One of the most common question Ashcroft Capital gets asked is, what`s better? Investing in single-family real estate or multifamily properties? While Ashcroft Capital is (for obvious reasons) a huge advocate for investing in multifamily properties, they advise investors to assess the type of involvement they’re willing to commit to when choosing which would be a better fit. While both generate income and are often said to be no better than the other, it’s best to carefully weigh your decision.
Multifamily properties differ from single-family properties as this type of property can host more than one tenant. Multifamily properties encompass apartment buildings, condominium communities or any real estate containing more than one unit. Single family properties, on the other hand, include homes that house one family – this can be a condo, a house or a townhouse amongst others.
There are several advantages associated with investing in single family properties that cannot be guaranteed with multifamily investments. One of which is a broader range of potential buyers. Single family properties often sell quicker for this reason. In addition to this, because you will be dealing with a singular tenant, there is less risk for conflicts to arise. Landlords only have one tenant to hold accountable for payments and proper property care.
However, some might consider this to be a disadvantage when the tenant decides to vacate the unit. With the tenant gone, you will not acquire any other income to offset the vacancy. Another disadvantage is the cash flow – investing in single family homes rarely amounts to the cashflow you can gain from a multifamily home investment. And in spite of having a broader demographic in comparison to multifamily consumers, single family homes tend to charge higher rent rates and are typically located in less convenient areas, away from the high density locations that many multifamily units occupy.
As for investing in a multifamily property, one of the more highly valued pros is its potential cash flow since each unit is typically slightly lower in price in comparison to single family homes. Having rent from more than one tenant helps to cover operating costs. This is especially helpful being that there are fewer vacancy issues when investing in multifamily units. Another significant pro worth noting is the amount of control multifamily property investors have in the future valuation of the property, whereas single family homes are subject to economical factors.
Of course, this too can be seen as a disadvantage if you’re not willing to put in some work and creativity to generate maximum income from the property. Maintenance does tend to be higher in multifamily properties with building appliances or services having to be replaced from time to time. In addition to this, some are discouraged by the mere thought of tenant disagreements and a tendency to sell at a slower pace than single family real estate.
Though both are investment properties, some questions you should take into consideration when choosing between the two are:
- Are you willing to or capable of covering costs when your single family unit has been vacated?
- Does the simplicity of investing in a single unit outweigh the cashflow benefits of a multifamily property?
- What’s more important to you? Selling quickly or expanding your portfolio?
- Are you willing to hire a team of professionals to manage the daily maintenance of a multifamily property?
Consult with one of our members to decide if multifamily property investing is for you!
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