When I first became a landlord, I assumed that multi-unit properties would generally be the best investments. I imagined myself exclusively owning triplexes and quad-plexes.<\/p>\n
But as the years have gone on, I\u2019ve grown to love single-family residences (SFR\u2019s), as well.<\/p>\n
In this article, I\u2019m going to compare multi-units and SFR\u2019s. I like both of these types of properties, both of which have benefits that are quite different from one another.<\/p>\n
(As a note: In this article, I\u2019m discussing small residential multi-units of 2-4 units.\u00a0 I don\u2019t have any experience with larger, commercial multiplexes … at least, not yet.) J<\/p>\n
\u00a0#1: More Building, Less Land<\/strong><\/p>\n In a rental-property situation, the underlying land is a non-performing asset. What does that mean? You make money on the building (specifically, on rent from the tenants occupying the building), not on the underlying land. Yes, that parcel of land may rise in value, but your strategy is based around monthly cash flow, not long-term capital appreciation.<\/p>\n Multi-units allow you to consolidate multiple rental units on the same parcel of land, thereby allowing you to maximize your performing asset (the building units) while minimizing the \u201coverhead,\u201d so to speak, of the underlying land that you\u2019re required to purchase.<\/p>\n #2: Consolidated Overhead<\/strong><\/p>\n A multi-unit building has only one roof, one set of gutters, one basement or crawl space, one yard that needs termite bait stations and pest control. This represents consolidated overhead. Rather than pay to replace four unique roofs on four SFR\u2019s, you can replace one roof on a 4-plex.<\/p>\n #3: Easier Property Management<\/strong><\/p>\n Why drive to four properties when you can drive to just one? Property management can be easier in a multi-unit, since a trip to one building can allow you to visit many more tenants.<\/p>\n #4: Create a Rising Price<\/strong><\/p>\n The \u201cvalue\u201d of the house will largely be a reflection of your gross and net rental revenue. That means that even in a stagnant economy, where home prices aren\u2019t moving, you can \u201cforce\u201d your property to rise in value simply by stepping up your game and becoming a better manager. If you can cut operating expenses and\/or raise the rent, you\u2019ve just caused the value of the property to rise \u2013 regardless of what\u2019s happening in the overall economy.<\/p>\n