While most multi family properties are designed to allow the peaceful coexistence of many families within their separate units, some apartments and houses give you the feeling that youre actually living in one big family. Things like sharing one washer and dryer between five families means you never know whose underwear youll have to fish out of the washer before you start your own laundry. And a shared water heater means that now theres an incentive to early morning classes. Catching the Cosby Show every night at seven through your living room wall keeps you conveniently updated on the latest goings-on in the Huxtable home.

While living in multi family housing may not be an ideal situation for some tenants, it can be a way to wealth for the person collecting the rent. My own landlord, also currently a college student, manages several properties for his wealthy, out-of-state family, collecting a handsome property managers fee in the process. Sure he had to evict the people upstairs, replace the roof, renovate the unit next door, and perform other sundry tasks, but at the end of the month, hes got another $2500 in the bank.

One time while he was fixing a clogged drain at our place I asked him how his family got to be so successful in the multi family investment property business. He told me that his family hadnt always been the housing barons they are today; after scraping together everything they had, even borrowing from extended family, they still had to take out a substantial loan from a local bank. With this they bought their first multi family property-an old duplex three blocks from the university. Although the location was great, being as close to campus as it was, the purchase had depleted the familys financial resources to the point were they had to move into the property while renting out the other half. From this experience, my landlords family gained some useful insight into multi family apartment financing.

Several weeks later I had the opportunity to speak with my landlords father, the owner of the property my wife and I were currently living in. While enquiring about his investment property business I learned a little about multi family investment property financing. According to him, most lenders will only provide financing for multi family dwellings of five units or more, with a minimum loan amount of $500,000. Apparently it isnt worth a lenders time to finance smaller investments.

Most multi family or apartment loans have a thirty-year term with interest rates ranging from 4.7% to 6.625% for loans up to $3 million. I learned that most of the time these smaller loans carry a little higher interest than loans exceeding $3 million and are termed as recourse loans; in other words, if you default on the loan the lender may take recourse by seizing your private assets. Loans in excess of $3 million are termed as non-recourse, meaning private assets are protected in the event of a borrower default. In addition, most lenders offer basic options like fixed and adjustable rate loans.

In the final analysis, the key to the success of this family in the multi family investment property market wasnt the way they quickly handled tenant complaints or provided decent amenities; these things merely kept them in business. The reason for their success was a thorough understanding of investment property financing gained from years of research, experience, and trial and error.