Purchasing a rental property is hard, especially if you have to decide between a Single-Family or Multi-Family Unit! Make sure you follow these tips!
Many first-time real estate investors struggle with the question of investing in a single-family home or going all out and purchasing a multi-unit property, whether it be a townhouse, condominium, or entire apartment building. Each option comes with its own set of positives and negatives, and it tends to be a hot-button issue with proponents screaming the benefits of each. In general, there’s no definitive answer—it depends on individual circumstances and desires. If you’re struggling with this decision, check out the positive aspects of single-family and multi-unit options and determine which best suits your financial and business aims.
The Positives of a Single-Family Home Investment
When you invest in a single-family home, you’re likely looking for affordability. It is much easier to secure the finance for homes such as these, as in general, they’re cheaper than say an entire apartment building would be. Should you need a bit of help financing, look into real estate loans from New American Funding. It’s also much easier to find single-family residences under market value, depending on the state of the economy and the housing market when you’re shopping around.
Single-family homes require less maintenance, and as such, repair costs are much lower in terms of money and time. Generally, renting to single-family home tenants will see the tenant taking responsibility when it comes to home care, be it yardwork or what have you. If you plan on managing your apartment or home yourself, you’ll have a much easier time with a single-family purchase.
The tenants will pay the utilities, usually have a greater sense of home (which generally lends itself to a tenant taking better care of the property), and you’ll find yourself securing long-term tenants on a more regular basis than you would with apartment complexes. To make this a reality, always use a certified screening service. Newer landlords tend to make the mistake of ignoring this important process, so check out something like SmartMove services here; you’ll get every bit of information you need, be it credit score or criminal history.
One final, very important aspect of single-family homes to note is their ability to appreciate at an exponentially higher rate than multi-family units.
The Positives of a Multi-Family Unit
Depending on the area, multi-family properties can see higher returns than a single-family unit would, especially in metropolitan areas like San Francisco or New York. In general, multi-family units also receive more income based on simple math—more units means more tenants, which translates to a plethora of rent checks each month.
With a single-family home, one rent check is all you have to count on; should the tenant move out, you’ll be out of income for the month. In contrast, multi-unit properties mean a diversified income. Consider a four apartment complex: should one tenant move out, you’ll have three other rent checks coming in that month, which could translate to fewer money problems and a decrease in your stress levels. This reliability is very appealing to many real estate investors.
While more maintenance is required with multi-family residences, the average cost of providing this maintenance is usually less than in single-family properties. Shared spaces mean singular repairs, whether it be fixing the roof, fixing a burst pipe, or any other common household issue that should arise. You’ll also be able to find bulk materials to save you money in the long run; for example, if one tenant’s carpets need an update, it’s likely the rest do too, so you can find deals on bulk orders.
If you’re looking for a more hands-off investment, multi-family units are the way to go. It’s cheaper to hire property management services for multiple units, and the rates at which you’ll need to pay them for their efforts are lower than they would be for a single-family home or a collection of single-family homes.
Choosing between single-family and multi-family real estate investments requires looking at your own financial situation and degree of involvement you plan on investing. Take these positives into consideration and choose what fits your business aims best.
Are you considering buying a rental property? Would you choose a Single-Family or Multi-Family Unit? Let us know below…