Which is a better place to put your money? Is it better to invest in single family homes or multi-unit rental properties?
You might begin to explore another alternative to invest some of your hard-earned money as the stock market rises and falls like the Rockies. You’ve been merging your equity, and aiming for the next investment opportunity since a year ago.
You had collected tens of thousands of dollars and were ready to find, purchase, and rent a property.
Then you suddenly noticed the market was quite hectic. You haven’t discovered the ideal house for you after a few weeks of searching. And you’re considering broadening your search, both in terms of location and property type.
Initially, you planned to purchase single family homes. It would ideally have a foundation and roof, but poor carpet and dingy paint on the interior, which would prevent many purchasers but be a reasonably simple fix for you. Unfortunately, this form of housing has yet to appear, leaving you to consider if you should invest in single family homes or multiplexes. Are both of these options viable for first-time landlords like you? Let’s find out.
What are the benefits to investing in single family homes?
Renters with a long-term lease –
People who rent houses usually want to stay for a long time. Those who rent condos over a garage are looking for low-cost housing so they may save money and get out as quickly as possible.
Attract more high-quality tenants –
Tenants with money would choose to reside in a peaceful home to avoid noise coming through the next wall. This is most likely a family (rather than a single person), which may multiply additional responsibilities.
Plan B is simple –
If the landlord turns into a disaster, we could probably sell single family homes in a matter of weeks. The ability to sell removes a lot of the burden of the purchase.
What are the benefits of owning a multiplex?
Less demand for purchasing —
Because there are significantly fewer individuals willing to invest their money in a multiplex than in single family homes (almost only long-term investors are interested in buying), we can locate a better price on the property.
Cheaper per unit —
In a particular location, a basic single family home costs around $100,000. A neighboring duplex for $115,000 means the price per unit is only $57,500, which is far less than purchasing single family homes to rent out.
Lower vacancy risk —
With a multiplex, the chances of having 100% vacancy (and hence no money in your pocket) are smaller. You’ll have a more stable revenue flow with more rentable apartments, even if one of your renters decides to up and go soon.
Does that mean investing in single family homes is not a good idea?
Interest rates are now low, but they will most certainly rise in the future.
For a long time, we’ve had historically low-interest rates, but the celebration is coming to an end. Last year in January, you could acquire a mortgage with an interest rate as low as 2.67% — and occasionally even lower.
Rates had climbed to 3.12% by December (which is still good). However, given the current level of inflation, which is at its highest since 1982, expect the Federal Reserve to hike rates much more. They might be 4% by the end of the year.
If you need to borrow money to purchase a rental property, now appears to be the time to do it. All signs lead to getting single family homes as soon as possible. You can still do something about it if you put out some effort, but it may be too late soon.
Let’s sum up the discussion!
Overall, both alternatives may be excellent long-term investments that provide you with the cash flow you require. If you’re sure you’re in it for the long run, the multiplex could be your best bet.
But if you’re hesitant to become a landlord and a wonderful single family home or properties deal comes your way, it wouldn’t hurt to check it out for a year or so to see how it goes. Many people will eventually be looking for a good building to buy. Also to rent out, and then use the cash flow to buy the next one.
But you don’t think it matters if the structure is multiplex or single family at this stage. You want to remain landlords, until you are elderly and then use the money to enjoy a carefree retirement.
So, how about you? Do you prefer single family homes or multiplexes as an investment?