For today’s rental real estate investors, opportunity comes in a wide range of properties. If you’ve been questioning 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. Generally, investing in rental real estate offers strong long-term profitability and relatively low risk. Numerous Sun Valley rental real estate investors specialize in one particular property type for a reason.
It consumes time and effort to acquire the requisite knowledge to know when you have located a great property at the right price. But if you need to choose or are wanting 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 particular property type, there are several things you need to find out before even starting your property search. For example, you need to explore whether you will be capable of arranging the financing you need, whether you have a qualified investment team involved, and which property best matches your unique business acumen and investing style.
Most investors begin by investing in single-family homes for a reason. Even though they may not usually be “easier” to buy, they can be less challenging for investors who are just starting. Arranging to finance a single-family residence is a fairly simple process that most investors are already familiar with. Also, knowing the techniques by managing just one property and one tenant can help new investors become competent without getting upset. There is a lot to learn about buying and managing rental real estate, regardless of what sort of property you prefer.
On the other side, investors can quickly determine real estate investing by buying a multi-family property as a single-family rental. There will be more research required, and financing can sometimes be a struggle. But with multiple tenants, you can anticipate multiple streams of income to neutralize the higher expenses. Although all multi-family properties can deliver steady income and higher profits, the smaller multi-family properties, including duplexes or triplexes, can maintain great potential for rental property investors looking to take a new direction. Properties with four units or less can also be financed using conventional mortgages, making them more reachable along these lines.
Some investors are opting to invest in single-family properties rather than multi-family properties because they seem to have a more consistent appreciation and fewer challenges. In ordinary condition, all kinds of properties appreciate eventually. But calculating expected appreciation on a multi-family property can be a bit more challenging than a single-family property.
The same is true for property management, including leasing and tenant relations. The more tenants you get, the more time and effort it will consume to communicate efficiently with each other, perform daily property evaluations, and complete regular property maintenance. If you appoint a professional property manager, you may be able to get a reduced rate for a multi-family property. But the dollar amount you have to pay will be higher since that percentage is usually based on the number of tenants you have, not your total rental income.
Ultimately, it’s necessary to factor your exit strategy into your real estate investing decisions. When it comes time to sell your rental properties, single-family homes are not too complicated to sell. This is because demand seems to be higher for single-family homes, and increased competition indicates a better sales price for you. By comparison, selling a multi-family property can take longer and be much more challenging to manage, simply because you are limited to investors looking for multi-family properties. Since they are investors, they’ll be far more likely to pass your property by if it isn’t priced low enough to make their investment dollars’ worth.
At the end of the day, the type of property you choose to invest in is up to you. But now that you have a good understanding of the pros and cons, you can decide what best fits 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 Vision! Contact us online or call 818-233-8789 and ask our Sun Valley property managers about our FREE market analysis.
We are pledged to the letter and spirit of U.S. policy for the achievement of equal housing opportunity throughout the Nation. See Equal Housing Opportunity Statement for more information.
