Real estate investors tend to have firm opinions about the best type of property to invest in. In particular, there is a good deal of debate about whether it is better to invest in single-family or multi-family rentals. In reality, both have distinct advantages and disadvantages, and the following comparison can help new investors decide where to start.
Advantages Of Single-Family Rentals
Proponents of single-family rentals like the return on investment they get with individual homes. Houses command a higher rent, residents tend to cover utilities themselves, and maintenance costs for a single house are lower than for a large building. In addition, renters in single-family homes tend to be more stable. Often families are connected to the community, and they want to keep their children in the same schools. Single-family home renters are more likely than apartment tenants to remain in a home for at least five years.
Disadvantages Of Single-Family Rentals
Investors who build a portfolio of multiple single-family rentals realize that growth is much slower than with multi-family properties. It can take a long time to buy 10 homes, but ten apartments in a single building can be acquired all at once. In addition, maintenance of multiple properties spread out over a city takes more effort than maintaining a single building.
Advantages Of Multi-Family Rentals
Investing in multi-family properties allows investors to scale more quickly. They also find that it’s easier to maintain a single building than multiple properties. Another advantage of owning an apartment building is that improvements to the property are really cost-effective. Adding a pool to an apartment building, for example, improves every rental unit at one time.
Disadvantages Of Multi-Family Rentals
Multi-family properties are much more expensive to buy than single-family homes, and investors face more of a challenge to finance such a purchase. In addition, there is more turnover with apartment tenants, which means that units may stay empty more frequently or for longer periods of time than single-family homes.
Wall Street investors have shown a lot of interest in single-family rentals since the housing bubble burst, and corporate investors have been buying foreclosed properties in bulk. Even as foreclosures have died down, the single-family rental market remains strong. To learn about this trend, see more on Twitter here.