So, you’re ready to invest! Should you consider purchasing single family or multi-family homes? There’s certainly rental demand for both types of properties. Which makes the most sense for you as an investor? In this article, we take a look at this very topic. Here’s what you should consider when comparing single family vs. multi-family investment properties.
Purchase Price & Rental Income
Prices for both single family and multi-family homes in Massachusetts have been on the rise for quite some time. The prices of multi-family homes will always be higher for obvious reasons. It’s helpful to evaluate options based on the cost per unit and the potential rental income. For instance, in a market like Lynn, 3-bedroom single family homes average about $400,000 and earn roughly $2,800 in rental income. A two-family home with 3-bedroom units will cost $550,000 or more ($275,000+ per unit) and generate maybe $4,600 rental income ($2,300 per unit). Which do you consider the better option?
Vacancies and Risk
Another important consideration is vacancy. For a single family property, you are only renting out one unit. Thus, a vacancy has immediate impact and can quickly lead to losses. With a multi-family, the extra units act as a buffer. Vacancies might cut into profits but are less likely to generate losses. Of course, long-term vacancies are not good for any property, but there’s certainly less risk when comparing single family vs. multi-family investment properties.
It’s understandable to think that two units means twice the work, but not necessarily. Yes, there are twice the kitchens, baths, and utility systems, but there are also many common features. If you owned two single family rental homes, that’s two roofs to maintain, two driveways to plow during winter storms, etc. You perform some of those maintenance tasks only once for a multi-family. In many ways, you can manage more properties and grow your portfolio more quickly with multi-families than single families.
Single Family vs. Multi-family Investment Properties, Which Is Best for You?
As you can see from the above, we’re big fans of multi-families. Sure, we’re biased because we are MultiFamilyProperties.com. But, you have to admin that we have some valid points for comparing single family vs. multi-family investment properties. As you explore more investment opportunities and expand your portfolio, be sure to use an agent who specializes in investments. Specialized knowledge of this property type is key to good investment decisions. Contact us to connect with an agent in our network.