For today’s rental real estate investors, opportunity comes in a wide variety of properties. If you’ve been considering whether or not you want 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 whole, investing in rental real estate offers strong long-term profitability and relatively low risk. Many Van Buren rental real estate investors specialize in one specific property type for a reason.
It will take time and effort to gain the expertise necessary to recognize when you’ve found a great property at the right price. Although if you need to make a choice or are contemplating expanding your real estate portfolio, you have to take a closer look at what both multi-family and single-family rentals have to offer.
When determining a particular property type, there are many things you’ll need to figure out before even starting your property search. For example, you will need to examine whether you will be able to arrange the financing you need, whether you have the right investment team on board, and which property best suits your particular business acumen and investing style.
Many investors start out 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 process that many investors are already well acquainted with. Plus, learning the ropes by managing just one property and one tenant can help new investors get up to speed without feeling exhausted. There is a lot to learn about buying and managing rental real estate, no matter what type of property you choose.
Then again, 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 sometimes be a challenge. But with multiple tenants, you can expect multiple streams of income to offset the higher expenses. While all multi-family properties can offer steady income and higher profits, the smaller multi-family properties, such as duplexes or triplexes, can hold 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.
Some investors select the option to invest in single-family properties over multi-family properties because they usually have a more predictable appreciation and fewer challenges. Under normal circumstances, both types of properties appreciate over time. But calculating expected appreciation on a multi-family property can be a bit more challenging than a single-family property.
The same applies to property management, including leasing and tenant relations. The more tenants you have, the more time and effort it will take to communicate effectively with each one, conduct regular property evaluations, and complete regular property maintenance. If you hire 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, the important thing is 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. By comparison, selling a multi-family property can take longer and be much more difficult to arrange, merely because you are limited to investors looking for multi-family properties. Because they are investors, they will be much more willing to pass your property by if it isn’t priced low enough to make it worth their investment dollars.
In the end, the type of property you choose to invest in is up to you. But now that you have a good 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 First Choice! Contact us online or call 479-242-0791 and ask our Van Buren property managers about our FREE market analysis.
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