How Much Money do I Need to Invest in Multifamily Property?

Disclaimer: All mentions of dollar amounts should not be considered quotes. There are so many cost variables in each person’s situation that it’s impossible to get an accurate cash outlay estimate unless you apply with a lender.

The sticking point to investing in real estate is often the same: the upfront cash needed.

And investing in a multifamily property can come with a sizeable price tag.

But it doesn’t have to. Let’s see how much money it actually takes to invest in a multifamily property and different strategies to reduce that number.

How much money do I need upfront to buy a multifamily property?

The amount varies greatly depending on the type of multifamily you’re buying. 

You will need anywhere from 3.5% to 30%+ of the purchase price to close the loan including the down payment, closing costs, and reserves.

But let’s look at how much it would take to buy a 2-4 unit home that you plan to live in with an FHA loan compared to buying a non-owner occupied property or commercial apartment complex.

Owner occupied 2-4 unit (FHA)Non-owner occupied 2-4 unit5+ unit apartment complex
Home price$500,000$500,000$1 million
Down payment $17,500 (3.5%)$125,000 (25%)$200,000 (20%)
Closing costs*$10,000$10,000$25,000
Reserves*$0-$8,500$8,500 (3 months’ payments)$108,000 (18 months)

*Estimates based on generally expected costs. FHA requires 3 months reserves for 3-4 unit properties.

Now you can see why many investors opt for residential property and also live in one unit if they can.

See if you can qualify for a multifamily investment home.

Upfront costs for multifamily property

Here are the types of costs you can expect to pay.

Down payment: The lender will want you to pay a percentage of the purchase price from your own funds. This is typically 3.5% for an FHA loan and 5% down for a conventional 2-4 unit home. 

Closing costs: These costs cover third-party fees like the appraisal, title insurance, credit report, and more. The lender also requires you to prepay some property costs, such as real estate taxes and homeowners insurance.

Cash reserves: After you’ve covered the down payment and closing costs, the lender might require you to have additional cash in reserves. Reserves are measured in months of the full payment. FHA requires no reserves for a duplex and 3 months reserves for a 3-4 unit. Typically you need 3-12 months of reserves for a non-owner-occupied multifamily property purchased with a conventional loan.

For the down payment and closing costs, you need the funds in a checking or savings account, or other liquid (easily used) form. For reserves, it’s okay to keep the money invested in stocks, bonds, and retirement accounts. The lender just wants to know that you can access the funds in an emergency.

The type of property matters most for how much money you need

The best strategy to keep upfront costs low is to buy a residential (2-4 unit) multifamily property and live in one unit.

With this strategy, you’re eligible for as little as 3.5% down with an FHA loan. If you have current or former military service, you could also use a VA loan to buy a property with zero down.

If you buy a “non-owner-occupied” multifamily property – one you don’t plan to live in – you’ll need 20-25% down for both residential and commercial properties.

Related: Single Family vs Multifamily Home Purchase Calculator

Strategies to invest in multifamily property with little upfront cash

Here’s how to keep your initial cost outlay to a minimum.

House hack: As mentioned, your down payment and reserve requirements are much lower when you purchase a residential 2-4 unit home using an FHA loan. You have to live in the home for 12 months, then you can convert the entire property into a rental.

Ask the seller for closing cost help: The seller can contribute funds toward your down payment, typically up to 6% of the sales price (with FHA). A motivated seller could realistically kick in $10,000 from their proceeds to cover your closing costs.

Get a down payment gift: FHA loans and some conventional loans allow you to receive gift funds for owner-occupied purchases. Relatives and other eligible donors just have to complete a gift letter and issue you the funds.

Find a run-down property: Competition is fierce for quality multifamily homes. But with FHA, you can find a property no one else wants so you can make a low offer. Buy and repair a home with one loan using the 203k rehab program. Do light remodel work or major renovations to bring the property up to standards and increase rent potential.

Use your military service: Eligible current and former military veterans can buy a property up to 4 units with zero down using a VA loan.

Seller financing: In rare cases, a motivated seller might agree to carry the loan. This is most common with commercial apartment complexes, but possible with residential as well. Because seller financing doesn’t come with any pre-set rules, you can negotiate things like down payment and closing costs.

How much money to do need to invest in multifamily property?

To buy a $500,000 multifamily property with an FHA loan at 3.5% down, you would need $27,500-$36,000 to cover the down payment, closing costs, and reserves.

Where can the money come from to invest in multifamily property?

You can use checking, savings, investment accounts, sale of other property, and in some cases, gift funds and seller closing cost credits.

Bottom line: Multifamily takes more money than single-family

When you’re buying a single-family home to live in, it’s not hard to buy with almost no money out-of-pocket. It’s a little tougher with multifamily. 

Still, you can get into a good multifamily investment for relatively little money upfront by knowing the strategies that work.

Start your multifamily investment purchase.


  • Tim Lucas

    Tim Lucas (NMLS 118763) has 20 years of hands-on mortgage industry experience helping everyone from first-time buyers to experienced investors. He purchased his first home at 26 with just $1,100 out-of-pocket and now owns real estate worth $2.4 million. Tim was the managing editor at national websites and and has been featured in publications such as Time, U.S. News, MSN, and more. He is a licensed loan originator (NMLS 118763). Connect with Tim on LinkedIn, Twitter, and TikTok.