Investing in Single-Family vs. Multi-Family Properties


Investing in Single-Family vs. Multi-Family Properties

Investing in Single-Family vs. Multi-Family Properties

Real estate investors ponder choices between investing in single-family vs. multi-family properties. Time, risk, return, consistency of income, and appreciation prospects all factor into the decision.

Entry and Exit

Single-family properties are often easier to sell than multi-family buildings. They are also easier to finance and typically require lower down payments. This is especially true of 2- or 4-flat owner-occupied buildings, which may qualify for FHA loans with as little as 3.5% down. Residential mortgages for single-family properties usually carry lower interest rates. Starting as a real estate investor with one single-family home is far less overwhelming than a multi-family property which requires you to manage a large down payment, higher interest, more cash in reserve, and multiple tenants.

Scale and Risk

Single-family rentals tend to attract high quality, reliable tenants who want to stay put. The downside, of course, is that if a tenant leaves, the vacancy can be costly as you market the property and screen new prospective tenants. Multi-family buildings spread the vacancy risk and the attendant loss of income. Losing a tenant or two in a large apartment complex doesn’t cause all income to immediately vanish.

Appreciation and Demand

Single-family rental homes are in high demand. The lingering burden of the economic crash of 2008 and more recent pandemic-related losses, plus the oppressive costs of student loans, have put many workers of home-buying age in a bind. Millennials looking to start families or find communities with good schools and recreational facilities have less opportunity to save up for a down payment. They are attracted to single-family rentals because they provide the kind of lifestyle they want without the steep upfront costs they can’t afford.

Single-family homes appreciate faster than multi-family buildings and offer more opportunities when it comes time to sell. Buying a multi-family building requires a commercial loan, and those buildings are far more expensive than single-family homes. Property owners have greater opportunities to trade up or expand their portfolios with single-family homes.

Consistency and Reliability

Multi-family housing is a constant round-robin of finding and vetting new tenants. Renters of single-family homes tend to settle in and stay longer. While the income won’t be as great as with a multi-family building, it will be more reliable. Maintenance costs are likely lower, and tenants take on more responsibility and are more invested in the upkeep of the property, including maintaining landscaping, paying utilities, and handling trash removal. With multi-family housing, you will likely need to make constant repairs, as multiple units wear at different times as tenants come and go.

Property management services can make real estate investing smoother. Investors who are looking for opportunities or have questions about investing in single-family properties in the Metro Atlanta area, including Buford property management, can contact Excalibur Homes for assistance.

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