Comparing the Benefits of Single Family vs Multi-Family Housing Investments

Renting out residential properties like apartments and single family homes is one of the frequent starting points for investors. A single family home portfolio usually comes shortly after flipping homes but before moving on to other multi-family dwellings. Self-management of these properties comes with a unique set of challenges, but can create a stable source revenue even during slow economic growth.

Many investors have found that having single family homes in their portfolio is an excellent step along the learning curve of real estate investing. Having one or two homes gives experience in managing the needs and frequently asked questions of tenants, and with the constant turnover in home ownership around the country, it is relatively easy to get started. For home flippers, it is even easier because you are used to quick turnarounds and buying houses at a good value.

Still, whether you are dealing with a single-family home or multi-family dwelling, there is enough day-to-day business needed that it’s worth investing in a professional property manager. They can field the average concerns and issues that come up, freeing your time to focus on the big picture and growing your wealth.

One of the biggest challenges within a single family home portfolio is scaling it up. The more homes you own, the more chances there are for something to go wrong. Two hundred houses means two hundred roofs, two hundred mortgages, two hundred properties to oversee. Even with a professional property manager helping you out it’s a lot to manage, especially when you compare that to an apartment building where those same two-hundred properties can be condensed into one or two buildings.

Many single family home investors might begin with a portfolio of single houses, but tend to take those same experiences and re-invest their money later into apartment buildings and multi-family housing complexes. They are simpler and more organized, and also tend to have higher ROI than single family homes during an economic downturn.

During the Great Recession, many forms of investment spiraled downward. New housing suffered one of the biggest hits. Even single family home rentals went downhill because the new housing that couldn’t be sold became rentals instead. However, people living in multi-family units oftentimes do not have to downgrade further even during periods of economic hardship. At the same time, people who no longer can afford the single-family rentals are now looking at apartments, driving up demand.

Even during periods of relative economic prosperity, there is still a demand for rental units. They frequently act as a starting point for the younger generation, while they are building wealth en route to home ownership, and also for older generations who may not want the stress of maintaining their own property.

Stability is a major advantage for any real estate investment. No matter what state the economy is in, people are still looking for a place to live that they can call home. Unlike other investment idea that change drastically over time, real estate investors tend to grow with experience, rather than exit entirely.

Single-family home portfolios are a great starting point for those with less experience who want to start small. For large scale investments, multi-family housing is a more efficient option, and it will also have better flexibility during up and down markets.

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