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Landlording & Rental Properties

The Pros and Cons of Single Family Rental Properties

Kevin Perk
Expertise: Landlording & Rental Properties, Real Estate Investing Basics, Flipping Houses, Business Management, Personal Development, Mortgages & Creative Financing, Real Estate News & Commentary
210 Articles Written
Single Family Rental Property

When you mention the term "landlord" to someone, they generally are going to imagine a person who owns large multi-family properties. But many landlords, including myself, own a significant number of single-family rental properties. In fact, I know some landlords who would never touch a multi-family property.

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Single family properties can make great rental properties.  But, just as with everything else in life, single family properties have their pros and cons.  Here is a short list.

Single Family Rental Property Pros

  • There are fewer expenses as tenants tend to be responsible for yard maintenance and all utilities.
  • Tenants tend to stay longer in single family homes.   Single family tenants tend to be in that stage of their lives when they are more settled, often with kids looking for a good school.   As I have said before, turnover is a cashflow killer, and turnover will generally be reduced with a nice home and good tenant screening.
  • A single family home can be sold at a retail price, giving you another potential exit strategy for the property.  Generally, the only person who is going to buy your multi-family property is another investor.
  • Your potential buyer base is much broader with a single family home.  There are simply more folks out there who can and will buy a single-family homes as opposed to multi-family.  So you will have an easier exit if you need it.
  • You may not be expected to furnish appliances.  Many single family tenants have their own appliances.
  • Lower property taxes.  Here in Tennessee, all non-owner occupied multi-family residential properties are assessed at a higher rate for property tax purposes.

Single Family Rental Property Cons

  • When tenants move your vacancy rate is 100%.  When a single family home is vacant there is NO money coming in.  This lack of cash flow can be painful if the unit is not filled quickly.
  • When vacant, theft and other vandalism can be more of a problem because there is no one there to look out for your property.
  • With single family homes as your rental properties, everything you have that can break multiplies.  You have more roofs that can leak, more air conditioners that can go out, basically just more of everything.
  • More upkeep.  There are more fences to repair, eaves and dormers to paint, etc.
  • Management could be more difficult as your properties are more spread out and not all under one roof.  You use a sort of economy of scale.

None of these pros and cons are deal makers or killers, but they may affect your thinking on how and where you want to invest.  It is always good to look at both sides of the coin.

So which do you prefer, single or multi-family?  Tell me why with your comments.

