Are single-family houses or multifamily better investments?
People generally ask the question is it better to invest in single-family or multifamily rental properties? Many investors assume multifamily properties are the better investment because they are built to produce income for landlords. Many real estate investors also say that multifamily properties are the best, but I think single-family homes can be a great investment as well. In some cases, single-family homes can make you much more money and be easier to buy than multifamily properties. In other cases, multifamily properties can make more money and be a better investment. I have personally invested in single-family, multifamily, and commercial properties.
Single Family Homes
Single-family home has one unit. Usually, one family lives there, and that is why it is called a single-family home. In many towns, the zoning laws allow more than one family to live in a single-family home, but two or three families live together. Most towns limit how many unrelated people can live in a single-family home. If you are renting out single-family homes, you may not be able to rent the property to 5 different college students. The zoning laws will tell you who can live there. If the house is in an area that allows multifamily properties, you may be able to rent to unrelated parties, but always check with zoning before investing in properties!
Advantages of Investing in Single Family-Homes
· Appreciate faster than MFH, depending on the city/area,
· Generally a broader range of potential buyers (when it’s time to sell)
· Per unit, the basis is more worth (but this can be a disadvantage too as you pay more for it)
· Single-family homes can often sell quicker, even in a down market again due to a broader range of potential buyers
· Only have to “deal” with 1 tenant, not many
· Tenants don’t argue with other tenants because they are the only ones living there.
· Easier to get the tenants to pay for all of the utility bills again because they are the only ones using them
Multi-Family Homes
A multifamily property is a house or apartment that has more than one unit. A duplex is two units and could have two units right next to each other or one unit on the main floor and one in the basement. A triplex has three units and a fourplex four units, and so on.
Buying a multifamily property as an owner occupant is commonly known as house hacking and is a great way to get started investing in real estate.
Advantages of Investing in Multi-Family Homes
· Potential to cash flow better because there are many more units purchased for a slightly lower price per unit typically.
· In Multi-Family homes, we have a large range of possible tenants to choose from as the per-unit rental cost is usually less than an SFH.
· Multi-Family homes are less expensive per-unit basis as compared to single-family homes.
By digging into what type of property suits you best is usually the best strategy you can have, rather than listening to all the “talkers” out there about which is the better investment. And yes, that even includes yours truly! So get out there and decide for yourself which is best….in all likelihood, whichever one you think fits your skills, personality, and aptitude, the better investment it will be for you. But, you’ll never know until you get started … so go ahead and get started!