Are Single Family Homes or Apartments Better?

Question

I am interested to hear opinions on whether more doors is really better. Lets hear the pros and cons of owning single family homes versus apartments. Give me three or four bullet points on why each is better or worse.

Crystal Smith · Answer

I'd like to give you 3 or 4 bullets but I only have 2.

• We stopped purchasing single family homes to hold because it always bugged us when a house was not producing cash flow because of a vacancy.  A vacant unit on an apartment building never bothered us though.
• We were making more $ flipping Singles than holding them even w/ the tax consequences

Sri Voodi · Answer

From a investor stand point

SFH - Pros

More freedom to do whatever you want to the property

Tenants tend to live longer in SFH, and they care for the property

SFH - Cons

Additional costs like gardening, pool maintenance etc

Big ticketed repairs like roof

Condos - Pros

Common areas, roofing, gardening, pool maintenance taken care of

Water/trash/solid waste taken care of

Condos - Cons

Unprofessional HOA - trust me they can be pain in a**

Sharing walls - unruly neighbors can give your tenants sleepless nights - vice versa

Tenants tend to eventually move to SFH

High HOA fees

Demanding tenants can and will drive you crazy with common area repairs even though they know you have no control on them - Hot water/Bees etc.

I have dealt with both, I would always pick SFH over Condo given an option

Clayton Plank · Answer

@Joe Splitrock depends on your goals and experience.

With Multifamily/apartments the positives for me are when you have a vacancy you have other units paying so the pain is not as bad. You only have one property tax and one roof  that is spread among several units unless you are going for multi building apartments. Units are together vs spread out at different addresses.

The negatives for me are 5 or more becomes commercial (Different loans, insurance,). The larger apartments require more time and maybe employees to be on site during business hours. Have multiple tenants at one location so you may have tenant arguments to deal with.

Single family positives for me are SFH tend to appreciate quicker. They are easier to exit if you change directions as you can market a home owner and investors. Don't have to worry about sub metering utilities.

Single family negatives for me are if you have a vacancy you have no money coming in. Have several properties to maintain vs one location. Multiple loans, insurance, trusts or LLC. They rarely cash flow as well as multifamily. Normally more expensive per unit.

Clayton

Joe Splitrock · Answer

@Clayton Plank I used to think the same way about income coming in. I had a duplex that combined both sides rented for $1100. I had a house renting for $1100 at the time. In this situation with two properties it sounds better to have only half the duplex empty. However lets say you have ten homes and one is vacant. Only 1/10th of your income is gone that month. If you have 10 duplexes and two vacancies, now you have the same income loss. Since ten duplex is 20 units, you have twice as many potential vacancies as single family in this example. I started coming to the conclusion that more doors was more vacancy. Lots of good points though, thanks for your post.

Are Single Family Homes or Apartments Better?

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