Photo: Universal Pops

By Kevin Perk
Kevin Perk is co-founder of Kevron Properties, LLC with his wife Terron and has been involved in real estate investing for 10 years. Kevin invests in and manages rental properties in Memphis, TN and is a past president and vice-president of the local REIA group, the Memphis Investors Group.
    William Shaffer
    Replied over 7 years ago
    You sort of mentioned this but one con of SFH investing is when you own 10 units you have 10 roofs and 10 HVAC units. When you own a 10 unit property you have 1 of each.
    Kevin Perk
    Replied over 7 years ago
    William, Good point. But you mat have 10 HVAC units depending on how the property is set up. But definitely only one roof. Thanks for reading and commenting, Kevin
    Jessica Sala-Bonin
    Replied over 7 years ago
    Before I owned I’d only rent SF 🙂 It can be a great investment as there are a ton of others like myself out there and def a need for SF rental units!
    Kevin Perk
    Replied over 7 years ago
    Jessica, Very true. Some folks only like to rent single family dwellings. Thanks for sharing and reading, Kevin
    Rob
    Replied over 7 years ago
    My preference is MF units and the main reason for that is when there is a move out (vacancy) I still have income from that property. I have found that there are very few occasions where all the units are empty (2-4 units in my portfolio). For me MF are the lower risk investment.
    Kevin Perk
    Replied over 7 years ago
    Rob, I like them for this reason as well. But that does not mean I will not buy a single family at the right price. 🙂 Thanks for reading and commenting, Kevin
    Sharon Vornholt
    Replied over 7 years ago
    I only has SFH’s. but I can see the benefits of multi-families too. Sharon
    Kevin Perk
    Replied over 7 years ago
    Sharon, Thanks for commenting. As a single family owner only, do you think I covered the cons pretty well? Any other pros? Kevin Reply Report comment
    Kevin Perk
    Replied over 7 years ago
    Sharon, Thanks for commenting. As a single family owner only, do you think I covered the cons pretty well? Any other pros? Kevin
    Dennis
    Replied over 7 years ago
    I do both, at this time I have enough multi’s and unless you get on your knees and beg me to buy your multi I am not interested. Don’t get me wrong I love the cash flow, and vacancies are no big deal after you have a lot of units. I am on the tipping point with multi’s as they are a lot more to manage so one gets to a point where it might become a full time job which I am not in need of. My plan is a little different then most on BP; I don’t want to be a full time RE investor. However I just hired a management company for the multi’s so if this works out, I might be induced to buy some more, but probably not. At this time I am only interested in SF, fix em up correctly (don’t hire idiots to do the work and buy the best materials) rent them out for long term. Sit back and listen to the silence.
    Roy N.
    Replied over 7 years ago
    Dennis: Strangely, I’m looking at the workload and having the opposite response … I need another (16 – 20 unit) multi to put me over the hump where it makes fiscal sense to have a full-time manager.
    Kevin Perk
    Replied over 7 years ago
    Now you’re talking Roy! Thanks for the comment, Kevin
    Kevin Perk
    Replied over 7 years ago
    Dennis, I hear you. But please go by and check them out every once in a while. That silence can be expensive. Sometimes for whatever reason, tenants will not tell you something needs repair, like a leaking roof or other water leak. Do a periodic inspection and do not let a simple problem become a major repair. Thanks for reading and commenting, Kevin
    jeff d
    Replied over 7 years ago
    You bring up good points about SFR’s…..but another con I would add is a biggie: generally cheaper per door costs with multi family. You can usually buy 2 units in the form of a duplex cheaper than you could buy 2 units in the form of 2 SFR’s. And if your multi is in the right condition and location, you can sometimes collect just as much rent per sq ft.
    Kevin Perk
    Replied over 7 years ago
    Jeff, Yep, you are absolutely right depending on your market. Good point! Thanks for reading and adding to the discussion, Kevin
    Kevin Perk
    Replied over 7 years ago
    Jeff, Yep, you are absolutely right depending on your market. Good point! Thanks for reading and adding to the discussion, Kevin
    Ben
    Replied over 7 years ago
    In my area right now (Detroit Suburbs) cap rates on multifamily homes seem to range from 8-11% or so. Cap rates on single family homes are closer to 12-14%. Maybe this is just because I’m better at finding deals on the single family side though. As for the vacancy, I find it really makes little difference to have a SF vacant than a MF other than the security issue. If I have 10 SF or a 10 unit MF and have 1 vacancy I’m still at 90% occupancy, though I suppose if you only have a couple of properties or are in a lower cash-flow area that could hurt more. That said, for an experienced investor I understand that it may be easier to get traditional financing for multi-family, and you’ll most likely make more money per deal too.
