You're about to buy your first apartment building.
It has five units. It looks almost identical to the fourplex you purchased a few years ago.
Same neighborhood.
Same type of tenants.
Same investment strategy.
Except for one important difference.
What Changes When You Cross Five Units
Here's what makes a multifamily property inspection for more than four units different:
Crossing from four units to five changes far more than the property classification. It changes your financing structure.
And that change requires a different level of due diligence - which in turn changes how we approach your inspection. Overlooking those differences can leave you facing costly surprises after closing.
I'm Scott Frakes, owner of Michigan Commercial Inspections, LLC. As a Certified Master Inspector® (CMI®), CCPIA®-certified commercial property inspector, and Michigan licensed builder since 1997, I've spent years helping investors evaluate commercial buildings throughout Michigan. One of the most common surprises I see is buyers discovering—after they've made an offer—that purchasing a five-unit apartment building is nothing like buying a house.
This guide explains what a multifamily property inspection includes, how commercial inspections differ from residential inspections, what affects pricing and scheduling, and why understanding the five-unit threshold can help you make a more confident investment decision.
Key Takeaways
- Buildings with five or more units are generally classified as commercial property.
- Commercial inspections evaluate an income-producing asset—not just a building.
- Understanding the remaining useful life of major systems can help you budget future capital expenses.
- Tenant access often affects inspection scheduling, so book early during your due diligence period.
- A thorough commercial inspection can strengthen negotiations and reduce unexpected ownership costs.
How many units is considered commercial property in Michigan?
Five or more.
Buildings with one to four units—duplexes, triplexes, and fourplexes—are generally treated as residential real estate. Once a building contains five units or more, it's typically considered commercial property.
The distinction is far more than just paperwork.
Residential financing looks primarily at you: your income, credit score, and debt-to-income ratio.
Commercial financing looks primarily at the property itself—its income, operating expenses, and physical condition. Lenders underwriting a commercial loan often care more about the remaining life of the roof than your personal credit score.
Two exceptions often surprise buyers:
- A mixed-use building with ground-floor retail may be treated as commercial even if it contains fewer than five residential units.
- Federal lending guidelines generally limit borrowers to ten financed residential properties before commercial financing becomes necessary. So if you have a lot of investment properties, even a single-family home could be treated as a commercial unit.
Is a five-unit building considered commercial?
Yes.
A five-unit building sits on the commercial side of the line, even if it looks almost identical to the fourplex next door.
This is where I see many first-time commercial investors caught off guard. Buyers who have successfully purchased duplexes or fourplexes often assume the next step follows the same process.
It doesn't.
A multi-unit inspection becomes much more focused on evaluating the property as an investment asset rather than simply determining whether it's in good condition.
What does a multifamily property inspection include?
A multifamily property inspection evaluates the building systems serving the property as a whole, along with a representative sample of individual units.
Typical inspection components include:
- Roof and building envelope
- Structure and foundation
- Electrical service and distribution
- Heating and cooling systems
- Plumbing supply and waste systems
- Water heaters
- Common areas
- Mechanical rooms
- Site drainage and paving
- Exterior stairs and walkways
- Life safety systems, including egress, handrails, smoke alarms, and carbon monoxide detection
On a residential inspection, I might evaluate one furnace and one water heater.
On a multifamily property, I may be evaluating eight water heaters, multiple furnaces or boilers, several electrical panels, and building systems that serve dozens of occupants.
The question shifts from "Does this work?" to "How much useful life remains, and what will replacement cost the owner?"
What's the difference between a residential and a multifamily inspection?
Scope—and purpose.
- A residential investment property inspection focuses primarily on determining whether a home is in sound condition.
- A multifamily property inspection is designed to help buyers understand what the building will cost to own over time.
Condition findings still matter. But equally important is understanding the remaining useful life of expensive building components so you can anticipate future capital expenditures and negotiate accordingly.
A twelve-year-old roof isn't necessarily a defect. It's a number that belongs in your investment model.
Commercial inspections performed by Michigan Commercial Inspections, LLC follow the CCPIA Standards of Practice, which are specifically designed for commercial properties rather than single-family homes.
