For today’s rental real estate investors, opportunity comes in a huge variety of properties. If you’ve been reviewing whether to invest in multi-family or single-family rental homes, it’s important to note that there are both pros and cons for both. Usually, investing in rental real estate offers strong long-term profitability and relatively low risk. Lots of Hansen rental real estate investors specialize in one particular property type for a reason.
It takes time and effort to achieve the necessary expertise to identify when you’ve found a great property at the right price. But if you need to make a choice or are looking to expand your real estate portfolio, first take a closer look at what both multi-family and single-family rentals have to offer.
When deciding on a particular property type, there are many things you’ll need to figure out before even starting your property search. For instance, you will need to explore whether you will be able to facilitate the financing you need, whether you have the ideal investment team on the project, and which property best matches your particular business acumen and investing style.
Many investors start by investing in single-family homes for a reason. Although they may not necessarily be “easier” to buy, they can be less challenging for investors who are just starting. Arranging to finance a single-family residence is a relatively simple task that many investors are already comfortable with. Moreover, understanding the basics by managing just one property and one tenant can help new investors ease into the flow without devolving into frustration. There is a lot to learn about buying and managing rental real estate, irrespective of what sort of property you select.
On the other hand, investors can quickly jump into real estate investing by buying a multi-family property as a single-family rental. There will be more research required, and financing is quite challenging. But with multiple tenants, you can hope for multiple streams of income to balance the higher expenses. While all multi-family properties can produce steady income and higher profits, the smaller multi-family properties, such as duplexes or triplexes, can hold great potential for rental property investors looking to branch out. Properties with four units or fewer can also be financed using conventional mortgages, making them more manageable in that way.
Some financiers prefer to put money in single-family properties rather than multi-family properties because they appear to have a more reliable appreciation and fewer challenges. Under ordinary operations, both kinds of properties appreciate over time. But calculating expected appreciation on a multi-family property can be a bit more demanding than a single-family property.
This is also applies to property management, including leasing and tenant relations. The more tenants you serve, the more time and effort it will require to communicate well with everyone, perform routine property evaluations, and achieve daily property maintenance. If you recruit a professional property manager, you may be able to get a reduced rate for a multi-family property. But the dollar amount you will end up paying will be higher since that percentage is usually based on the number of tenants you have, not your total rental income.
Finally, it’s vital to factor your exit strategy into your real estate investing decisions. When it comes time to sell your rental properties, single-family homes are easier to sell. This is because demand appears to be higher for single-family homes, and rising competition implies a better sales price for you. In contrast, selling a multi-family property can take longer and be much more challenging to set up, simply because you are limited to investors looking for multi-family properties. Since they are investors, they will be much more eager to disregard your property if it’s not priced low enough to make it worth their investment dollars.
At long last, the kind of property you want to invest in is up to you. However, now that you gain a clear understanding of the pros and cons, you can determine what best fits your investing goals.
Now that you’ve invested, are you getting the most out of your location properties? Look no further than Real Property Management Magic Valley! Contact us online or call 208-734-4001 and ask our Hansen property managers about our FREE market analysis.
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