    Kevin Perk
    Replied over 7 years ago
    Ben, All good points! Plus, you demonstrate that you really know your market, which is so important for any investor. Thank you for reading and commenting, Kevin
    Kevin Perk
    Replied over 7 years ago
    Ben, All good points! Plus, you demonstrate that you really know your market, which is so important for any investor. Thank you for reading and commenting, Kevin Reply Report comment
    Kevin Perk
    Replied over 7 years ago
    Ben, All good points! Plus, you demonstrate that you really know your market, which is so important for any investor. Thank you for reading and commenting, Kevin
    Jeremiah
    Replied over 7 years ago
    What are your thoughts on financing? It feels like there are pros and cons to all 3 options (SF, small MF, large MF), but I’m not well versed enough to understand them all 🙂 Reply Report comment
    Jeremiah
    Replied over 7 years ago
    What are your thoughts on financing? It feels like there are pros and cons to all 3 options (SF, small MF, large MF), but I’m not well versed enough to understand them all 🙂
    Kevin Perk
    Replied over 7 years ago
    Jeremiah, Don’t worry, that what Bigger Pockets is here for, to help you become more well versed. It semms to me that the hardest to finance are the smaller multi-family properties. There are financing programs for single family homes and there are programs for large multi-family properties. It is the smaller ones that fall through the cracks. A small regional bank is gold to an investor who likes to invest in smaller multi-family properties, as they will do deals many pother banks will not touch. These smaller banks will often open up a line of credit so you can buy these smaller properties (and single family as well). You may have to knock on few doors these day, but they are out there. Thanks for reading and commenting, Kevin
    Sebastien Cloutier
    Replied over 7 years ago
    Renting a house usually requires asking for such a high price to cover all the expenses (mortgage, taxes, repairs, etc.) that I don’t see that it would be worth it. The only good thing about it is that somebody else is paying off your mortgage. But many lenders won’t take care of your property and leave a big mess when they move out.
    Kevin Perk
    Replied over 7 years ago
    Sebastien, It all depends on your market. You are correct, there are many areas where the price of the single family home will not allow positive cash flow, especially if financing is involved. But there are other areas where you can get a single family home to cash flow all day. I know as I have some that do very well. Proper tenant screening and management will eliminate most of the folks who “leave a big mess when they move out.” Screening is key, key, key to eliminating the bad ones. Thanks for reading and commenting, Kevin
    Kevin Perk
    Replied over 7 years ago
    Sebastien, It all depends on your market. You are correct, there are many areas where the price of the single family home will not allow positive cash flow, especially if financing is involved. But there are other areas where you can get a single family home to cash flow all day. I know as I have some that do very well. Proper tenant screening and management will eliminate most of the folks who “leave a big mess when they move out.” Screening is key, key, key to eliminating the bad ones. Thanks for reading and commenting, Kevin Reply Report comment
    Kevin Perk
    Replied over 7 years ago
    Sebastien, It all depends on your market. You are correct, there are many areas where the price of the single family home will not allow positive cash flow, especially if financing is involved. But there are other areas where you can get a single family home to cash flow all day. I know as I have some that do very well. Proper tenant screening and management will eliminate most of the folks who “leave a big mess when they move out.” Screening is key, key, key to eliminating the bad ones. Thanks for reading and commenting, Kevin
    deville
    Replied over 7 years ago
    Would you have a name or # for the small regional bank?
    Kevin Perk
    Replied over 7 years ago
    deville, It is going to depend on your market, what you are buying and in a word, you. I really cannot tell you which one to go to. You are going to have to go knocking on doors. One idea though, look at property transfers and see which banks are funding the deals you want to be doing. Those banks would be a good place for you to start. Thanks for reading and commenting, Kevin
    Kyle Hipp
