There are different types of real estate rental properties. Which one is better to get? Single Family home? Townhome or multifamily apartment? None of them is better than the others, It all depends on location, buying price, rental price, property tax, insurance cost and other situation and condition that can affect the rental property. After all, nothing matters unless you can get nice rental income with nice tenant who takes care of your property in it, right?
There are pros and cons with each type of rental properties that you choose. I would like to just discuss the pros and cons between single family home and multifamily housing.
Buying and Selling
Single family home can attract either regular buyers or investors. It can be a rental property or just a regular family who wants to buy and live in it. Multifamily housing is limited to investors. It doesn’t mean it takes longer to sell, you just have to market it to the right buyers and the cash flow calculation definitely has to make sense to attract buyers.
Interest rate has always have an impact on real estate market. A prospective buyer for a single family home doesn’t necessarily concern on how the interest rate might affect his/her monthly cash flow since he/she might buy it to live in it. The investor for multi family home certainly has more concern on how it affects his/her passive income.
Vacancy and tenant turnaround
Tenant in the single family home tends to stay longer than in multifamily housing. Multifamily housing will have more turnaround since it has more variety of tenants who live in it. While with single family home, no tenant means zero income, with multifamily housing there are still more wiggle room. Some vacant units doesn’t necessarily mean negative cash flow.
Repairs and Management
Management fee for single family home runs about 8-10% of monthly rental fee while multifamily home can go as low as 4%. Wear and tear in rental property is totally expected, but it occurs more often in multifamily home.
It is easier to maintain small number of people than big number of people. In a single family home, you only have one tenant or one family while in multi family home you will have multiple tenants, multiple families, obviously. When the tenants don’t get along as neighbors, landlord will also get the headache. For example, one extremely dirty tenant might push the neighbors away and eventually will cause vacant units.
Rental price, demand and tenant quality
Single family home tends to be in higher rental price since it is lower in supply. Since the property manager only have to look for one good tenant at higher price point, it gives better chance to select more desirable tenant.
Some apartment complex come with amenities like gym and swimming pool. Although some of them might don’t have in-unit washer and dryer. Single family home will most likely to have in-house washer and dryer but not necessarily gym and swimming pool. But most of the time tenants don’t care about those stuffs.
So, which one do you prefer?