Why Invest in Single Family Rentals
For a longer-term investment, you can buy properties and rent them. Purchasing apartment buildings or mobile home parks allow you to generate multiple income streams versus a single income on a single-family home. But there are drawbacks to that, too. You have more people to deal with, lower rent payments, and increased management and maintenance.
If you’re just starting out in real estate investment, it might be better to choose a single-family home. There are some pros and cons to either choice. Here are a few things to think about.
Higher Rent Payments
You can typically rent a house for much more money than an apartment or mobile home park. The other side of that is an apartment and mobile home parks generate multiple rent checks. But those checks come with a lot of extra managerial duties and responsibilities.
Location is everything and there are other factors to consider, but single-family homes typically appreciate faster than multifamily and mobile home parks. It’s all just numbers on paper until you sell the house, but it is nice to see your investment grow when your appraised value rises. On the other hand, you have less control over the value in single-family properties since it’s based on comparable sales vs the income it’s producing like commercial properties.
When renting out a single-family home, the tenants are usually responsible for all the utility payments. In an apartment building or mobile home park, the landlord might have to cover some if not all of the utility bills. You won’t be subject to waste and abuse if the tenants are footing the bill.
Better Quality Tenants
This might be debatable since there are good and bad people at every income level. However, house renters tend to be more responsible than apartment or park tenants. They take better care of their yards and are more likely to pay their rent on time.
People renting a house are more likely to stay longer than in apartments but less than in a mobile home park. You won’t have to deal with high turnover, empty units, or interviewing several potential renters. People renting your house will consider it their home. They will treat it better, especially if they are considering buying it in the future.
In a single-family home, you will only have to deal with one person or one family. In the other assets, you have multiple personalities to deal with and they may not get along with each other. You will have to intervene in squabbles and complaints about each other. That’s a headache you can avoid.
Single-family homes have only one furnace, one laundry machine, and maybe two toilets. Multifamily dwellings have multiple appliances and fixtures which will need your attention. This can be expensive, frustrating, and time-consuming. Your tenants in a single-family home might take care of some of these things themselves, too, and you will have fewer things to worry about.
You Can Do It Yourself
You can easily manage one house on your own. If you rent out an apartment or mobile home park, you will have many people and much more maintenance to deal with. You would have to hire a property manager to effectively deal with all the responsibilities and unwanted surprises that come with renting multiple units. Paying a property manager comes right out of your profits, so it’s something to consider when making an investment.
Of course, there are no guarantees in the real estate market. You can have a poor experience renting to a single-family or an enjoyable one running an apartment and mobile home parks. However, keep the above points in mind when considering investing in real estate. You can always other types of properties to diversify your portfolio but when starting out a single-family home can get you some experience and allow you to see if being a landlord is right for you.
If actively investing is not for you or you want to invest but don’t have time, Vecno Capital is here to help you create cash flow, build wealth, and diversify your portfolio all passively. Just sign up for our Investor Portal to get started!