I’m a big fan of multi-family real estate investing, but I understand the benefits of single-family at the same time. Investors have their own preferences for good reasons. Hopefully, this helps you find something that works for you.
Multi-family Real Estate
- Property management is so much easier and more efficient with multi-family investing, for numerous reasons. When you need to collect rent, you have multiple tenants in a single location as opposed to driving to multiple places. Additionally, when dealing with neighbors, the neighbors are tenants too and much easier to manage
- Acquisition cost per unit is usually lower with multi-family; one roof over multiple units with shared systems results in lower costs per door. The ratio of rent collected to acquisition cost per door is higher with multi-family than single-family.
- Lower maintenance costs are realized from shared systems. A single heating source for a whole building, fewer water lines from the city, and material that can be used in multiple units but stored in a single location will all make a maintenance technicians day more efficient, saving you money
- If one tenant doesn’t pay, there are more to cover your expenses
- If it’s flipping you’re after, there’s money to be made in multi-family. However, that profit will be much slower to realize than with single-family. To flip a multi-family property, there are more units to renovate which takes more time, and you’re holding onto the property longer with higher holding costs
- Selling a multi-family property takes longer due to a smaller pool of buyers. You may also have to do some owner financing to get the price you want
- It’s harder to find a good multi-family deal since there are fewer properties, and recently a lot more competition
Single-family Real Estate
- Finding a deal is easier: sIngle-family homes are more plentiful than just about any other form of real estate. WIth a higher pool of sellers, finding a good deal is more likely; if you’re flipping, there are hard-money lenders ready to help
- Single-family homes yield slightly higher rent for the same number of beds and baths than an apartment
- Tenants enjoy living in a single-family home with a yard and driveway, and you can often negotiate them doing yard maintenance for you
- Single-family appreciates with the market; it’s easier to gain equity by doing little to no work on the property if your house is in a growing market
- With 100 single-family homes, there are 100 heating sources, 100 tenants to collect rent from, and 300+ neighbors to deal with. The economies of scale just aren’t as good as multi-family
- If you’re renting and a tenant doesn’t pay, you have no income that month but still have expenses to pay
- Acquisition cost per unit is higher with single-family
Different investing strategies work for different people, motivations, and preferences. Personally, I like single-family for turning quick profits, and multi-family for longer-term buy and holds, due to easier management. Different strategies for different markets, and different times.
Have questions? Feel free to get in touch