While many real estate investors prefer one type of residential property over another, the truth is that it is possible to achieve success with either. What makes the biggest difference is whether or not you follow a particular investment strategy.
There can, however, be definite advantages and drawbacks to owning either single family or multi-family units. These can include the following:
Owning multi-family properties can be a great way to increase your cash flow exponentially. This is because if you own a 2- or 4-family building, you can have numerous tenants paying you rent all at the same time. The flip side is that you will have more tenants to manage – and possibly more phone calls to field in terms of leaky faucets and other issues. Some of the other advantages and drawbacks that go along with owning multi-family property include:
- Better net cash flow potential. With multi-unit property, you have the potential for better net cash flow in comparison to single family property. This is because your price per unit is oftentimes lower.
- More consistent cash flow. When you own multi-family property, if just one tenant moves out, you won’t lose 100% of your rental income – so you will still have cash flow coming in while searching for a tenant to fill the vacancy.
- More difficult to find financing. When purchasing multi-family property, it can be more difficult to find financing. You may also need to have a better credit score, and other financial resources – especially if you are just getting started in this area of real estate investing.
- More difficult to sell. When the time comes to sell a multi-unit property, it can be more difficult to locate a buyer. With that in mind, the property may stay on the market for a longer time period than a single family property.
Single Family Properties
There’s no question that many people prefer living in single family residences. These units can provide a great deal of privacy for your tenants, as well as room to grow. They can also, however, be a lot more work. The primary pros and cons to owning this type of property include:
- Large pool of potential tenants. Because so many people enjoy living in single family homes, you have a large pool of potential tenants. These properties will also be easier to sell than a multi-family property when the time comes to do so.
- Higher rent. Although it can depend on the area, you can usually charge a higher amount of rent for a single family property as versus a multi-family unit.
- Price appreciation. In most cases, the value of a single family property will also generally appreciate at a faster rate than that of a multi-family property.
- Loss of cash flow when vacant. Unfortunately, a single family property can be an “all or none” situation in that, when your tenants move out, you lose 100% of its cash flow until the next renter moves in
- More difficult to manage. This type of property can also be more difficult to manage – especially if you have several single family residences that are located in different areas of the city. In this situation, you may need to consider a property manager.
In either case, investors can be successful if you just work your plan. You can also reduce your time dealing with tenants and maintenance issues by partnering with a competent property manager. This will allow you to still reap the benefits of your investments, without taking time away from other obligations. For more information on working with a property manager in the Orlando and surrounding area, Contact Us.