Are you a first-time investor?
Quick, it’s time to form an opinion!
The question of whether to invest in a single family home or multifamily apartment is fiercely debated among investors. That debate will only become more fierce as millennials continue to rent for longer.
We’re going to guide you through the pros and cons of each, so you can debate it with the best of them!
Multifamily apartments consist of individual units occupied by unrelated tenants. Tenants generally view apartments as a more temporary home and tenant quality varies widely.
Multifamily apartments have their upsides, however.
Multifamily apartments win on the numbers game when it comes to collecting rent. With multiple families all paying rent, the potential returns for you are much higher than for a single family home.
While it’s true that tenant turnover tends to be high in multifamily complexes, remaining occupancy helps offset losses from vacant units elsewhere.
For as long as even a single family occupies a unit, the property will continue to pull in money.
A single family unit, meanwhile, will be nothing but a drain while it sits unoccupied.
Multifamily apartments are attractive to those looking to expand their investment portfolio. Their multi-occupancy structure allows you to invest simultaneously in multiple units. Apartments come in all shapes and sizes and allow you to grow your portfolio exponentially if you so choose.
Single Family Home
With a single family home, you’ll be attracting tenants who intend to remain at the property. Usually, they’ll care for it as if it were their own.
Families tend to offer a positive contribution to the neighborhood, and you’re less likely to encounter problematic tenants, resulting in a strong investment overall.
Lower turnover and maintenance costs
While the pure cash flow of a multifamily home is usually higher, single family properties come with the advantage that tenants are likely to remain longer and take better care of the property, reducing overall costs to you. Over time, this could offset what you’ll be paying for maintenance of a multifamily property.
Alongside lower turnover, single family residences tend to attract a better class of tenant at the outset. The clue is really in the name: these are usually families looking to settle down and create a home.
This is likely to result in fewer headaches such as anti-social behavior, criminality, or maintenance issues affecting your property value.
With a multifamily property, there’s no knowing which tenants will contact you and when.
By contrast, a single family property only has a single ‘voice’, so you’re less likely to be fire-fighting constant problems as they arise.
Single family properties appreciate well and are attractive to buyers. When you do decide to move on, you should be able to shift the property.
Whereas multifamily homes are likely to have their value judged on their rent income, a family home’s value is driven more by supply and demand.
Now you’re aware of the key differences between investing in a single family home or a multifamily apartment, you can begin to form a picture of which investment best suits you. Just in time for a surge in demand for housing over the coming years!
If you have any questions, leave a comment with us below, or contact us for further advice.