets interesting.
Your house is worth what someone will pay for it based on what similar houses sold for. That's it.
Multifamily properties worth over four units? They're valued on income. Specifically, on that NOI number we talked about.
Here's why this matters: Let's say you buy a 20-unit building. Current rents are $800 per unit, but market rate is $900. The previous owner was lazy.
You raise rents to market rate over 12 months. That's an extra $100 per unit, times 20 units, times 12 months. You just added $24,000 to your annual NOI.
If the market cap rate is 6%, you just created $400,000 in property value. From raising rents to what they should have been anyway.
This is called "forced appreciation," and it's why experienced investors love multifamily.
The Real Challenges (Because Nothing's Perfect)
I'm not going to sell you a fantasy. Multifamily investing has real challenges.
The entry cost is higher. You need more capital upfront. A duplex might be accessible, but a 50-unit building? You're looking at hundreds of thousands in down payment, even with financing.
Management is more complex. More units mean more toilets breaking at 2am. More tenant disputes. More maintenance coordination. You need systems or you'll drown.
The learning curve is steeper. You need to understand commercial financing, property management, market analysis, and capital improvements. It's not rocket science, but it's not passive either.
Vacancy and tenant turnover hurt more in absolute dollars. Yes, you're more protected percentage-wise. But losing $50,000 in annual rent from vacancies still stings, even if it's only 10% of your total income.
How to Actually Get Started
Most people overthink this. They read 47 books, take 12 courses, and never buy anything.
Here's the simple path:
Start by analyzing deals. Even if you can't buy yet, look at 100 properties. Run the numbers. You'll develop intuition for what works and what doesn't.
Get your financing lined up. Talk to commercial lenders. Understand what they require. Know your buying power before you fall in love with a property.
Consider starting small. A duplex or triplex lets you learn the game without betting the farm. You can even house hack, live in one unit while renting the others.
Build your team before you need them. Find a good property manager, a responsive contractor, and a commercial real estate agent who specializes in multifamily. These relationships are worth their weight in gold.
Focus on one market. Don't try to invest everywhere. Pick a market, learn it deeply, and become the expert on that area's multifamily properties.
The Bottom Line
Multifamily real estate isn't magic. It's a business that rewards people who do the work, understand the numbers, and play the long game.
Will it make you rich overnight? No. Will it build substantial wealth over 10-20 years while providing monthly cash flow? Absolutely.
The investors I respect most aren't the ones with the fanciest deals. They're the ones who bought their first small multifamily property, learned from it, and kept buying.
Start where you are. Use what you have. Learn as you go.
At Hutfin, we work with investors at every stage of their multifamily journey. Whether you're analyzing your first deal or scaling to your tenth property, the fundamentals stay the same: buy right, manage well, and let time do the heavy lifting.
The best time to start was ten years ago. The second best time is today.
