Thinking about a 2 to 4 unit property in Bedford Hills or Katonah, but unsure how the numbers and rules pencil out? You are not alone. Small multifamily here can be a smart wealth play, yet returns depend on precise underwriting and compliance with local requirements. In this guide, you will learn how to model ROI, where small multifamily is allowed, what the Town requires, and how to finance and operate with confidence. Let’s dive in.
Quick snapshot: Bedford’s investment profile
Bedford is an upper-tier Westchester market with high purchase prices relative to national norms, strong tenant demand, and meaningful property taxes. That mix often yields mid single-digit cap rates for small multifamily, especially without value-add upside. Regional reports show suburban multifamily cap rates commonly in the 5 to 7 percent range depending on asset quality and rates. You should expect local pressure from high basis costs and taxes, balanced by solid rental demand. GREA’s market insights provide useful context for current cap-rate conditions.
Property taxes are a material line item in Westchester and Bedford. Recent local reporting highlighted increases to typical tax bills, which can directly impact cash flow if not modeled correctly. Review current tax bills and timing using Town resources and local coverage, including The Bedford Citizen’s tax update and the Town’s Tax Rates and Penalty Schedules.
Where small multifamily is allowed
Bedford’s zoning code includes Two-Family (TF), Village Apartment (VA), and Multifamily (MF) districts. Before you underwrite a deal, confirm a parcel’s zoning, density, setbacks, and any special permits. Start with the Town’s Maps and Zoning Regulations page and the zoning code on eCode360. If a property has been converted, verify that the current use is legal or legally nonconforming.
Registration, inspections, and disclosures
The Town of Bedford requires that buildings with two or more rental units register through its CitySquared portal. This includes two-family, multifamily, and mixed-use buildings. Owner-occupied two-unit properties must still register, although they are exempt from the inspection component. See the Town’s Landlord Registration page for steps and fees.
For non-owner-occupied buildings with two or more units, the Town’s Landlord Registry and Rental Property Health & Performance Law requires:
- A third-party Health and Safety Inspection every five years.
- Energy benchmarking and public posting of building health information through the Town’s portal.
- Recertification and fee payment on the same cycle.
Review the program details and FAQs on the Landlord Registry portal so you can plan for inspection windows and benchmarking tools.
If the building was built before 1978, federal lead-based paint disclosure rules apply. Before lease execution, you must disclose known information and provide EPA/HUD guidance. Learn more about the rule on the EPA’s lead disclosure page.
Rent regulation basics in Bedford
New York’s rent stabilization framework under the Emergency Tenant Protection Act applies only where a municipality has adopted it and vacancy criteria are met, and it generally covers larger buildings of a certain vintage. A 2 to 4 unit building in Bedford is typically not within an ETPA category, but you should always verify status with the State and the Town. Use NY Homes and Community Renewal’s overview of rent stabilization and ETPA as a starting point.
ROI math for Bedford Hills and Katonah
Start with a simple framework:
- Gross scheduled rent: total annual market rent for all units.
- Vacancy and credit loss: conservative 4 to 8 percent, often about 5 percent in a tight market.
- Operating expenses, excluding debt: commonly 30 to 50 percent of effective gross income for small buildings, with property taxes a large component in Bedford.
- Net Operating Income (NOI): effective gross income minus operating expenses.
- Cap rate: NOI divided by purchase price.
- Cash-on-cash return: pre-tax cash flow after debt service divided by total cash invested.
Here is an illustrative example from the research to show how the math works:
- Example property: 3 units at a $1,000,000 purchase price.
- Market rents: $3,500, $3,000, $2,500 per month. Gross scheduled rent = $108,000 per year.
- Vacancy at 5 percent. Effective gross income = $102,600.
- Operating expenses at 40 percent of effective gross. Expenses = $41,040.
- NOI = $61,560. Implied cap rate = 6.2 percent.
If you put 25 percent down, your cash-on-cash return depends on actual debt service, which varies by lender and terms. Always plug in current quotes before making an offer.
What moves your returns
- Taxes and assessments: Confirm current bills and any pending changes. A tax increase can erase thin cash flow. See local coverage on tax trends.
- Real, unit-level rents: Use current listings and rent rolls for the subject property. Rents can vary widely by unit size and location within the hamlets.
- Expense structure: Who pays which utilities, condition of major systems, and management fees all matter. For small buildings, professional management often runs 8 to 10 percent of collected rent.
- Value-add: Renovations that raise rents or reduce expenses can shift returns, but you must include cost, timing, and any lead-safe work requirements.