    Replied over 7 years ago
    I started with duplexes and my last 2 (well 3 If you count my personal residence) have been single family. The key for me was easy of entry as they were all private sales (not on the mls). In this market, I also felt that it was a good diversification because the rents on single family homes are high and if my market shifts to more of a sellers market, I can easily sell at higher prices if the rent demand softens.
    Kevin Perk
    Replied over 7 years ago
    Kyle, You will certainly have more options if you need to sell. There are a lot more folks who will buy a single family rather than a multi-family (let’s not even get into qualifying for mortages on multi-family). I think the expanded exit possibilities is one of the strongest pros of single family rental properties. Thanks for reading and commenting, Kevin
    Kevin Perk
    Replied over 7 years ago
    Kyle, You will certainly have more options if you need to sell. There are a lot more folks who will buy a single family rather than a multi-family (let’s not even get into qualifying for mortages on multi-family). I think the expanded exit possibilities is one of the strongest pros of single family rental properties. Thanks for reading and commenting, Kevin
    Kyle Hipp
    Replied over 7 years ago
    I started with duplexes and my last 2 (well 3 If you count my personal residence) have been single family. The key for me was easy of entry as they were all private sales (not on the mls). In this market, I also felt that it was a good diversification because the rents on single family homes are high and if my market shifts to more of a sellers market, I can easily sell at higher prices if the rent demand softens. Reply Report comment
    Dawn Anastasi
    Replied over 7 years ago
    In my area there is much more demand for single-family homes than MF. People will pay a higher rent per door to get one. The sweet spot is 3 bedroom SF but I’ve done well with 2 bedrooms and 4 bedrooms. (Example: duplex 2 bedrooms rents for $600-$650 but 2 bedrooms SF rents for $750-$825).
    Kevin Perk
    Replied over 7 years ago
    Dawn, Good for you on knowing your market! And you are right, some folks will pay a premium for a single family in a good neighborhood. Thanks for reading and commenting, Kevin
    Jennifer
    Replied over 7 years ago
    I own only SFRs. I think you’ve got the pros and cons covered pretty well once you also add Jeff D’s point about purchase prices per door.
    Kevin Perk
    Replied over 7 years ago
    Thanks Jennifer! And thanks again to Jeff too for helping out, Kevin
    Elizabeth Colegrove
    Replied over 7 years ago
    We currently only own single family and townhouses. In our markets they cheaper with better returns and condition than multi-family. In the towns/areas I have looked, multi-family have yet to make sense.
    Kevin Perk
    Replied over 7 years ago
    Elizabeth, Sounds like you have not found the right deal yet. Keep looking. What area are you in if you do not mind sharing? Thanks for reading and commenting, Kevin
    Shari Posey
    Replied over 7 years ago
    I’m struggling right now in deciding if MF is better than SF. I only have single units now but I am considering an MF. The expenses are what is just not making sense with the MFs. I have a question…for a long-term strategy, would you rather buy/own 2 SFs or 1 fourplex if cost/cash flow were the same?
    Kevin Perk
    Replied over 7 years ago
    Shari, If the expenses do not justify the price, lower your offer price. Do not try to make the numbers fit just so you can get a multi-family. Keep trying one will come along. If I could get the same cash flow out of two units versus 4 I would go with the two. I have a minimum cash flow per unit so the four-plex would have to have double the cash flow of the two houses. Plus with houses you have an easier exit strategy as others have pointed out. Good luck, and thanks for reading and writing in, Kevin
    Mary Dambrosio
    Replied over 7 years ago
    I have a mix of SF’s, townhouses, and multi-family units. By far, it’s tougher to turn over the MF since the buyer-pool is limited. I have had my 4 unit place in Lake Placid, NY on the market for 6 months with only a couple of showings, and no offers. Since it’s 2 hours from my home, I placed it in the hands of a local broker, which I think is a mistake, since they just stick a sign on it and wait for a buyer to appear! When that expires, I will market it myself. (I’m an attorney/ broker) I thought it would be perfect for the skiing family who wants help with the mortgage, but the local broker hasn’t conveyed that message out to anyone. Single family units (including townhouses) are much easier to rent and to sell.
    Kevin Perk
    Replied over 7 years ago
    Mary, You are absolutely correct about the exit strategy, as your example demonstrates. Hopefully you will have some good fortune soon. Thanks for reading and commenting, Kevin
