As a small investor in the real estate market, you may wonder whether single family homes or multi-family properties are the better option. Large investors might say that multi-family properties are better because they allow you to scale up your investments at a rapid pace. But for small investors, single family homes often provide a better way to succeed in the real estate investment market. Many reasons exist why single-family homes provide a good investment for smaller investors, including easier financing, higher rates of return, better stability, and opportunities to diversify.
Many small investors choose single family homes because they usually cost less than multi-family properties do. Lower cost means that qualifying for financing is easier for small investors, and that you can often purchase properties more often. Some investors may perceive multi-family homes as a better investment because their value is based on the income they produce. But that can actually make them less profitable, because single family homes are valued based on what someone will pay for them. That means that single family properties well below market value are much easier to find, while a steady supply of single family homes exists making your investment prospects promising.
Single family homes also offer a good investment because of a potentially higher rate of return. If you’ve done your research, you can find many properties that offer a capitalization rate (net operating income divided by current market value) higher than some multi-family properties. Particularly if you can purchase properties in areas where rents are high compared to house values, you might find good potential to make more money on single family houses. Another advantage is that single family homes have historically appreciated more than multi-family properties and tend to hold their value well.
The stability of single family homes also makes them a good choice for small investors. Rental homes tend to have more stable residents than multi-family do. Known for high turnover rates, multi-family properties will likely require more work and expense just to keep the rents coming in every month. The right property management company can ensure that your investment is profitable by selecting great residents, negotiating favorable contract terms, and reducing your overall operating costs.
Finally, being able to diversify your investment matters. When you purchase single family homes, you can spread your investment capital over different areas, hedging against declines in market value. The same can’t be said for a multi-family property. For the same amount of money you’d spend on one multi-family property, you can own several houses in different locations, a smart investment move.
As a small investor, you need the right people to help make your real estate investment goals a reality. At Real Property Management, we have the expertise to reduce your costs and help keep your profits high. With our competitive pricing and guarantees, you can be confident that your real estate investment is in the right hands. To learn more and to find the nearest Real Property Management location, visit our website at www.realpropertymgmt.com.
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