Specialist · North Kansas City, MO · Member since 2015 · 17 posts · 6 votes
I have always considered Multi-Family to be an asset class of Commercial Real Estate... But I see more and more Investors who consider Multi-Family to be neither Residential or Commercial - something of its own. It also seems that some consider Multi-Family to be the gateway between the two - a way to transition into Commercial Real Estate.
Real Estate Investor · Encinitas, CA · Member since 2016 · 3k+ posts · 3k+ votes
8y
@Jolene Desmond Most of it boils down to <5 vs. 5+ units. It impacts how the property is appraisal (i.e. valuation) and materially changes the terms for financing. Not to mention that in one you can "house hack" and in the other you can't. That said, while I own commercial *multifamily* real estate I've never considered it as "a way to transition into Commercial Real Estate". If, but "commercial" you mean things like office, retail, medical, industrial, etc. space. That's really a different animal (to me) where you have to look at things like ceiling height and loading bays for industrial. If you're doing retail you have to look at car-counts. People that deal with strip malls have to look at things like anchor tenants, what you have to do to get them, leasing commissions, etc. It's all just a different world (to me) than commercial multifamily. But that's me...
Real Estate Investor · Encinitas, CA · Member since 2016 · 3k+ posts · 3k+ votes
8y
@Jolene Desmond Most of it boils down to <5 vs. 5+ units. It impacts how the property is appraisal (i.e. valuation) and materially changes the terms for financing. Not to mention that in one you can "house hack" and in the other you can't. That said, while I own commercial *multifamily* real estate I've never considered it as "a way to transition into Commercial Real Estate". If, but "commercial" you mean things like office, retail, medical, industrial, etc. space. That's really a different animal (to me) where you have to look at things like ceiling height and loading bays for industrial. If you're doing retail you have to look at car-counts. People that deal with strip malls have to look at things like anchor tenants, what you have to do to get them, leasing commissions, etc. It's all just a different world (to me) than commercial multifamily. But that's me...
Developer · Houston, TX · Member since 2015 · 1k+ posts · 1k+ votes
8y
I don't think most investors consider multifamily as a transitional asset while they gear up for the other commercial classes.
What I will agree with is that multifamily is a commercial asset class that is easier for most people to understand as opposed to industrial, office, etc. Most people have lived in apartments so have a general idea of what it entails and what should be done to run it properly. While most people have worked in an office or shopped in a mall/shopping strip, they have no idea of the backend details so it's still a daunting asset class to consider getting into.
Rental Property Investor · Toronto ON, Canada · Member since 2015 · 58 posts · 11 votes
8y
For my properties, apartments buildings that are more than 6 units "enjoys" commercial rate, meaning higher rate for insurance, property tax. Besides that, it has no difference than apartment buildings with 6 or less units (residential).
We have commercial units for leasing as well, I felt a lot different than leasing a residential unit, longer vacancy between tenants, different landlord and tenant regulation, and need to consider customer traffic for those commercial tenants. We just agreed to merge 2 commercial units to create space for one commercial tenant, and plan to do renovations to fulfill the new tenants' needs. Of course the new tenant cover part of the cost for renovation.
Investor · Austin, TX · Member since 2013 · 933 posts · 1k+ votes
8y
Jolene,
Agree w/@Michael Le that its definitely a commercial asset class. I have been involved in syndicating apartments and self storage / mobile home parks. It would seem that folks understand things they have participated in more often and understand. Apartments are a very mainstream and core alternative real estate asset holding IMO. I have actually worked with investors on two deals at once and was testing the interest in both which were attractive opportunities and had similar return characteristics. For every $4 of investment money, $3 went into MF vs $1 into SS/MHPs. I would gather that it takes more education and experiences that investors have not had w/the SS/MHP asset classes. That may change over time as expose them to more of these types of deals but from a syndicate standpoint that is my experience.
Rental Property Investor · Honolulu, HAWAII (HI) · Member since 2011 · 4k+ posts · 2k+ votes
8y
A thought I had is the MFh is easier for investors to get to maybe it is a easier to find investors. As you grow and a lead investor to commercial and other exotic investments you investor base will strengthen and move with you to new ventures.
Manassas, VA · Member since 2013 · 60 posts · 24 votes
8y
My understanding is the only reason to differentiate MFH and other commercial investing is the subspecialty knowledge. The valuation of commercial in general vs. SFH is basically the differentiation you are asking about?
Full time investor · Cincinnati, OH · Member since 2013 · 405 posts · 312 votes
8y
I went from a 15 year career in IT to mixed use to retail to single family to strip mall to land development to office etc. The first one was multi-family over retail and that led me to focus on commercial.