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Multi-family vs. Single-Family Homes

Chubbuck 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 debating 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. As a rule, investing in rental real estate offers strong long-term profitability and relatively low risk. Many Chubbuck rental real estate investors specialize in one particular property type for a reason.

It takes time and effort to obtain the skills you need to recognize when you’ve discovered a great property at the right price. However, whether you want to make a decision or want to expand your real estate portfolio, it is important to take a closer look at what both multi-family and single-family rentals have to offer.

Before choosing a certain property type, there are many things you’ll need to figure out before even starting your property search. To get started, you have to check whether you can handle the financing you need, whether you have the right investment team on board, and which property is the right choice for your specific business acumen and investing style.

Several investors start by investing in single-family homes for a reason. While they may not necessarily be “easier” to buy, they can be less intimidating for investors who are just starting. Arranging to finance a single-family residence is a relatively simple procedure that is already common for investors. Furthermore, mastering the fundamentals by managing just one property and one tenant can help new investors get competent without getting overwhelmed. There is a lot to learn about buying and managing rental real estate, no matter what type of property you choose.

On another note, investors can easily do 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 a dilemma. But with multiple tenants, you can assume multiple streams of income to compensate for higher expenses. Although all multi-family properties can generate steady income and higher profits, the smaller multi-family properties, such as duplexes or triplexes, can provide great potential for rental property investors looking to diversify. Properties with four units or less can also be financed using conventional mortgages, making them more accessible in that way.

Most people choose to invest in single-family properties instead of multi-family properties because they prefer to have a more foreseeable appreciation and fewer challenges. Under ordinary circumstances, both types of properties appreciate after some time. But calculating potential appreciation on a multi-family property can be a bit trickier than a single-family property.

The same is true for property management, including leasing and tenant relations. The more tenants you have, the more time and effort it will require to communicate clearly to everyone, carry out regular property evaluations, and undertake routine property maintenance. If you acquire a professional property manager, you may be able to get a reduced rate for a multi-family property. But the dollar amount you will end up paying will be higher since that percentage is usually based on the number of tenants you have, not your total rental income.

Finally, it’s beneficial 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 tends to be higher for single-family homes, and increased competition means a better sales price for you. On another note, selling a multi-family property can take longer and be much bigger challenge to manage, simply because you are limited to investors looking for multi-family properties. Because they are investors, they will be much keener to pass your property by if it isn’t priced low enough to make it worth their investment dollars.

At long last, the kind of property you choose to invest in is up to you. But now that you have a clear 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 Pocatello! Contact us online or call 208-234-1000 and ask our Chubbuck property managers about our FREE market analysis.

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