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Multi-family vs. Single-Family Homes

Hopkins Multifamily Housing Building in a Modern NeighborhoodFor today’s rental real estate investors, opportunity comes in many different choices of properties. If you’ve been analyzing whether to invest in multi-family or single-family rental homes, it’s important to note that there are both pros and cons for both. Altogether, investing in rental real estate offers strong long-term profitability and relatively low risk. Various Hopkins rental real estate investors specialize in one particular property type for a reason.

It takes time and effort to gain the proficiency required to determine when you’ve found a great property at the right price. If you want to expand your real estate portfolio, first get a closer look at what both multi-family and single-family rentals have to offer.

When selecting a particular property type, there are a few things you need to find out before even starting your property search. For instance, you will need to examine whether you will be able to secure the financing you need, whether you have a good investment team on your side, and which property is right for your business acumen and investing style.

Other investors start by investing in single-family homes for a reason. Though they may not exactly be “easier” to buy, they can be less overwhelming for investors who are just starting. Arranging to finance a single-family residence is a fairly straightforward process that some investors are already aware of. Also, learning the basics by managing just one property and one tenant can help new investors get into the swing of things without being intimidated. There is a lot to learn about buying and managing rental real estate, regardless of what type of property you choose.

On another note, investors can easily gain experience in 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 challenging. But with multiple tenants, you can expect multiple streams of income to offset the higher expenses. Even though all multi-family properties can offer steady income and higher profits, the smaller multi-family properties, like duplexes or triplexes, can maintain potential for rental property investors who want to go bigger. Properties with four units or less can also be financed using conventional mortgages, making them more accessible in that way.

Many investors choose to put resources in single-family properties compared to multi-family properties because they seem to have a more secure appreciation and fewer challenges. Under normal circumstances, both types of properties appreciate over the years. But calculating possible appreciation on a multi-family property can be a bit more challenging than a single-family property.

That also applies to property management, including leasing and tenant relations. The more tenants you have, the more time and effort it will take to communicate effectively with everybody, accomplish regular property evaluations, and finish routine property maintenance. If you partner with a professional property manager, you may be able to get a reduced rate for a multi-family property. But the amount you will end up spending would be higher because that percentage is usually based on the number of tenants you have, not your total rental income.

Finally, it’s critical to factor your exit strategy into your real estate investing decisions. When the opportunity arrives to sell your rental properties, single-family homes are easier to sell. This is because demand is generally higher for single-family homes, and increased competition signifies a better sales price for you. In contrast, selling a multi-family property can take longer and be a lot more difficult to manage simply because you are limited to investors looking for multi-family properties. Because they are investors, they will be much more inclined to disregard your property if it isn’t priced low enough to make it worth their investment dollars.

In the end, the type of property you want to invest in is your hands. But now that you’ve got a strong understanding of the pros and cons, you can decide what best fits 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 Viking! Contact us online or call 612-442-8850 and ask our Hopkins property managers about our FREE market analysis.

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