For today’s rental real estate investors, opportunity comes in a wide variety of properties. If you have been pondering 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. Investing in rental real estate offers strong long-term profitability and relatively low risk. Several Henrico County rental real estate investors specialize in one special property type for a reason.
It takes time and effort to obtain the capability required to see when you’ve found a great property at the right price. But if you need to make a choice or are looking to expand your real estate portfolio, first take a closer look at what both multi-family and single-family rentals have to offer.
When deciding on a particular property type, there are many things you’ll need to figure out before even starting your property search. For instance, you will need to examine whether you will be able to arrange the financing you need, whether you have the right investment team on board, and which property best suits your particular business acumen and investing style.
Many investors start by investing in single-family homes for a reason. While they may not necessarily be “easier” to buy, they can be less intimidating for investors who are just starting. Arranging to finance a single-family residence is a fairly straightforward process that many investors are already familiar with. Plus, learning the ropes by managing just one property and one tenant can help new investors get up to speed without feeling overwhelmed. There is a lot to learn about buying and managing rental real estate, no matter what type of property you choose.
On the other hand, investors can easily learn 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 less can also be financed using conventional mortgages, making them more accessible in that way.
Some investors choose to invest in single-family properties over multi-family properties because they tend to have a more predictable appreciation and fewer challenges. Under normal circumstances, both types of properties appreciate over time. But calculating expected appreciation on a multi-family property can be a bit more challenging than a single-family property.
The same is true for property management, including leasing and tenant relations. The more tenants you have, the more time and effort it will take to communicate effectively with each one, conduct regular 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 will end up paying will be higher since that percentage is usually based on the number of tenants you have, not your total rental income.
Finally, it’s important to factor your exit strategy into your real estate investing decisions. When it comes time to sell your rental properties, single-family homes are easier to sell. This is because demand tends to be higher for single-family homes, and increased competition means a better sales price for you. By comparison, selling a multi-family property can take longer and be much more difficult to arrange, simply because you are limited to investors looking for multi-family properties. Because they are investors, they will be much more willing to pass your property by if it isn’t priced low enough to make it worth their investment dollars.
In the end, the type of property you choose to invest in is up to you. But now that you have a good 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 Richmond Metro! Contact us online or call 804-417-7005 and ask our Henrico County property managers about our FREE market analysis.
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