So here are some thoughts to consider about these two types of investments, when deciding to invest in single-family or multi-family homes.
Single-Family Investment Properties
Single-family investment properties have numerous advantages over multi-family properties from an investment standpoint. Most of all, single-family homes can typically be purchased below market value, and can be much easier to manage and maintain.
Purchasing Below Market Value
For starters, it’s easier to purchase single-family investment properties below market value than multi-family properties. This is important because profits are made and lost when purchasing an investment property, especially when flipping the property.
In contrast, large multi-family properties are often sold above their present market value in view of future improvements the new owner is expected to make resulting in higher rents.
Property Management and Expense
Property management and the associated expenses vary based on the tenant population and the logistics of managing the properties within a specific geographic area.
Single-family homes located in desirable neighborhoods with highly qualified tenants can require less management than larger, multi-family investments, especially in light of the fact that single-family homes can have lower turnover. Families in these homes can view their living conditions as more permanent, rather than temporary. This can lead to less turnover, and also result in less maintenance and repairs because tenants are more likely to take care of the property and make small improvements.
Multi-family properties can also be easier to manage than some single-family properties, again depending on the tenant population and geographic logistics. The fact that all the units in a multi-family complex are centrally located can make them easier to manage. But, these positives can quickly be reversed with higher turnover and longer vacancies when compared to single-family properties.
Multi-Family Investment Properties
Besides the contrast between single-family and multi-family investment properties already discussed above, there are a few more benefits to investing in multi-family properties.
Multi-family properties are specifically designed and built to generate rental profit, in contrast to single-family properties that are generally built as owner occupied homes. As a result, investors who are serving a high turnover population will have more opportunities to generate profits with multi-family properties built to be refurbished more frequently, and built with materials intended for frequent replacement.
Large multi-family properties can also be managed and maintained by a centrally located staff, which reduces expenses. And some real estate investors like to live in one of their multi-family units while self-managing the property, and producing income with the other units.
Pick the Right Property Type For You
There are pros and cons to both multi-family and single-family investment properties, depending on numerous variables. Therefore, different investors will prefer to invest in different types of properties for a number of personal reasons.
And for larger investors, a combination of both single-family and multi-family can contribute to a diversified and balanced portfolio.
Graystone Investment Group
Graystone Investment Group is an experienced Investment Group wholesaling single-family and multi-family properties in the Greater Tampa Bay market.