Here at InvestPro Properties, we are often asked which type of property is a better investment; a single family property or a multi-family property. The best investment depends on what your goals are.
Single Family Properties
We tend to prefer single family homes in our market. There’s a reason why large Wall Street investment firms have been acquiring so many single family homes as rentals. We feel you can get better deals, they appreciate more, they require less cash to purchase and they are usually in better neighborhoods that attract a higher quality tenant, in most cases. With the single family home, the down payment and repairs are usually less than they are with multi-family properties and the maintenance is less as well. They are great for slow, steady growth. Single family homes are perfect for the individual who wants to acquire houses over the long haul. Even if you buy just one or two rentals per year for 10 years, you can expect to retire early.
One of the negatives is that their values are market dependent. The values of single family rentals are driven by other residential sales comparables. The income normally does not factor into the price of single family homes.
There are also advantages to multi-family properties. One nice thing is that the cost of professional property management is usually built into the business model and the purchase price. A quality professional manager will generally do a better job maximizing your return than you could do on your own. It also tends to be more hands-off so you can spend your time finding other deals or doing what you want to do.
Another advantage is that you have more control over the value. It’s not as dependent on sales as single family rentals. They are valued as a source of income, and the higher the income, the higher the value. It’s therefore possible for you to buy a mismanaged property at market value, make the necessary renovations and increase rents while decreasing expenses. This will help your property grow in value over a period of time.
If you’re looking for a passive type of investment, working with a professional property manager is the best way to go, whether you want to invest in a single family property or a multi-family property.
Please contact us at InvestPro Properties if you have any questions or need any help analyzing a potential investment property.