Single Family versus Multi-Family Rental
If you have been wanting or thinking about investing in residential real estate then you have probably asked yourself which type of asset should I invest in, Single Family Rentals or Multi Family? Both can be good investments and both have their pros and cons. Below we will show you why Single Family Rental could be the option for you.
More Affordable
Single –family rental properties are less expensive than multi-family, simply because of the size. It is much easier to buy a single-family property than a multi-family because they are more affordable.
Lease Time
On average it takes less time to lease a single-family property than multi-family, which increases cash flow quicker. SFP offer convenience to potential tenants to view the property
Tenant Quality
Many experts claim that SFR attract better quality tenants, which means they are more likely to pay their rent on time, stay longer and keep the property in better shape. All these factors reduce your stress in collections, leasing and maintenance.
Tenants versus Tenants
Single-family tenants do not have other tenants to squabble with. Dealing with issues because tenants are mad at each other causes frustration and vacancy issues.
Utility Bills
In most cases the tenant pays for all the utilities in a single-family property because they are the only ones using the service. They will make sure the lights are off and the water doesn’t stay running. Generally, multi-family property landlords pay for the utilities, adding an extra expense, which lowers the cash flow.
Diversification and Portfolio Growth
Yes, multi-family will increase the value of your RE Portfolio much quicker, however it is one property so they are all associated with the same risk. Using the same amount of money and leverage on SFR allows you to diversify your portfolio by purchasing in different geographic areas, schools, cities, states and asset sizes.
Utilities & Major Repairs
Maintaining a multi–family property is significantly more expensive than maintaining a single-family property on sure size alone. With multi-family properties, HVAC units are larger and more expensive to repair and replace. Plumbing and electrical are connected so one issue could affect multiple tenants which leads to rent credits and vacancy. Cash reserves need to be larger to handle the larger costs associated with multi-family properties. Single-Family costs are much smaller and do not affect another property.
Liquidity
Single-family rentals are easier to sell and sell much quicker than multi-family properties because of the affordability the pool of investors is larger and because families looking for a home will be in the pool of potential buyers.
Partners
You can always partner with someone else, however the affordability of SFR gives you the freedom of choosing a partner, whereas investing in multi-family you will most likely need some sort of partner.
Insurance
In the insurance world a single-family property is any property that is between 1-4 units. This gives investors multiple options to shop because all the major carriers such as State Farm, All-State and Farmers will insure these smaller properties and it is much less than multi-family properties. Multi-family insurance is considered commercial insurance and is more expensive and harder to insure based on the amount of carriers willing to insure the property.
Funding
Similar to insurance, banks underwrite single-family properties differently from multi-family. It is easier to get funding on a SFR than getting a commercial loan for multi-family properties
Lower Risk
All in all, single-family assets have a lower risk than multi-family assets because the properties are less expensive, easier to fund, greater diversification and the loan is less likely to default. Lower costs on deferred maintenance, repairs, property management and insurance.
If you’re looking for investment property opportunities and/or property manager in Tulsa, Oklahoma, we hope you will give us a call. We’d love the opportunity to talk to you and let you know what we can do to help manage your property in the Tulsa market. Please contact us at Renters Place and we’ll show you what makes us different when it comes to Tulsa property management.
918-728-8080 / info@rentersplace.com
