Real estate investors are increasingly turning their attention to multifamily properties, such as duplexes and triplexes, in 2025. This shift comes as single-family home investments become less viable due to rising prices and interest rates, pushing investors towards properties that offer better cash flow and financial stability.
Key Takeaways
- Multifamily properties are gaining popularity among real estate investors for their superior cash flow.
- Owner-occupied financing and 'house hacking' strategies make these investments accessible to new buyers.
- Properties with three or more units often provide better cap rates and economies of scale.
- The strategy helps offset mortgage payments, allowing investors to save more for future properties.
Shifting Investment Landscape Favors Multifamily Homes
The real estate market has seen significant changes in recent years. Prices and interest rates have soared in many areas, making traditional single-family rentals less attractive for investors seeking strong returns. This environment is driving a clear trend towards multifamily properties.
Josh and Ali Lupo, who invest in upstate New York, have witnessed this change firsthand. They explained that properties which once made sense as long-term single-family rentals no longer work financially. Their own journey to financial independence was partly fueled by their multifamily portfolio.
Market Shift
Prices and interest rates have approximately doubled in many markets over the last four to five years, impacting investment strategies.
The 'Triple-Headed Monster' Advantage
Massachusetts-based real estate investor and agent Dana Bull refers to multifamily properties as "triple-headed monsters." This term highlights the three major financial benefits these investments offer: acquisition discounts, economies of scale, and enhanced cash flow.
Consider the maintenance costs. If an investor owns a three-family home, they only have one roof to replace, one driveway to clear, and shared hallways to maintain. This significantly reduces expenses compared to managing three separate single-family homes.
"If you buy a three-family, when the roof goes out, you only have one roof to replace. You have one driveway to shovel. You have the shared hallways to take care of."
— Dana Bull, Real Estate Investor and Agent
Scaling Up for Better Returns
Childhood friends Connor Swofford and Pieter Louw began investing in real estate together in 2024. They quickly expanded their portfolio to over 20 units in Buffalo by focusing on multifamily properties. While they started with duplexes, they now prefer larger properties with at least three units.
Louw noted that the cash flow and cap rates are considerably better with larger multifamily buildings in their market. This makes them a more lucrative and secure investment over time.
What is a Cap Rate?
A capitalization rate (cap rate) is a ratio used to estimate the profitability of income-generating real estate investments. It measures the rate of return on the property based on the expected net operating income.
Accessible Entry with Owner-Occupied Financing
Investing in multifamily properties is not just for experienced individuals. Dana Bull views it as an excellent entry-level approach for new investors. Duplexes, triplexes, and fourplexes fall under residential real estate, allowing buyers to use residential loans.
These loans often include low down-payment programs, especially if the buyer intends to occupy one of the units. This strategy is incredibly powerful for those without significant savings.
Mike Newton used this method to buy his first property, a $450,000 duplex near Seattle, in 2018. He did not have the 20% down payment typically required for investment properties. By planning to live in half of the duplex, he secured owner-occupied financing with only a 5% down payment.
The 'House Hacking' Strategy
After closing on his duplex, Newton moved into one unit. The other unit already had a tenant, providing immediate cash flow. He also found a roommate for his own unit. The rent from these two tenants covered most of his monthly mortgage payment.
This strategy, known as "house hacking," allowed Newton to save more money for his next property. He has since expanded his portfolio to over 10 units. Newton believes house hacking is one of the safest ways to begin real estate investing.
- Offset Mortgage: Renting out part of your primary residence can significantly reduce or eliminate your mortgage payment.
- Low Risk: It offers a relatively low-risk way to experience being a landlord and managing tenants.
- Build Equity: Tenants help pay down the mortgage, building your equity faster.
Finding Multifamily Opportunities and Creative Solutions
Not all markets have an abundance of multifamily properties. The New England market, for example, has a large inventory of these buildings. Bull explained that many were built in the late 1800s and early 1900s to house people economically in areas near cities like Boston.
If multifamily properties are scarce in a particular area, investors can still employ creative house hacking strategies with single-family homes. This might involve adding an Accessory Dwelling Unit (ADU) or converting an unfinished basement into a rentable space.
Another option, as Mike Newton demonstrated, is to simply find a roommate for a portion of your living space. The core idea remains the same: leverage your property so that others contribute to paying down your mortgage, thereby accelerating your path to financial growth.