Financing paths for 2 to 4 units
If you plan to live in one unit, FHA and conventional owner-occupied programs can help you qualify and potentially use rental income from the other units.
- FHA allows owner-occupied financing for 2 to 4 units, with county-specific loan limits and occupancy rules. See HUD’s latest update on FHA loan limits.
- Fannie Mae and Freddie Mac permit owner-occupied loans on 2 to 4 unit properties and may allow rental income in qualification under program rules. Review Freddie Mac’s guidance on 2 to 4 unit mortgages.
For non-owner-occupied purchases, options include regional bank portfolio loans and DSCR products. Small-balance agency programs may apply for larger assets, while 2 to 4 units often fit best with single-family lending channels. For broader context on multifamily, see Fannie Mae’s multifamily guide overview.
Due diligence checklist for Bedford
Pre-purchase, verify the following:
- Zoning and use: Confirm the district and whether the current configuration is legal or legally nonconforming. Start with Town maps and zoning and the code on eCode360.
- Landlord Registry status: Check if the building is registered, when the next inspection is due, and whether any compliance letters are outstanding. See Landlord Registry guidance.
- COs and permits: Verify that all units and any additions or alterations have proper permits and a valid certificate of occupancy.
- Tax history: Pull municipal, county, and school tax bills and assess whether any changes are pending. Use Town resources and recent reporting like The Bedford Citizen.
- Rent roll and leases: Obtain leases, security deposit records, and any rent regulation documentation. Confirm market versus in-place rents and verify status with HCR if needed.
- Building condition and lead: Order a full inspection and plan for lead-safe compliance for pre-1978 properties. Review the EPA disclosure rule.
After closing, handle these operational items:
- Register or update the building in the Town portal and schedule the Health and Safety Inspection if applicable. Complete energy benchmarking and public posting as required. Start with the Landlord Registry.
- Insurance: Secure a landlord policy with adequate liability limits and replacement cost coverage.
- Management and reserves: Decide on self-management or a professional manager and set a 5 to 7 year capital plan for roof, HVAC, plumbing, and other major systems.
Pricing, rent, and cap-rate signals to watch
- Pricing: Bedford’s prices are high relative to national averages, which increases your cost basis and impacts returns.
- Rents: The hamlet centers show strong but variable rents by unit size and property type. Use current local listings and the subject property’s rent roll to set assumptions.
- Cap rates: Regional small-multifamily cap rates often fall between 5 and 7 percent, with older or value-add assets trading higher. See GREA’s market insights for directional context and rely on local sales comps for precision.
Next steps
- Build a pro forma using the simple model above. Stress test it for vacancy, taxes, and rate changes.
- Pull local sales comps for 2 to 10 unit buildings to benchmark cap rate and price per unit.
- Request the full tax history and confirm any pending assessments with the Town.
- Get current quotes from lenders that fit your plan, whether owner-occupied or investor.
If you want an investment-literate perspective on where to buy, how to structure, and how to operate within Bedford’s rules, connect with William Martin for discreet, finance-first guidance.
FAQs
Do small multifamily owners in Bedford have to register the property?
- Yes. Buildings with two or more rental units must register through the Town’s portal. Owner-occupied two-unit properties still register, though they are exempt from inspections. See the Town’s Landlord Registration page.
How often are inspections required for non-owner-occupied buildings?
- Most non-owner-occupied buildings with two or more units require a third-party Health and Safety Inspection every five years, plus energy benchmarking and public posting. Review the Town’s Landlord Registry guidance.
Are 2 to 4 unit buildings in Bedford rent stabilized?
- Typically no. ETPA coverage depends on municipal adoption and building characteristics, and it usually targets larger, older buildings. Always verify status with NY HCR and the Town.
What cap rate should I underwrite for Bedford Hills or Katonah?
- Many small multifamily deals underwrite in the mid single digits given high basis costs and taxes. Use local comps for precision and reference regional context from GREA’s market insights.
Which financing options work for an owner-occupant buying a duplex or triplex?
- FHA, Fannie Mae, and Freddie Mac all permit owner-occupied financing on 2 to 4 units, with program rules for using rental income to qualify. See HUD’s update on FHA limits and Freddie Mac’s 2 to 4 unit guidance.
How should I account for taxes and assessments in my pro forma?
- Pull the latest municipal, county, and school tax bills and check for pending changes. Taxes are often the largest expense line in Bedford. Use Town resources and local reporting like The Bedford Citizen to inform your assumptions.
