The Benefits of Single Family Rentals
By JD Esajian on October 23, 2013
There is really no best way to get started in the real estate industry. Some investors will focus their attention on multi-family properties while others will never entertain anything more than a single-family unit. It all comes down to what you feel comfortable with as a landlord and what makes the most sense for your specific goals as an investor. For every negative associated with single-family properties, there are two positives. While subjective, single-family rentals are a great way to get started in the investing industry. However, like anything else in investing, much of your decision making comes down to personal preference, strategy and your time-frame.
Most people view their landlord as an individual in charge of several units. In actuality, many new investors are first time landlords for single-family properties. The first, and most obvious reason, is the availability and cost effective nature of these types of properties. The multi-family market was one of the hardest hit during the recession. Getting financing on these properties has still not returned to normal, yet many programs still require 20-25% down payment. Even if you are paying cash, finding multi’s has proven difficult. There are simply not a lot of them available on the market.
With a single family property, you know you have one roof, one yard and one set of tenants. Some people will view this as a negative, but for the first time landlord, this makes things easier. They know they will only have to deal with maintenance on one unit and supply one set of appliances. On one hand, if your tenant walks out of the property, you now have 100% vacancy to make up for. However, on the other side, you only have one tenant to worry about. Most renters of single-family homes tend to stay in the house longer and for the most part will take better care of it.
The true strength of a single-family property comes to fruition when you decide to sell. The demand for a single-family unit will always be much higher than any multi-family. Even if financing turns around, most buyers want to raise a family in a single family property.
There will always be a potential for issues; whether you are renting one unit to one person or you are holding a five unit property. While this is true, renting out one unit holds much less of a chance for property damage than if you had multiple units. Your single family house only has so much space and will only get as much usage as the number of people living there. This should extend the life of the house, appliances and mechanics and keep you away from the house.
If you are an investor that buys mostly multi-family properties, you can look at these as negatives and reinforce your position. That is the beauty about investing. There is no right or wrong approach and there is no definitive statement you can make about any one property or style of investing. Single families may be the preference for new investors, but that doesn’t mean that they are for you.