    Alan Mackenthun
    Replied over 7 years ago
    Good article. Shari, it really depends. At this point I have mostly SFR as I bought as many as I could when prices dropped and the cash flow was better there. On the other hand, now I might go for the quad if I could find conventional financing to use only 1 mortgage rather than 4. Also the maintenance should be lower on 1 building rather than 4.
    Kevin Perk
    Replied over 7 years ago
    Alan, Thanks for helping out and for the kind words. Kevin
    Alan Mackenthun
    Replied over 7 years ago
    Good article. Shari, it really depends. At this point I have mostly SFR as I bought as many as I could when prices dropped and the cash flow was better there. On the other hand, now I might go for the quad if I could find conventional financing to use only 1 mortgage rather than 4. Also the maintenance should be lower on 1 building rather than 4. Reply Report comment
    Alan Mackenthun
    Replied over 7 years ago
    Good article. Shari, it really depends. At this point I have mostly SFR as I bought as many as I could when prices dropped and the cash flow was better there. On the other hand, now I might go for the quad if I could find conventional financing to use only 1 mortgage rather than 4. Also the maintenance should be lower on 1 building rather than 4.
    Alan Mackenthun
    Replied over 7 years ago
    We’ve bought mostly townhouses. As long as the association fee is reasonable, we don’t have to worry about exterior maintenance or snow/lawn care and we get good cash flow. When the market is strong we can sell retail and find another deal.
    Kevin Perk
    Replied over 7 years ago
    Alan, Good points. Can the homeowners association ever do special assessments? If so that is one thing I would be cautious of. It is also good to remember that some homeowners associations in some states have a lot of power if dues are not paid. Some can even take your property. So everyone out there, be sure and pay your dues. Thanks for reading and commenting, Kevin
    Kevin Perk
    Replied over 7 years ago
    Alan, Good points. Can the homeowners association ever do special assessments? If so that is one thing I would be cautious of. It is also good to remember that some homeowners associations in some states have a lot of power if dues are not paid. Some can even take your property. So everyone out there, be sure and pay your dues. Thanks for reading and commenting, Kevin
    MTKenstein
    Replied over 7 years ago
    I have 3 SFRs and four 2-4 unit MFs with 3 and 4 br per unit. Granted, most of the MF are section 8, but my cap rates are insane (30-50%) It’s hard to get excited about the SF that are <10% in my area (NOLA). I know I will have high turnover, but I'm young and a long ways from needing to liquidate. This is my FT job, so I can deal with the management headaches. I'm just getting started (9 units bought since June, 4 rented, renovating 5, should have them rented by Dec) but I'm shooting for 100 units in 10 years.
    Kevin Perk
    Replied over 7 years ago
    MTKenstein, In ten years lets have a toast at Commander’s Palace for the purchase of your 100th unit. 🙂 Great city, great plan. Good luck! Thanks for reading and commenting, Kevin
    Geoff
    Replied about 7 years ago
    I have multi’s and mostly SF. I strongly prefer the SF. Turnover is by far the biggest issue and turnover is simply lower with a house. I always hear the economy of scale argument but I don’t fully agree. First, all the multi’s I have/seen always have their own HVAC (prevention is key) so that is no different than a house. Second, I have a 4000 sq ft 4 family, but I have a number of 800-1000sq ft. SF’s. Everything is relative to sq ft. An apartment and a house all have plumbing, electrical, drywall, doors, etc.. I also believe cap rate is relatively the same when comparing similar neighborhoods. Obviously their is opportunity at both, it really just comes down to personal preference. Also, the more units you have, the more spread out your risk is, no matter what you have.
    Kevin Perk
    Replied about 7 years ago
    Geoff, Good points all around. Thanks for reading and for sharing your experience, Kevin
    Kevin Perk
    Replied about 7 years ago
    Geoff, Good points all around. Thanks for reading and for sharing your experience, Kevin
    Patrick O
    Replied over 6 years ago
    Thanks for the article and the comments. We currently only own SFs but the prices are going back up on single families so we are tempted to look for deals on duplexes and/or 4-family units… Reading people’s feedback and your comment was helpful. Thanks!
    Kevin Perk
    Replied over 6 years ago
    Patrick, Thank you for the kind words! I am glad you found the article and comments helpful. Good luck to you, Kevin

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