Multifamily homes can offer extra income, are hard to find on Long Island

Angelica Cocha, an agent with EXP Realty in Hampton Bays, received more than 100 inquiries for a rental house several months ago, leading her to hold an open house, something she had never done.

Low inventory and high demand continue to make it difficult for tenants in the neighborhoods she works in to find rental units, and for investors like her to find multifamily houses to buy and rent out.

Cocha, 39, a resident of East Quogue, immigrated to the United States from Ecuador in 2006, and has specialized in working with Latino buyers and renters for seven years.

"There is a big market for them, and they are investing in rental properties too, not just as first-time homebuyers," she said.

Single-family homes account for 80% of the housing in Suffolk County, and 77% in Nassau, according to census data. That leaves just 20% in Suffolk and 23% in Nassau for all other types — apartment buildings with hundreds of units, two-family houses and everything in between.

In 2021, about 42% of all residential units in the real estate market across the country were multifamily buildings, according to Statista.com, a provider of market and consumer data. That's almost double that of Long Island.

While the Island has far fewer multifamily houses than the rest of the country, real estate investors look to these properties to generate income by renting out the units, often holding on to the properties long term as their values increase.

However, high home values and mortgage interest rates have been preventing investors from buying in the current market, some experts say.

It's really a lot of competition for the tenants. It can be sad.

— Angelica Cocha

Cocha owns several rental properties, including a multifamily house in Flanders that she said she will never sell. She bought the two-unit property in 2019 for $280,000 and although she would like to invest in another, it's practically impossible to find multifamily properties for anyone who wants to buy one in that area.

"When something comes up, investors really jump on it," she said.

She has on occasion encouraged clients renting a two-family house to buy the property as soon as the landlord is willing to sell.

With a strong need for rental units on the East End because of high demand, many workers in Riverhead and Flanders are forced to look for rentals farther west in Shirley and Mastic, Cocha said. "It's really a lot of competition for the tenants," she said. "It can be sad."

While there are some so-called affordable housing units available, "I don't think it's enough," Cocha said. 

'A lucrative business'

Jason Orsini, a real estate agent with Douglas Elliman Real Estate in Plainview, works with many clients who have bought and sold multifamily homes on Long Island. He also owns four multifamily properties, which have nine tenants.

"It can be a lucrative business," he said, adding that he makes more than $80,000 a year before taxes on these properties.

But the current market is tough, said Orsini, 43, of Smithtown.

"To buy a true legal two-family to rent as an investment, the rates are just too high right now; it's not going to make money," Orsini said. "Buyers and investors may have to wait for rates or prices to come down."

Two-family properties on Long Island are selling for between $700,000 and $1 million, depending on condition and location, Orsini said.

"I won't touch anything over $600,000," he said.

To buy a true legal two-family to rent as an investment, the rates are just too high right now; it's not going to make money.

— Jason Orsini

His rental properties are in Levittown, Hicksville, St. James and Wantagh, and if he meets his goals, he'll have 10 rentals by the time he's 50.

"It's always been my dream," he said.

Dawn Serignese, an agent with Daniel Gale Sotheby's International Realty in Port Washington, said part of the drive to invest in multifamily properties is the security, compared to other investments.

"Investors think it's less volatile than the stock market," she said. "They have a little more control over the investment."

Buyers should be armed with information before they jump in, she said. They should know what the maximum rent is that they can charge in their neighborhood, what the expenses are and then pay an appropriate price so they can make money.

Serignese's opinion is that "If they're looking for a secure investment, this is it," adding that she doesn't often see them come onto the market.

Financing these properties is harder than buying a single-family, because most banks require a 25% down payment.

Attractions of passive income

You can only work so much overtime as a nurse, and it's exhausting. With real estate investing, it's passive income.

— Danielle Michelakos

After working as a neonatal intensive care nurse for 22 years, Danielle Michelakos decided last year to add a side gig and become a real estate agent.

"I've always admired real estate investors and flippers," said Michelakos, a 47-year-old single mother from Lynbrook who works at Compass Realty. "There's no ceiling to your income. You can only work so much overtime as a nurse, and it's exhausting. With real estate investing, it's passive income."

When she was 40, she bought her first house — a single-family Cape in Lynbrook — for $419,000 with 20% down. She said she wished she put less down and saved cash for a two-family house.

Michelakos said the risks involved in buying — analyzing the market the property is in, the potential income, the costs of the mortgage, the taxes — are always on her mind.

That's the end game, to buy one and have someone else pay my mortgage.

— Billy Ragona

Billy Ragona, 39, of Elmont, bought his first two houses in 2005 at age 21. One, he bought as a vacation house for $15,000 in Pennsylvania and quickly sold it for about the same price.

The second he bought for $450,000 in North Babylon. He lived there for a while, then allowed family to live there before selling it for a loss a few years later, he said.

Shortly after, he began flipping houses for a living, mostly in Nassau County.

While he typically owns houses for one to two months before selling, if they were multifamily properties, "I would hold on to them," he said.

He plans to buy one eventually, but he's daunted by the prices for multifamily houses right now.

In his future multifamily house, he is aiming to rent it for many years and then live in it when he retires, he said.

"That's the end game, to buy one and have someone else pay my mortgage."