More privacy
The most important benefit of a single-family home is that it usually sits on a piece of private property and doesn’t share walls. Meaning you have a lot more privacy!
👍 One term you may have heard used fairly often is a single-family home. But, what is a single-family home exactly, and how is it different than other types of homes?
👍 “A single-family home is an independent residential structure that sits on its own land and is designed to be used as a single dwelling unit, having just one kitchen, unshared walls, and unshared utilities,” says Texas real estate agent Benjamin Ross.
Pros of single-family homes
More options for exterior décor
Another benefit of a single-family home is that it is much easier for you to personalize your landscaping. Indeed, you can modify or restructure your own place or land without hassle or anyone disagreeing and, or interrupting.
Single Family & Multi-Family
🔔 Single Family Homes - Pros
- Generally, SFH appreciates faster than MFH.
- Traditional financing rates are more competitive.
- There is a larger pool of buyers/sellers of you can sell/buy quickly.
- No common areas or walls are shared which minimizes tenant conflicts.
- Ease of purchase equity given the number of foreclosures on market.
- Better quality tenants.
- Single utility meters so tenants pay for all utilities.
🔔 Multi-Family Homes - Pros
- Typically higher cash on cash returns as price per door tends to be lower.
- Property management fees are lower as all units are consolidated.
- Generally, rents are less, which expands your renter pool.
- Loss of tenant has minimal impact as other units are producing rent.
- Financing is tied to the property’s financial performance rather than the buyer’s financials.
- You can force equity as the property value is determined by the net operating income (NOI) and capitalization rate (Cap Rate)
🔔 Single Family Homes - Cons
- Generally, cash on cash return is not as high as MFH.
- Property management rates tend to be higher due to economies of scale.
- If you lose a tenant, you do not have other units bringing in rent.
- Traditional financing limits you to 10 loans and 25% down.
🔔 Multi-Family - Cons
- More tenant issues as walls and common areas are shared.
- Additional maintenance costs for common areas and pools.
- Appreciation is tied more to rents than the market.
- Generally appreciate slower than SFH.
- Tenant placement tends to cost more.
- Additional management and cost for units that do not have separate utility meters.
- Tenants generally do not stay as long as SFH so you will have more turnover and make-ready costs.
WHO YOU SHOULD ASK FOR
The most important thing you can do as a new investor, who is deciding between single-family and multifamily properties, is to surround yourself with wise and reliable people. Investing is not something you need to do on your own.
Find a broker who knows the details of the sales and the rental market in your local area. Also, look for a property manager who understands rental values and the local tenant pool. By doing those, surely, you can make an informed decision about what and where to buy.
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