The Pros & Cons of Investing in Small vs. Large Multifamily Properties

Investing in multifamily real estate is a powerful way to build wealth, generate passive income, and scale your portfolio. However, choosing between small multifamily properties (2-20 units) and large multifamily properties (50+ units) can be a tough decision. Both options come with their own set of benefits and challenges, and the right choice depends on your investment goals, experience level, and financial resources.

Let’s break down the pros and cons of each to help you make an informed decision.

Small Multifamily Properties (2-20 Units)

✅ Pros of Small Multifamily Investments

1. Lower Barrier to Entry – Small multifamily properties require less capital upfront, making them accessible for beginner investors. Financing is often easier with residential loans (for 2-4 units) or small commercial loans (for 5+ units).

2. Easier to Self-Manage – With fewer units, investors can handle property management without hiring a third party, saving money on fees.

3. Faster Exit Strategies – Smaller properties can be sold to both investors and owner-occupants, providing more flexibility when it’s time to exit.

4. Potential for Higher Appreciation – Duplexes, triplexes, and fourplexes often appreciate based on comparable home sales, not just income, making them attractive in strong housing markets.

❌ Cons of Small Multifamily Investments

1. Limited Cash Flow – Fewer units mean less rental income, making it harder to generate significant profits, especially if vacancies occur.

2. Less Economies of Scale – Maintenance and repair costs per unit can be higher, as expenses aren't spread across a larger number of units.

3. Greater Vacancy Risk – If a duplex has one vacant unit, you lose 50% of your rental income, whereas a large property can absorb vacancies more easily.

4. Tougher to Scale – Growing a portfolio requires buying multiple small properties, which can be more time-consuming than acquiring a single large multifamily asset.

Large Multifamily Properties (50+ Units)

✅ Pros of Large Multifamily Investments

1. Stronger Cash Flow – With more units, income is higher, and vacancies have less impact on overall revenue.

2. Economies of Scale – Costs for maintenance, property management, and renovations are spread across multiple units, reducing expenses per unit.

3. Professional Management – Larger properties generate enough revenue to justify hiring a property management company, making them more passive for investors.

4. Better Financing Options – Large apartment complexes often qualify for Fannie Mae, Freddie Mac, and commercial loans, which can have better terms and lower interest rates.

5. Appreciation Based on Income – Unlike small properties, which rely on market comps, large multifamily properties appreciate based on NOI (Net Operating Income), giving investors more control over value growth.

❌ Cons of Large Multifamily Investments

1. Higher Initial Investment – Large properties require significant capital upfront, often necessitating syndication or joint ventures.

2. More Competition – Institutional investors and experienced syndicators actively seek large apartment deals, making it harder for individual investors to compete.

3. Longer Sale Process – Selling a large multifamily property takes longer because the buyer pool is mostly investors, not individual homebuyers.

4. Operational Complexity – Managing a large property involves more tenants, maintenance, and compliance requirements, making professional management essential.

Which Investment is Right for You?

👉 Choose Small Multifamily If:

✔️ You’re a new investor looking for a lower-cost entry point
✔️ You want to self-manage to maximize profits
✔️ You prefer more flexibility with financing and exit strategies
✔️ You’re comfortable with slower scaling

👉 Choose Large Multifamily If:

✔️ You want higher cash flow and greater economies of scale
✔️ You have access to significant capital or syndication partnerships
✔️ You prefer a more passive role by hiring a property manager
✔️ You want to scale quickly in multifamily investing

Both small and large multifamily properties offer strong wealth-building opportunities—it all depends on your investment strategy.

💬 Which type of multifamily investing appeals to you?