The Pros and Cons of Single Family Rental Properties
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