If you’re considering purchasing investment real estate for the first time, you might wonder what type of unit to buy. In some cases, a multi-family rental is better than a single-family home—but not always. Here are a few benefits of both types and when to choose one over the other.
Benefits of Single-Family Investment Properties
For most new investors, a single-family property is the best starter option. As you begin to familiarize yourself with the finer details of being a landlord, having only one unit to look after and one set of renters to deal with is usually preferable. Many of the other benefits of purchasing a single-family property include:
- Overall Cost: In general, single-family homes are less expensive to purchase. If this is your first rental property, it might make a big difference.
- Availability: For most markets, finding a single-family home to purchase is much easier.
- Finding Quality Tenants/Rent Prices: Most renters looking for a home have a higher housing budget and are sometimes much more quality tenants.
- Financing: It is often easier to get banks to
finance the purchase of a single-family home.
Benefits of Multi-Family Investment Properties
There are times when purchasing an apartment complex or duplex is the better option overall. Sometimes it is a good idea to jump in and get your feet wet, especially if you come across a great deal or plan to be in the rental business for the long haul. A few of the top reasons to buy a multi-family investment property include:
- Improved Scalability: When you purchase a multi-family investment property, you automatically scale your business to multiple units.
- Reduced Renovation Costs: If you suddenly have to replace the roof on the whole building, you’re replacing the roof for all of the units and not just one.
- Higher Monthly Cashflow: More units mean more tenants paying monthly rent.
- The Ability to Live There: If you
need a place to live while you build your rental business, you can always save
one unit for yourself if you have a multi-family property.
Hiring Help with Your Real Estate Investment Business Decision
Of course, running any sort of rental investment business alone is challenging without having to make such a big decision on your own. That’s why it is important to seek out the advice of a quality property management company. In most cases, they understand the local market well enough to direct you to the option that is most profitable for the neighborhood or zip code you’re considering buying property in, whether that is single-family or multi-family.
Comparing the Two—Is There a Clear Winner?
Now that we’ve talked about both types, it is time to determine a clear winner. The truth? There is none.
The decision to choose between single-family and multi-family properties all comes down to your ability to secure financing, available listings in the area, and your desire to scale your business in a certain timeframe. But, if there is no preference and you are a complete novice, it might be a good idea to start with a single-family property and then move to multi-family buildings a year or two down the road.
Hey, experienced investors. What’s your personal preference—single-family or multi-family units? We would love to hear your response in the comments below.