Multifamily refers to any building that is divided into multiple housing units. That can include duplexes, fourplexes, townhomes, and apartments. Multifamily housing represents one of the largest real estate markets in the world. When it comes to investing in housing through the financial markets or crowdfunding sites, multifamily typically refers to investing in apartment projects.
Multifamily investments represent the largest segment of commercial real estate investments. As a percentage of total commercial investments, the multifamily sector continues to grow. Nearly 45% of all commercial investments are in multifamily, and that percentage has been growing. (source
Statista.com)
Multifamily is considered a "defensive investment" by many investors. Defensive investments are those that protect against unpredictable market fluctuations that can lead to losses (source
Investopedia). Compared to other types of commercial investments, multifamily has the lowest historic vacancy rates and highest valuations based on capitalization rates (source
NAR). With rent rates that typically rise when inflation increases, multifamily is also often seen as a hedge against inflation (source
Forbes).
Since multifamily is a residential product that shares features with single-family homes, many investors are more comfortable understanding the dynamics of a multifamily investment. Cash flow comes primarily from rents, which are typically steady and predictable, assuming that the property is well managed. Unlike direct investment in single-family rentals, multifamily allows investors to have passive investments in housing - ownership without the responsibility of property management. Crowdfunding provides investors with access to larger multifamily investment options, which can sometimes offer greater stability and larger returns due to economies of scale.