Deciding to invest in one type of real estate investment, and not in another, might be driven by your investment goals, how much money you can make, how much risk you want to take on, your skills and expertise, and, not an unimportant factor, your personal preference.
Since Kennedy Remedy Investments has a focus on investing in multi-family properties, a question we often get asked is about the differences between multi-family and single-family properties. In this article, we’ll outline the main differences and then also address some of the reasons why investors tend to choose one over the other.
A single-family property is built, and zoned, as a single residential unit. It could be a standalone house, it could even be an attached house, but generally one person or family owns the house, and one person or family lives in it. For example, a single-family property can be owned by an investor who rents the property to a tenant who lives in the property.
A multi-family property is built, and zoned, as a building (or series of buildings) with multiple residential units. Multi-family properties can range from duplexes and triplexes to large apartment buildings or apartment complexes. From the perspective of the real estate investor, the multi-family property may be owned by a single owner or more than one owner. The residential units in the property are then rented out to tenants.
Deciding to invest in single-family or in multi-family properties comes down to many factors but there is a commonly held belief that investing in single-family properties is for small investors, whereas investing in large apartment buildings is only possible for very rich individuals or large companies. This comes from two other beliefs:
Skills required. A beginner investor can start investing in single-family properties with little knowledge or skill. You can find your own tenants, get template rental agreements online, and handle tenant calls and minor maintenance issues by yourself. You will certainly “learn on the job” but you can get started. Owning and managing a large multi-family property will, however, require specialized skills in facility management, upkeep and maintenance, legal and accounting skills. Cost as a barrier to entry. Simply put, a single-family house is likely to cost less than an apartment building. For a beginner investor, your available funds may restrict you from starting out with single-family investing. The down payment on an apartment building is likely to be prohibitively large, and qualifying for a mortgage will require proving to a lender that you have the necessary knowledge, skills, and experience.
What if I told you that choosing to invest in single-family homes vs multi-family properties, did not come down to the skills required or how much money you have?
Property syndication makes it possible for investors to invest in multi-family properties without specialized skills. A property syndication will typically rely on specialists to manage the day-to-day operations of a large property, while investors can remain passive and uninvolved in these tasks. Property syndication also makes it possible for investors to start investing in multi-family properties with relatively small amounts. Feel free to read more about property syndication in this blog article.