Most investors who choose flipping houses as an investment technique concentrate their attention on single-family houses. This is the most popular type of home and the easiest to sell or rent in today's marketplace. However, many properties with income potential are also viable candidates for flipping.

Multi-family units are considered properties with income potential. They appreciate in value, like single-family homes, but they also generate cash flow from rent paid by tenants. Some examples of properties with income potential are duplexes and triplexes (when sold as one unit), a house containing a separate apartment or a room for rent, or a home with a guest house.

Investing in this type of property may be a good way to go if you're planning to live in one of the units for two years in order to receive the two-year capital gains tax break. If you make the house your primary residence for two years, you're allowed to pay no tax on up to $500,000 of profit per couple (or $250,000 if you're single). That's a very nice incentive for the average person.

Furthermore, the advantage of living for two years in a multi-family unit (as opposed to a single-family dwelling) is that you can use the rental income from the other unit to help cover your carrying costs. Potential buyers for your flip will also see the advantages of the rental income.

If you intend to flip the property in a short time rather than live there, you face the expense and organizational challenges of renovating two units at the same time - two heating systems to upgrade, two bathrooms to fix up, two kitchens to modernize, etc. Of course you won't want tenants in the unit while the work is in progress. And if you take in tenants immediately after the renovations, you don't have the flexibility of selling a vacant property. However, a quick fix-up and sale of the property is still quite feasible if you are prepared for these complications.

Before committing to the purchase of a multi-family dwelling, you must check that the building conforms to all zoning ordinances and classifications. Each unit should also have its own utility meters. Make sure there is adequate parking for the number of tenants. Buildings with three-bedroom, two-bathroom units are generally more desirable investments than buildings with smaller one or two bedroom units. The large units attract families, who tend to stay in one place longer than single persons. This in turn makes the property more attractive from a potential landlord's point of view.

You may find it easier to pick up a multi-family property for a bargain price because there will be less competition from the average home buyer. Even if a property isn't currently on the market, you can approach the owner and tactfully inquire about his interest in selling. Some owners of multi-family properties tire of being landlords and may be in the right frame of mind to consider your offer.

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