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Single-Family Vs. Multifamily Rental Properties: Which Investment Is Right For You?

Arguably, there is no “better investment” when it comes to single vs multi-family investing. The right investment is the one that meets your particular needs. Single-family properties are, as you would imagine, the traditional home built for one family or household. On the flip side, a multi-family property is any property that holds more than one household.

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Arguably, there is no “better investment” when it comes to single vs multi-family investing. The right investment is the one that meets your particular needs. Single-family properties are, as you would imagine, the traditional home built for one family or household. On the flip side, a multi-family property is any property that holds more than one household. This includes apartment and townhouse complexes, duplexes and triplexes. 

To determine which investment is right for you, below is a breakdown of the possible advantages and disadvantages of each property type. 

Single-Family

If you are a newcomer to real estate investing then a single-family property is advantageous for multiple reasons. Typically, these properties are less expensive than multi-family homes. When looking at factors such as a down payment, loan approval, and accessibility, single-family homes tend to be more attainable. 

Single-family homes also experience less turnover. Since there is only one family living in the home, there is only one tenant to worry about as opposed to owning an apartment complex where tenants are constantly moving in-and-out. According to National Real Estate Investor, the average tenant of a single-family rental home stays for three years and says that five to six years is not uncommon either.

They’re also easier to sell given the demand for single-family homes, which has increased even further as a result of COVID. In an article from Redfin, real estate agent Pam Henderson said, “Spending so much time at home during quarantine has made a lot of people realize that it might be time to stop renting a cramped apartment in the city and time to start owning their first single-family home.”

Since single-family homes are in high demand, the availability of houses online can prove scare depending on the location you’re searching in. For interested buyers, online marketplace Roofstock lists carefully vetted single-family properties on its platform. Platforms like Roofstock are resourceful tools that can help expand your search for the perfect investment property.

Roofstock provides you with information such as annual appreciation, financial highlights over a 3 and 5-year period, neighborhood rating, cash flow, and more.
 

Multi-Family

If you have the capital to place a down payment on a multi-family property, then this property type has great potential. Now while there may be a higher turnover rate, these properties do provide higher cash flow. This, in turn, provides a greater financial cushion and can make it easier to continue building your real estate portfolio.

If you yourself are looking to move, you can do what many other savvy investors do and occupy one of the property’s units. If you own a duplex or triplex, you could live in one unit while renting out the others. The idea is that the money coming in from the other tenants would either pay for most of your rent, or pay for it entirely, allowing you to live for free.

When it comes to finding the right real estate investment for you some of the biggest factors to consider are available capital, financing, risks, and personal investment goals. You may also want to research the location you’re looking to buy in to see what the demand is for single and multifamily homes in that area.

Click here to browse Roofstock’s active listings.

Photo by Tom Rumble on Unsplash

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