Some investments require more time and monetary commitment, and some less. Depending on your reason for purchasing a rental property, find out how to choose between single-family and multi-family homes for your next investment.
The most important is to:
- find out how much you can borrow for your investment
- prepare your short and long term goals
- get educated on the realities of both investment types
- be aware of your financial health and monetary comfort zone, and
- consult real estate professionals to help you find the best deals
Make sure to do this before considering ANY real estate investment.
See How Much You Can Borrow for Your Single-Family or Multi-Family Investment
Multi-family units tend to be more expensive real estate. That’s why the first step in your choice between a single-family or multi-family investment should be getting your mortgage pre-approval!
If your mortgage financing cannot cover the cost of a milti-family home, then your choice is already made.
It takes less than 1 minute to fill out the mortgage pre-approval form at AQRE Lending! Learn how much you can borrow, Apply Today!
Short Term Versus Long Term Investments
For investment purposes, a multi-family investment provides the owner with more potential rental income than a single-family home. So if cash flow and income are your top goals, then a multi-family property may prove advantageous.
However, if your long term goal is to claim the new property as your primary residence, then investing in a single-family home provides you with a better option.
You should be aware, however, that in the U.S., rentals are not eligible for homestead exemptions. With the exception of Delaware, Pennsylvania, New Jersey, and Rhode Island, all states offer some type of homestead exemption for primary residences.
As a result, if moving into the new property is part of your long-term real estate plan, then buying and temporarily renting out a single-family until you are ready to move it may prove advantageous for you and your family.
To learn more about using your investment property as your primary residence, read our in-depth article on the AQRE Home blog.
Investment Considerations for Single-Family and Multi-Family Homes
You must be prepared for the reality of both types of investment, and the initial rental preparation.
- Will your homes pass inspection to be considered rentable? This includes plumbing and sewage lines, and internal wiring, which must be in working condition to avoid impending disasters.
- Does the home offer high quality utilities, including high-speed internet, good power voltage, effective heating, to attract financially secure tenants?
- Will you be using a property manager for this home, or managing it yourself? A property manager can be a good option, especially if you are buying a multi-family investment.
- Have you drawn up quality tenancy contracts to avoid future headaches with your tenants?
- Have you put some money aside for initial improvements? While not necessary, improvements like a fresh coat of paint or a new kitchen will increase your rent and attract higher quality tenants from the get-go.
These considerations should be on your mind regardless of your investment type, but they can also help you narrow down your choice between single-family and multi-family investments.
Location Versus Location
Any real estate investor must consider location.
You should look at the details of your chosen area. Some areas attract more multi-family unit renters, while others attract more families in search of single-family homes.
Before making your choice between a single-family and multi-family investment, consider:
- the demographics of the area (age, education, family size)
- the percentage of violent versus non-violent crimes committed in an area
- the future plans for development of any surrounding areas
- the percent of the population that rents vs owns their home
- the projected population growth of the area in the future
Usually, the rating of the local high school will also provide insight into the stability of the surrounding communities, and whether families of single people looking for smaller rental units, will be making up your demographics.
Why is the location so important when buying a home? Find out now.
See hundreds of exciting homes with all the location data you need, using the Property Finder tool on AQRE Home!
Consult A Reputable Real Estate Professional
Before making an investment, you should consult a licensed and experienced real estate professional familiar with area rentals to help you choose between single-family and multi-family homes.
They should provide information regarding long term versus short term rentals, and this will make you feel even more confident about your investment decision.
In addition, if there are deed restrictions, the real estate professional should provide the prospective buyer with the necessary information.
To speak to real estate professionals with 20 combined years of experience, get in touch with our AQRE Home real estate team.
- Buying a Rental Property? How to Choose Between Single-family and Multi-Family Homes