The real estate market slowly recovered from the devastating losses in value suffered from the Great Recession. It’s not such a risk to invest anymore, and one could reasonably expect to make a profit in a short amount of time.
For a longer-term investment, you can buy housing and rent it out. Purchasing apartment buildings or duplex houses allows you to generate multiple income streams versus a single-family home. But there are drawbacks to that, too. You have more people to deal with, lower rent payments, and increased maintenance.
If you’re just starting out in real estate investment, it’s better to choose a single-family home. There are some plusses and minuses to either choice, but overall, I believe single-family homes are the better investment. Here are a few things to think about.
1. Higher Rent Payments
You can rent a house for much more money than an apartment. The other side of that is apartment buildings generate multiple rent checks. But those checks come with a lot of extra duties and responsibilities.
2. Faster Appreciation
Location is everything, and there are other factors to consider, but single-family homes generally cost less and appreciate value faster than multiple-family units. It’s all just numbers on paper until you sell your house, but it is nice to see your investment grow when your appraised value rises.
The investment isn’t as risky because you are spending less money than on an apartment building. Your mortgage will be more manageable and can be covered by your tenants’ monthly payments.
3. Utility Bills
When renting out a single-family home, the tenants are usually responsible for all the utility payments. In an apartment building, the landlord often pays the water, sometimes even the gas and electricity. You won’t be subject to waste and abuse if the tenants are footing the bill.
4. Better Quality Tenants
There are good and bad people at every income level, but house renters tend to be more responsible than apartment dwellers. They take better care of their yards and are more likely to pay their rent on time.
People renting a house are more likely to stay longer. You won’t have to deal with turnover, empty space, or interviewing potential renters. People renting your house will consider it their home. They will treat it better, especially if they are considering buying it in the future.
In a single-family home, you will only have to deal with one person or one family. In an apartment building, you have multiple personalities to deal with and they may not get along with each other. You will have to intervene in squabbles and complaints about each other. That’s a headache you should avoid.
5. Yard Space
Single-family homes almost always have a yard where kids can play. Perhaps there is room for a garden or a play structure which makes the home more desirable to renters. People want yard space for their families. Plus, the more the kids play outside, the less likely they will be to damage your house.
6. Less Maintenance
Single-family homes have only one furnace, one laundry machine, and maybe two toilets. Multiple-family dwellings have multiple appliances and fixtures which will need your attention. This can be expensive, frustrating, and time-consuming. Your tenants in a single-family home might take care of some of these things themselves, too, and you will have fewer things to worry about.
7. You Can Do It Yourself
You can easily manage one house on your own. If you rent out an apartment building, you will have many people and much more maintenance to deal with. You would have to hire a property manager to effectively deal with all the responsibilities and unwanted surprises that come with renting multiple units. Paying a property manager comes right out of your profits, so it’s something to consider when making an investment.
With one house you will have occasional repairs and be required to deal with them, but you can do it yourself. If you are handy, you can make minor repairs. If not, you can establish a relationship with professionals in your area so you can call on them when there is a problem.
You won’t need a property manager or a partner. You make all the decisions yourself, and you won’t have to split up your earnings.
Of course, there are no guarantees in the real estate market. You can have a poor experience renting to a single-family or an enjoyable one running an apartment complex. But keep the above points in mind when considering investing in real estate. You can always venture into multiple units to diversify your portfolio but start with a single-family home to get some experience and to see if it’s right for you. At the very least, you will have some stories to tell.