Residential vs. Commercial Multifamily Inspections
| Residential (1–4 Units) | Commercial (5+ Units) |
| Residential financing | Commercial financing |
| Focus on home condition | Focus on investment performance |
| Residential inspection standards | CCPIA commercial standards |
| Buyer qualifications emphasized | Property income emphasized |
| Individual systems evaluated | Multiple building systems evaluated |
| Repair recommendations | Capital planning & remaining useful life |
How long does a multifamily inspection take?
Longer than a residential inspection—and the timeline generally increases with the size and complexity of the property.
- A small apartment building may require only half a day.
- A twenty-unit property often requires a full day or longer.
- Large apartment complexes may take multiple days.
In many cases, coordinating tenant access—not the inspection itself—is the greatest scheduling challenge.
If you're working within a due diligence period, schedule your inspection as soon as your offer is accepted rather than waiting until the last minute.
Can tenants remain in the building during the inspection?
Yes.
Most multifamily inspections are completed while the property remains occupied. However, inspectors need access to representative units as well as common mechanical areas.
Coordinating access early helps avoid scheduling delays and ensures enough time to complete the inspection before your due diligence period expires.
How much does a multifamily property inspection cost?
Every property is different.
Pricing depends on factors including:
- Number of units
- Square footage
- Building age
- Number and complexity of mechanical systems
- Accessibility
Rather than offering flat-rate pricing that may not fit your property, I provide customized quotes based on the building you're purchasing.
Compared with the overall purchase price of a multifamily property, the inspection is one of the smallest investments you'll make—and often one of the most valuable.
Discovering deferred maintenance or upcoming capital expenses before closing can easily save many times the cost of the inspection.
Call or text 989-370-3039 and tell me about your property. I'll provide a personalized quote.
What Northern Michigan investment property buyers should watch for
Northern Michigan's climate is demanding on commercial buildings.
Freeze-thaw cycles stress foundations and pavement.
Ice dams repeatedly damage roofing systems.
Long heating seasons place heavy demands on furnaces, boilers, and water heaters.
Many apartment buildings in Gaylord, Traverse City, Saginaw, and surrounding communities also contain a mix of original and updated building systems. Knowing which systems are nearing replacement—and which still have years of dependable service remaining—is one of the most valuable outcomes of a commercial inspection.
Inspector's Notes
One pattern I see repeatedly in northern Michigan apartment buildings is uneven maintenance.
An owner replaces the boiler after it fails but leaves the original galvanized plumbing in place. Half the roof is replaced following storm damage while the remaining section quietly approaches the end of its service life. HVAC equipment may be upgraded one unit at a time over several years, leaving a building with systems of widely varying ages.
None of these issues automatically make a property a poor investment.
But they do change your capital planning.
Knowing which systems are likely to require attention over the next five to ten years allows you to budget appropriately, negotiate more effectively, and avoid unpleasant surprises after closing.
That's the kind of information a commercial multifamily property inspection is designed to provide.
Before You Close
Multifamily properties can be outstanding long-term investments—but only when you understand exactly what you're buying.
Before closing:
- Make sure you know which side of the five-unit threshold your property falls on.
- Schedule your inspection early enough to accommodate tenant access.
- And, work with an inspector who evaluates not only today's condition but tomorrow's ownership costs.
A comprehensive commercial inspection helps you move beyond appearances and evaluate the building as the income-producing asset it is. Understanding deferred maintenance, remaining useful life, and future capital expenses gives you the confidence to negotiate wisely and invest strategically.
Michigan Commercial Inspections proudly serves Gaylord, Traverse City, Petoskey, Grand Rapids, Lansing, Muskegon, Saginaw, and communities throughout Michigan's Lower Peninsula.
Call 989-370-3039 to discuss your property or request a customized inspection quote.
Scott Frakes, CMI®, is the owner of Michigan Commercial Inspections, LLC, a division of North Point Home & Property Inspections, LLC. A Certified Master Inspector® and CCPIA®-certified commercial property inspector, Scott serves investors, business owners, and commercial real estate professionals throughout Michigan.