Single-family and multifamily property investment both offer an opportunity to make a good income but which is a better option? If you are considering any and you are having a hard time selecting, it is important to have a better understanding to help you make an easy decision.
In this article, I will discuss single-family vs. multifamily rentals on which investment is a better fit. I’ll be providing my insights and perspectives because I have done both. I started in single-family then ultimately transitioned to multifamily rentals. I’m going to break down some pros and cons associated with both of them.
Single Family Pros
Easy Getting Started
The main advantage of single-family rental property is the easiness getting started. This is where the majority of people including me as I begin my journey in real estate investing. This is the exact route I took. I did some wholesaling with the single-family fix and flipped and then ending up with my first deal, which was a buy and hold.
To pull back the curtain a little bit. On my first deal I was able to find someone to bridge the gap, I leveraged their cash to buy the house for $25,000 and put an additional $25,000 into it and rented it for $850. The barrier to entry is very low when it comes to price point as well.
Lots of Properties Available
Another gain of single-family rental property is there’s a lot of available property out there as compared to multifamily rentals. Investors enjoy the opportunity to have more options for them to find the best deals they need.
With single-family rentals, it offers multiple exit strategies. It means that you can easily liquidate the property in various ways and resell them. Single-family property is also easier to sell as compared to multifamily rentals since you have a lot of buyer pools.
Multi-Family Rentals Pros
One of the main advantages of multifamily rental investment is efficiency. According to my personal experience, it takes less time or the same amount of time to buy an 80 unit apartment complex than acquiring 80 single-family residences. You’ll surely need to exert more effort in terms of time, energy, and resources.
Return of Investment (ROI)
The return on investment is faster, too if you decide to invest in multifamily rental property. Improvements that you make such as roofs, the parking lot, all of those go to the value of the asset as a whole. This allows you to maximize your profit without spending too much as compared to single-family rentals.
When you have buying materials like let’s say you have five vacant units and you are going to do a complete remodeling on them such as updating appliances, flooring, paint, fixtures etc. in a bulk manner then you can get good discounts from the suppliers. This also goes to labor, especially if it is a huge project, you are also going to get good discounts because there’s more work involved. When it comes to property management, multifamily rentals are easier to handle as well.
You have more control in multifamily rentals because they are more valued on their net income and not the comparable sales. You can do necessary improvements to property to make it more attractive in the market like adding some features or facilities or even increasing the rent.
In conclusion, selecting which type of rentals to invest in can be challenging especially if you are not that knowledgeable from it, but with those points discussed above, hopefully, I was able to help you decide which the right fit is.
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