You'll hear these terms used throughout this site:
Duplex: Residential property with two permitted units Triplex: Residential property with three permitted units Fourplex or Quadplex: Residential property with four permitted units Equity: The difference between the fair market appraised value of your multifamily property and the amount you owe on a mortgage. To calculate simply deduct the mortgage balance from the appraised value. Sweat Equity: The improvement in value of your duplex due to your labor, maintenance and renovations. Cap Rate: Cap (or Capitalization) Rate is the ratio of the net operating income to the market value of a property. The net operating income does not include debt or interest. Gross Rent Multiplier (GRM): The GRM is the ratio of Gross Scheduled Income (GSI) to the market value of the property. This formula does not take any expenses into account - you just divide the market value by the annual rent.
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Let's start with the basics...
Technically you could call any apartment building or condo tower a Multifamily property. But when I refer to "Multifamily" properties on this site I'm specifically talking about residential real estate properties with 2, 3 or 4 permitted living units. A Duplex has two units, a Triplex has three units and a Fourplex (or Quadplex) has four units. These 2-4 unit multifamily properties are popular with investors because if you're approved you can get the same conventional financing on them that you could get with a single family home. If you plan on occupying the property yourself you may even be able to get FHA financing (talk to your lender for more information). |