Investing in real estate can be a very lucrative, if not risky, pursuit. With regards to the types of real estate investments available, one decision to make is whether to invest in a single family or multi-family home. Both options can prove to be worthy investments and weighing the pros and cons of each will help determine which is best for you.
Single Family Pros
A big advantage to investing in single family real estate is that as a landlord, there is only one family of tenants to manage. With multi-family real estate, consider that problems between tenants can quickly escalate into time-consuming issues.
Another advantage of single family real estate is that it is much easier to sell in the event that you no longer want the property. Single family real estate appreciates much more quickly than multi-family and typically will provide a larger pool of interested buyers to choose from.
Single Family Cons
One of the main drawbacks to single family real estate is the cost. Single family properties tend to be more expensive per unit, although their overall cost is typically lower. There are, however, some disadvantages in regards to maintenance. While there are often times where a single fix can benefit all of the tenants in a multi-family home, each single family property you own will require its own individual repairs.
Another disadvantage associated with single family real estate is the increased risk posed by vacancy. Unlike with multi-family real estate, where the risk of vacancy is diminished by the other tenants living there, vacancy in a single family property means you will be paying for all the upkeep and bills yourself.
This can make it difficult to control cash flows when making multiple investments because most real estate auctions demand the full sum upon purchase. However, this financial strain can be lessened by purchasing real estate through online auctions. This is due to the fact that many online auctions only require a deposit upfront.
Multi-Family Pros
Although single family properties usually have more potential buyers to choose from, multi-family properties typically have a larger pool of tenants. This is because the rent in multi-family buildings is usually lower.
Another advantage of multi-family real estate is the convenience of only having to travel to one location to make a repair or resolve an issue with a tenant, rather than driving to multiple single family locations.
Multi-Family Cons
One disadvantage of multi-family units is that they require greater involvement in property management. The problems caused by one tenant can quickly become magnified as they can begin to cause issues with other tenants that would otherwise not exist. Also, because you have more than one tenant, it means you will have to respond to more families in regards to maintenance issues.
Also, multi-family units usually have a greater initial cost. Jumping into a multi-family unit is typically more expensive initially, especially when you start looking at anything over a duplex or triplex.
There are advantages and disadvantages associated with both single family and multi-family real estate. Weighing these various pros and cons against each other can help you determine which is best for you. Although investing in real estate can be a bit precarious, it also has the potential to be quite profitable.
Joseph Givens is a seasoned real estate professional who specializes in real estate auctions. When he’s not writing about the industry, he enjoys watching football on Sundays.
