How much can you afford for a multifamily investment? A guide for savvy investors
Did you know that multifamily properties account for nearly 18% of all housing units in the U.S.? These investments can provide a stable source of income and potential for long-term growth. However, determining how much you can afford for a multifamily is key to making a smart investment.
In this guide, we’ll walk through essential steps for evaluating your financial health, calculating affordability, and assessing property value. You’ll also learn about budgeting for extra costs and seeking professional advice. By the end, you’ll be ready to make an informed decision about your multifamily investment.
Why invest in multifamily properties
Multifamily properties offer a great way to diversify your income and build long-term wealth. One of the key questions you may have is, are apartment complexes a profitable investment? The answer often depends on factors like location, market trends, and how well the property is managed—but for many investors, they can provide steady income and future appreciation.
Instead of relying on rent from just one tenant, you’ll have multiple streams, which can really help smooth out your cash flow. For example, if one unit is vacant, the other tenants can still help cover your expenses. This can be a powerful long-term investment strategy, especially if you’re looking to grow your portfolio.
Assessing your financial health
Before jumping into a multifamily investment, it’s essential to get a clear picture of your financial health. A common question investors ask is, how much multifamily can I afford without overstretching my finances? A good rule of thumb: try to ensure you can cover at least 75% of the mortgage with your personal income, leaving tenant rent as a cushion for unexpected expenses.
Lenders might tell you that your rental income will easily cover your mortgage, but be cautious. What happens during vacancy periods or when repair costs spike? It’s always smart to plan for worst-case scenarios—this way, you won’t end up with sleepless nights over unexpected bills.
Calculating affordability
Understanding your financial limits is key to determining how much you can afford for a multifamily property. This involves factoring in your down payment, monthly income, and any existing debts to ensure you’re comfortable with your investment. Here’s a breakdown of what to consider:
Down payment requirement
Most lenders ask for at least a 20% down payment on multifamily properties. For a $500,000 property, that’s a $100,000 down payment. If you can put down more, you may avoid private mortgage insurance (PMI), which will reduce your monthly payments.
Think of this as an upfront investment that gives you a bigger stake in your property from day one. And remember, the larger your down payment, the smaller your loan—and that means less interest paid over time.
Calculate your income and expenses
Take a close look at your personal income and monthly expenses. This should include everything from groceries to your current housing costs. Use this to calculate how much of a monthly mortgage payment you can comfortably afford without feeling stretched too thin.
A good way to organize this is by creating a simple budget:
- Monthly income (salary, bonuses, etc.)
- Monthly expenses (utilities, groceries, debt payments)
- Estimated property expenses (maintenance, taxes, insurance)
Debt-to-income ratio
Your debt-to-income (DTI) ratio is a key number that lenders will consider. Ideally, you want a DTI below 36% for multifamily properties. This means your monthly debt payments (including the mortgage) should not exceed 36% of your gross monthly income. A healthy DTI reassures lenders that you can manage the mortgage alongside your other financial obligations.
Evaluating multifamily property value
Once you’ve set your budget for how much you can afford for a multifamily property, the next step is making sure the property is actually worth what you’re paying for it. You want to make sure that you choose the right property that aligns with your personal purchasing needs. Let’s look at a couple of ways to evaluate the property’s value and its earning potential.
Multifamily property analysis
When evaluating a property, start by comparing it to similar multifamily properties in the area (often called “comps”). Look at recent sales prices, rent prices, and occupancy rates. For instance, if nearby properties have similar features but are priced lower, that’s a red flag that the property you’re eyeing may be overpriced.
Think about how much rent you can reasonably charge and whether the property has the potential for appreciation. This helps you assess whether the property is likely to bring in a good return over time.
Calculate the return on investment for multifamily properties
Your return on investment (ROI) is crucial for determining whether the property will generate profit. To calculate ROI, compare your expected rental income to the total costs of the property (including mortgage, taxes, insurance, and repairs). A solid ROI for multifamily properties often falls between 6% and 12%. Keep this in mind when analyzing potential properties—it’s one of the best indicators of whether your investment will pay off in the long run.
Budgeting for additional costs
Beyond the mortgage, owning a multifamily property comes with extra costs that are easy to overlook. Maintenance, property management fees, and repairs can quickly add up. On top of that, you’ll want to budget for times when a unit is vacant. Keeping a reserve fund of at least three to six months’ worth of expenses can give you peace of mind and help you manage these costs smoothly.
Here’s a helpful list of extra costs to consider:
- Routine maintenance (landscaping, repairs)
- Unexpected repairs (broken HVAC, water damage)
- Property management fees (if you hire a management company)
- Insurance and property taxes
Seek professional advice
When it comes to multifamily investments, getting professional advice can save you both time and money. A real estate advisor or mortgage broker can guide you through the complex process of securing the right loan and evaluating properties. Having an expert in your corner ensures that you make informed decisions, avoid common financial pitfalls, and, most importantly, it will help you understand how much multifamily you can afford.
Manage your multifamily investments with MRI Software
Managing multifamily properties can be challenging, but MRI Software’s multifamily property management tools make it easier. From digital rent payments to streamlined lease signings, our tools are designed to simplify everyday tasks. With our software, landlords can automate essential processes, reduce manual effort, and focus on growing their investment portfolios.
Multifamily software used by the top ten NMHC managers
Take full control of the lead-to-lease process

Trendspotter: Multifamily 2024 Year in Review
In 2024, the multifamily sector witnessed a record number of new deliveries — nearly 30% more than 2023. This new supply, while welcome in a supply-constrained industry, drove some short-term pricing pressure for new leases. Most other metrics …
