Single-family vs. multifamily real estate investing is a question many real estate investors ask again and again. Certainly there are advantages to both.
When I started my real estate investing career about 30 years back, I thought buying single-family homes to rent was a great investment and would potentially secure my future wealth.
So I began buying single-family homes and learning the business that went with it, such as financing, upkeeping and the challenges that went with it. Since we bought properties in states scattered across the country, we chose to hire property management companies to manage them. The cash flows were erratic, but the tax benefits of owning and renting them was good. We just kept on purchasing and holding them for retirement.
But I have to confess, this year we sold all of them—except for a duplex that cash-flows very nicely even six years after we acquired it.
Single-family and multifamily homes are great for both seasoned investors and up-and-coming investors. As with any real estate deal, please do your due diligence to ensure the deal makes sense financially and fits your personal goals for your investing business.
“For those considering taking the plunge and investing in multifamily properties or single-family properties, it’s important to understand which investment vehicles do what,” writes Paul Esajian. “Deciding among single-family or multifamily properties is largely about personal preference and goals.”
“When you invest in scattered houses, the operating expenses are higher and management is more intense than it would be for a multifamily rental property with all the units on one site,” Jerry Chautin writes.
“That’s why management companies charge more for scattered houses. It is difficult to monitor for unruly parties, pet damage and illegal activities such as making and selling methamphetamines,” he says.
As a matter of fact, we had that happen to us with a single-family rental home in inland California, where our property management company discovered a meth lab when the authorities cited us. We did get it all abated and re-rented the house, but it cost an awful lot of money in the process.
The capital required for unexpected issues tends to eat in to the cash flow very quickly. Those include—but are not limited to—having to buy a new boiler, air-conditioning replacement or tune up, garage malfunction, tree roots getting too close to the house and many other reasons.
“While the market where the investment is located naturally influences all of these factors, there are a lot of potential advantages to investing in single-family rentals over multi-unit properties,” Andrew Bilen writes. “Particularly for individuals looking to build their portfolio over time, SFRs offer the option of acquiring units gradually, while the strengthening housing market and high demand for rentals help to minimize risk.”
Actually, there are lot more than just three advantages to investing in multifamily. So, after looking at so many ways to invest in real estate, I decided to choose only one path: multifamily investing.
I wholeheartedly encourage investors to choose this route, also. It made sense 10 years back and holds true today. It just makes all the sense in the world!
As if you need any other incentive or assurance that multifamily investments will continue to be great, consider these trends:
Well, as you can see, I really am very bullish on investing in multifamily as compared to single-family. I sincerely hope that after reading this article, you will also look into diversifying and start investing in multifamily. The best game is doing syndications: Pooling money together in accordance with the SEC (Security and Exchange Commission) rules and regulations.
Vinney Chopra is the Founder and CEO of Moneil Investment Group and President of Ideal Investments Group. Since coming to the United States more than 40 years ago - with only $7 in his pockets - he has built four successful businesses as well as his passions: a multifamily syndication academy and youth academy. With a bachelor's degree in mechanical engineering, he added a master's degree in business administration in marketing from The George Washington University, shifting his focus to marketing and motivation. He has been a professional fundraising consultant and motivational speaker for more than 35 years and also is a licensed real estate broker in California. Vinney and his wife started their real estate investments in 1983. He currently owns single-family homes and multifamily units in Texas, California, Atlanta, Arizona and India. People often call him “Mr. Enthusiasm” or “Mr. Smiles” for his positive attitude and commitment to bringing great value to everyone whose lives he touches.
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