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Multi-family vs. Single-Family Homes

Portsmouth Multifamily Housing Building in a Modern NeighborhoodFor today’s rental real estate investors, opportunity comes in a significant variety of properties. If you’ve been wondering 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. Overall, investing in rental real estate offers strong long-term profitability and relatively low risk. Several Portsmouth rental real estate investors specialize in one particular property type for a reason.

It takes time and effort to gain the skills you need to know when you’ve spotted a great property at the right price. However, whether you need to make a decision or are looking to expand your real estate portfolio, first get a closer look at what both multi-family and single-family rentals have to offer.

When selecting a certain property type, there are a couple of things you’ll need to work out before even starting your property search. For example, you will need to inspect whether you will be in the position to arrange the financing you need, whether you have the best investment team on board, and which property is the best choice for your particular business acumen and investing style.

Many investors start by investing in single-family homes for a reason. Although they may not really be “easier” to buy, they can be less complicated for investors who are just starting. Arranging to finance a single-family residence is a fairly easy process that many investors are already informed about. Also, learning the basics by managing just one property and one tenant can help new investors become efficient without getting overwhelmed. There is a lot to learn about buying and managing rental real estate, no matter what sort of property you select.

On the other hand, investors can easily learn real estate investing by buying a multi-family property as a single-family rental. There will be more research required, and financing can often be an issue. But with multiple tenants, you can expect multiple streams of income to compensate for higher expenses. Although all multi-family properties can deliver steady income and higher profits, the smaller multi-family properties, including duplexes or triplexes, can hold great potential for rental property investors seeking to grow. Properties with four units or less can also be financed using conventional mortgages, making them more available in that way.

Many people tend to invest in single-family properties instead of multi-family properties for the reason that they want to have a more constant appreciation and fewer challenges. Under ordinary circumstances, both kinds of properties appreciate after some time. But calculating expected appreciation on a multi-family property can be a bit problematic than a single-family property.

The same is true for property management, including leasing and tenant relations. The more tenants you possess, the more time and effort it will need to communicate clearly to each one, perform regular property evaluations, and undertake regular property maintenance. If you hire a professional property manager, you may be able to get a reduced rate for a multi-family property. However, the dollar amount you need to pay will be higher since that percentage is usually based on the number of tenants you have, not your total rental income.

After all, it’s advisable to factor your exit strategy into your real estate investing decisions. When it comes time to sell your rental properties, single-family homes are easier to sell. This is because demand seems to be higher for single-family homes, and increased competition signifies a better sales price for you. On the other hand, selling a multi-family property can take longer and be much more difficult to arrange, simply because you are limited to investors looking for multi-family properties. Since they are investors, they will be eager to overlook your property if it isn’t priced low enough to make it worth their investment dollars.

Basically, the type of property you want to invest in relies on you. However, since you have a clear understanding of the pros and cons, you can easily choose 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 Hampton Roads! Contact us online or call 757-395-4274 and ask our Portsmouth 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.