Should You Invest in a Single-Family Home or Multi-Family Rental Property?

by Greg on April 17, 2020

woman handing over home keys

If you have decided to take the plunge and invest in a rental property, you will need to decide on the type of property that you want to invest in. This doesn’t simply mean deciding on a neighborhood to focus on or knowing how much to spend in order to make a profit, this means thinking about whether you want to invest in a single family home or a multi family rental property. You may already have your heart set on a single family home or know that a multi family rental makes better financial sense, but you may not. If you are struggling to choose between the two, it’s time to look at the pros and cons.

The Pros of Single Family Homes

  • It’s often a lot more affordable to buy a single family home, which can make getting a mortgage a lot easier. If you are starting out with property investment for the first time and you are struggling to come up with capital, a single family property makes more financial sense.
  • It’s usually easier to manage a single family property, as there are fewer tenants to think about. With a multi family rental property, each unit will have different tenants.

The Cons of Single Family Homes

  • If you find yourself struggling to occupy the property with tenants, you may struggle to keep up with mortgage payments and other costs. Though marketing and advertising can reduce this risk, it’s something to consider.
  • Though you will only be paying for maintenance on one property, this isn’t always a benefit. You may actually end up paying a lot more for maintenance, as the cost of repairs relates solely to the single family property. With a multi family property, repairs benefit multiple units.

The Pros of Multi Family Homes

  • It’s not usually a struggle to find tenants to fill at least some of the units in a multi family home, which means there’s less chance of you being left without any rental income whatsoever. If a tenant moves out, other units will remain occupied.
  • You could be eligible for FHA financing if you choose to live in one of the units, which has the benefit of a 3.5% down payment. Investors who do not plan to live in the multi family property could be faced with a much higher down payment of 25%.

The Cons of Multi Family Homes

  • A multi family property is likely to be more expensive to buy than a single family property, which can make finding capital and securing a mortgage difficult. A number of mortgage companies will require you to have experience with property investing before they give you the go ahead, and new investors may not qualify even with a good credit score.
  • It can be stressful to manage multiple tenants, especially when it comes to maintenance calls and repair requests. A lot of landlords solve this problem by enlisting the help of professional property managers, who can offer 24 hour answering services and professional maintenance services.

There’s nothing easy about investing in property for the first time, but the rewards are likely to pay off in a big way if you do it correctly. With a fair amount of research and careful consideration of the exact type of property you want to invest in, it’s possible to become a successful landlord with single or multi family rentals. Remember, don’t jump straight into investing in a property until you are confident about your finances.

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