For today’s rental real estate investors, opportunity comes in a wide selection of properties. If you’ve been wondering 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. In general, investing in rental real estate offers strong long-term profitability and relatively low risk. Several Haslet rental real estate investors specialize in one certain property type for a reason.
It demands time and effort to gain the necessary expertise to determine when you’ve found a great property at the right price. But if you need to make a decision or want to expand your real estate portfolio, first take a closer look at what both multi-family and single-family rentals have to give.
When choosing a specific property type, there are numerous things you’ll need to solve before even starting your property search. For instance, you will need to evaluate whether you will be able to secure the financing you need, whether you have a good investment team on your side, and which property is ideal for your particular business acumen and investing style.
Most investors start by investing in single-family homes for a reason. Although they may not definitely be “easier” to buy, they can be less overwhelming for investors who are just starting. Arranging to finance a single-family residence is a fairly easy task that some investors are already familiar with. Additionally, understanding the basics by managing just one property and one tenant can help new investors be fully informed without feeling overwhelmed. There is a lot to learn about buying and managing rental real estate, irrespective of what type of property you opt for.
On the other hand, investors can quickly learn real estate investing by buying a multi-family property as a single-family rental. There will be more research required, and financing is quite demanding. But with multiple tenants, you can anticipate multiple streams of income to offset the higher expenses. While all multi-family properties can generate steady income and higher profits, the smaller multi-family properties, such as duplexes or triplexes, possess the potential for rental property investors looking to expand. Properties with four units or fewer can also be financed using conventional mortgages, making them more accessible by this means.
Many investors prefer to invest in single-family properties compared to multi-family properties because they appear to have a more stable appreciation and fewer challenges. Under normal circumstances, both kinds of properties appreciate after some time. But calculating expected appreciation on a multi-family property can be a bit more stressful compared to a single-family property.
The same is true for property management, incorporating leasing and tenant relations. The more tenants you accommodate, the more time and effort it will require to communicate properly with them, carry out regular property evaluations, and accomplish 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 amount you need to pay will be costly since that percentage is usually based on the number of tenants you have, not your total rental income.
Lastly, it’s necessary to factor your exit strategy into your real estate investing decisions. In case you want to sell your rental properties, single-family homes are less complicated to sell. This is because demand appears to be higher for single-family homes, and rising competition indicates a healthier sales price for you. By comparison, selling a multi-family property can take longer and be more complicated to handle, simply because you are limited to investors looking for multi-family properties. Since they are investors, they will be much more willing to pass your property by if it isn’t priced low enough to make it worth their investment dollars.
Finally, the kind of property you want to invest in depends on you. However, now that you possess a proper understanding of the pros and cons, you can determine what is beneficial for 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 Meridian! Contact us online or call 817-678-8787 and ask our Haslet property managers about our FREE market analysis.
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