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Single-Family Vs. Multi-Family Housing: Which Investment Is Better?

One on-going debate in the real estate industry is whether it is better to invest in single-family or multi-family homes. Both options have their respective strengths and weaknesses, and the ultimate answer depends upon the individual situation of the investor. Single-family housing is a more manageable choice for a beginning investor, however, for someone who has raised more money and has more experience in the field, a multi-family property may be a better choice.

Single Family Home Investment

Single-family homes are a popular option for new investors because they simply require less money. Because of this, one can make a profit fairly quickly. It is also easier to make your money back because the properties are cheaper for investors but still can be expensive for tenants, especially in popular urban areas like New York City or Philadelphia. On the other hand, single-family homes have their drawbacks as well. For one, if you purchase the property and a tenant moves out, you will have to find another person immediately or you will lose a large amount of money quickly. This is not an issue in multi-family housing where one tenant moving results in a less-consequential loss, even if they are not immediately replaced. Also, when managing a single-family home, the owner will most likely have to maintain the premises themselves, which is more costly both in time and money.

Multi-family Home Investment

Multi-family properties involve a different situation with other challenges; to manage a multi-family unit requires more money initially. However, that money will often include a management company: professionals in the field who are more experienced and will do the work for you. With more tenants, you do not take nearly the hit you may in a single-family home if a tenant leaves and you are not able to find an immediate replacement. It is easier to serve more tenants in a multi-family home because there are simply more units and thus more space. As mentioned before, the main issue with multi-family property investment is simply financial; in many cases, a lot more money is required. Also, it is more difficult to find a good deal on a multi-family home in today’s economic climate because of soaring real estate prices.

Final Decisions

Ultimately, as is often the case, choosing how to manage your money is a very personal decision. It is quite possible that many of the debates occur because one individual personally benefited from one option while others had success with another. The fact is that there is no one correct way to invest your money in real estate; only the correct way for you at any given time. One universal principle is that one must do their due diligence before taking on such a project. Much research and objective self-reflection will be required before making your decision. However, someone who is well-informed and has the means to properly pursue such work could end up with a great return.

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