It requires time and effort to gain the knowledge needed to determine when you have identified the best property at the right price. But if you need to make a choice or aim to expand your real estate portfolio, first take a closer look at what both multi-family and single-family rentals can do.
When choosing a specific property type, there are a lot of things that you’ll need to work out before even starting your property search. For instance, you should assess whether you will be ready to manage the financing you need, whether you’ve got the best investment team in place, and which property is suitable for your specific business acumen and investing style.
Many investors start by investing in single-family homes for a reason. Although they may not actually be “easier” to buy, they may be less frightening for investors who are just starting. Arranging to finance a single-family residence is a common starting point that most investors are already familiar with. Plus, learning the ropes by managing just one property and one tenant can help new investors get confident without feeling overwhelmed. There is a lot to learn about buying and managing rental real estate, regardless of what kind of property you pick.
Then again, investors can quickly understand 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 branch out. Properties with four units or fewer can also be financed by conventional mortgages, making them more available in this way.
Some investors decide to put resources in single-family properties rather than multi-family properties because they seem to have a steadier appreciation and fewer challenges. Generally, both kinds of properties appreciate over time. But calculating potential appreciation on a multi-family property can be a little more complicated compared to a single-family property.
This also refers to property management, along with leasing and tenant relations. The more tenants you have, the more time and effort it will require to communicate effectively with each other, run daily 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 expect to pay will be higher since that percentage is usually based on the number of tenants you have, not your total rental income.
Lastly, it’s essential to factor your exit strategy into your real estate investing decisions. When it comes time to sell your rental properties, single-family homes are quick and easy to sell. The reason for this is that demand tends to be higher for single-family homes, and increased competition means a better sales price for you. On the other side, selling a multi-family property can take longer and be a lot more difficult to organize, for the reason that you are limited to investors looking for multi-family properties. Since they are investors, they will be much more willing to pass your property over if it isn’t priced low enough to make it worth their investment dollars.
Ultimately, the kind of property you decide to invest in is in your control. But now that you possess an excellent understanding of the pros and cons, you can determine what is appropriate for 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 Southern Utah! Contact us online or call 435-673-4242 and ask our Washington property managers about our FREE market analysis.