6 Reasons to Invest in Single-Family Homes
Making investments to build wealth and secure your future is very important, and an excellent way to add to your portfolio is through real estate ownership. When you first get into property investment, though, there’s one big question you’ll need to ask yourself – should you invest in single- or multi-family homes? While both have pros and cons, there 6 primary reasons why we recommend putting your money into single-family properties.
1. Single-family homes are less expensive than multi-family. The initial cost of a single-family home is usually going to be significantly less than what you’ll pay for a multi-family unit. For most people, this scenario works out much better, because it’s less money upfront, and less money that’s tied up in a property. It also provides a way for the investor to diversify, by putting their money into multiple properties at lower costs, rather than one, large multi-family unit listed at two or three (or more) times that.
2. It’s easier to secure financing on single-family properties. Because of the lower sale price, it’s also easier to get financing. Banks would much rather lend you $100,000 than $300,000. Plus, if the property has 5 or more units, you’ll need a commercial loan to close the deal. These types of loans usually have higher interest rates that will cost you more in the long run, or they may be set up as a balloon loan with a variable rate or payment structure that may not be ideal.
3. They appreciate faster. Generally speaking, single-family homes appreciate in value much quicker than multi-family properties. While single-family homes are valued on supply and demand, the value of multi-unit properties is based on the structure’s conditions and the rent that’s coming in, leading to slower appreciation rates.
4. Returns are usually better with single-family homes. Cash-on-cash returns are often higher with single-family homes, too. With a smaller amount invested due to the lower sale price (and this is especially true for homes purchased below market value), investors can realize greater returns on tenanted single-family properties than they can with expensive multi-family units that bring in less rent.
5. They’re easier to maintain and manage. “Mo units, mo problems.” This is an issue that multi-family property owners can find themselves with, as the daily management of these larger properties can be much more complex and time-consuming than dealing with a single-family home. With single-family real estate, you’re working with just one renter, which is far simpler than working with multiple tenants on everything from rent collection to maintenance checks.
6. There is a much wider selection of single-family homes than multi-family. In most markets, single-family homes greatly outnumber multi-family properties, giving investors much more varied options on where to put their money. With single-family properties, the range of prices, sizes, and styles run the gamut, giving investors a huge selection to choose from and find a property that’s ideally suited for them.
These are just some of the reasons why single-family homes offer the greatest investment opportunity, in terms of real estate. And as if these weren’t enough to sway you, think about this: the housing market is booming, the economy is steadily improving, employment is up, and rent is on the rise. The conditions are perfect right now for making an investment in a single-family property, so what are you waiting for?