Both types of properties offer their own benefits and challenges. It is important that you look at each type carefully before making your decision and taking the leap. Once you take a closer look at the details of a single-family and multi-family home, you are likely to see that one better fits your portfolio more clearly. Some of those details include performing regular daily tasks like rent collection and property management.
Take a few moments to explore some key facts about single-family and multi-family real estate properties to see which one offers you the best short-term and long-term success with your next investment.
Single-Family Rental Properties
The idea of buying a single-family structure is often extremely appealing to future landlords that are interested in factors like long-term capital appreciation, substantial tax write-offs, and passive rental income.But there is much more to learn about this type of real estate investment.
Initial Lower Cost
Single-family rentals come with one huge advantage, which is a lower investment cost to get started. New real estate investors find that these properties cost less and require less upfront capital. Depending on the market where you plan to launch your real estate management business, you can find homes for far below $100,000—often under $50,000—particularly in the South and Midwest regions. Multi-family rental units in the same areas may cost well over $1 million.
Steady Growth and Strong Portfolio-Building Potential
If you have your sights set on building your portfolio steadily and profitably, a single-family property is an excellent choice—especially if you are considering buying one or more additional properties per year. With this strategy, you will have an amazing portfolio and serious cash flow over the next decade or two.
Quick Piece-By-Piece Liquidity
There may be times when you need additional cash flow for personal and business emergencies. You will find that funds are available through your rental investments, and it is far easier to sell a single-family unit than a multi-family property. More importantly, by doing so, you do not risk losing your entire portfolio, particularly if you have already invested in a few more single-family properties.
Multi-Family Rental Properties
Many first-time and more experienced real estate investors have their reasons for choosing multi-family properties that you might appreciate, too.
Cost-Per-Unit is Less with More Potential for Rental Income
Each multi-family unit is likely to cost far less than a fully single-family home while still allowing you to charge a similar rental fee. For instance, if you invest in a duplex, you may be able to charge the same monthly rental fee for each portion of the duplex that you would charge for asingle-family domicile.
Easier to Finance
Buildings that feature five or more units are eligible for commercial loans, which are actually easier to obtain than residential loans. Such loans are based more on the investment factor associated with the building than an assessment of your assets and liabilities.
Give Each Type of Property a Closer Examination Before Making Your Decision
Both types of properties offer several solid ways to build your portfolio whether you’re looking to purchase now or in the future.Just be sure to weigh out the pro’s and con’s and evaluate which property type is best for your financial goals.
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