Buying your first Brooklyn multifamily
Cap rates, rent stabilization and financing for two to four family buildings, from a former lender.
Why small multifamily is popular
Two to four family buildings sit in a sweet spot. They qualify for residential mortgages, including owner-occupied loans with smaller down payments, while producing rental income that can cover a large share of the carrying cost. In neighborhoods like Bushwick, Bed-Stuy and Greenpoint, they are one of the most common entry points for new investors.
Understand the numbers first
Every building we underwrite starts with the same core metrics:
- Gross rent: the total annual rent if every unit is occupied
- Vacancy and credit loss: we usually assume 3% to 5%
- Operating expenses: taxes, insurance, water, repairs, management and reserves
- Net operating income (NOI): gross rent minus vacancy and expenses
- Cap rate: NOI divided by purchase price
- Cash on cash return: annual cash flow after debt service divided by cash invested
Rent stabilization changes value
Buildings with six or more units built before 1974 are generally covered by rent stabilization, and some smaller buildings have stabilized units because of past tax benefits. Stabilized rents can only rise by amounts set by the Rent Guidelines Board, and the 2019 housing law made it very hard to deregulate units.
That means a stabilized unit renting at $1,600 in a neighborhood where market rent is $3,200 will likely stay far below market for years. We audit every lease and check the DHCR registration history before you make an offer.
Violations and certificates of occupancy
Check the certificate of occupancy to confirm the legal number of units. A building sold as a three-family with only a two-family CO can create lending, insurance and legal problems. Open DOB, HPD and ECB violations can also delay closing and add costs.
Financing options
If you will live in one unit, owner-occupied loans may allow lower down payments and better rates. Pure investors often use conventional investment loans with 25% or more down, or DSCR loans that underwrite the property's income rather than your personal income.
Lenders will usually count 75% of documented rental income toward qualifying, so realistic rent estimates matter.
A sample deal
Consider a three-family in Bushwick priced at $1,650,000 (sample figures). Two free-market units rent for $3,300 and $2,900, and the owner occupies the third, which would rent for $3,100. Gross potential rent is about $111,600 a year. After 4% vacancy and $31,000 of expenses, NOI is about $76,000, a cap rate of roughly 4.6%.
Living in one unit, your cash flow looks different: the two rentals cover a large share of a mortgage on a 10% to 20% down payment, and you build equity while paying far less than market rent for your own home.
Questions to ask before you bid
We walk through these on every investment tour:
- What is the legal unit count on the CO?
- Are any units rent stabilized, and are registrations current?
- When were the roof, boiler and electrical last replaced?
- Are leases, deposits and rent ledgers available for review?
- What is the real tax class and assessment trend?
Start with a brief
Our investor services start with a short brief on your target returns, budget and appetite for management. From there we send on and off-market opportunities with an editable underwriting model for each.
Figures in this article are general sample ranges for 2026 and are not legal, tax or financial advice. Confirm with your attorney, accountant or lender.
