If you are interested in operating a business or becoming your own boss, real estate investment is often a sensible choice. There are different types of real estate investing options, and much of the time, the residential sector is desirable.
However, if you’re not sure whether you want to invest in single or multi-family housing, read on to learn the basic pros and cons of each investment type so that you can make an informed decision for your future.
What is Single-Family Housing?
Single-family homes consist of a single unit, which usually takes the form of houses or manufactured homes. With these units, landlords receive single rent payments each period (typically monthly) from the tenants.
If you’re considering a single-family home investment, examine the pros and cons of this investment type to determine whether it’s right for you.
Investing in single-family properties will typically yield the following benefits:
- More financing options
- Cheaper cost
- Fewer vacancies
- Single-family homes for sale are easier to come by.
- Maintenance is usually less time-consuming.
Though single-family homes can be an excellent investment, especially for new investors, it’s important to be aware of the negative attributes of this property type.
- Less rental income than multi-family investments
- Vacancies hit harder in single-family rentals.
- Expanding a portfolio is more challenging with single-family investments.
What is Multi-Family Housing?
Multi-family housing is a type of residence that allows several families to live in a given location. This option may take the form of apartments, townhouses, condos, duplexes, triplexes, and fourplexes.
If you’re thinking about investing in a multi-family housing unit, there are a couple of things you should know before making your decision.
Multi-family homes might sound overwhelming, especially for a first-time property investor. While there are several challenges associated with multi-family unit management, there are also unique benefits.
- Portfolio expansion happens faster with multi-family properties.
- Greater cash flow potential
- You can live in one unit and rent out the others.
- Lower cost per unit
- Better cushioning during occasional vacancies
The benefits of multi-family home investment may sound quite exciting, but take a moment to consider the downsides as well.
- Greater time requirements
- Slower appreciation
- More difficult to screen potential tenants
- Challenging to resell
- More demanding to manage
Ultimately, it is up to you, the investor, to make educated decisions about the types of properties you invest in. However, if you’re new to real estate investing, starting with a single-family home might be a wise choice. This way, you can take some time to get into the swing of things as a landlord.
If you already have experience in real estate investing and are looking for something new, a multi-family property could help you quickly grow your portfolio.
Finally, whether you decide on single-family or multi-family investments, it’s a good idea to get involved with investor communities in your area. This will help you learn from other property owners and managers and may allow you to exchange units that don’t align with your business model for ones that are a better fit.