Single Family or Multifamily

[Alex Nassar]

Hi all, I am new to RE investing and am currently in the research stage trying to develop a strategy to pursue. I have a healthy income and have built a solid financial base for my age. I am looking to purchase a rental within the next year and am torn between SINGLE FAMILY OR MULTIFAMILY. If you are an experienced investor can you please provide your personal thoughts and experiences?  Thanks, looking forward to reading them.

If it helps, I am looking for Class A or Class B properties as I don't necessarily need the cashflow right now and am okay waiting 3+ years. Ideally I could breakeven YoY for the first few years and not float too many costs so I can continue saving and investing.

[Tanner Lewis]

Quote from @Wale Lawal:

@Alex Nassar

Choosing between single-family and multi-family properties as an investment strategy depends on various factors, including your financial goals, risk tolerance, management preference, and the real estate market dynamics in your target location. Here are some considerations:

Higher Initial Investment: Multi-family properties are generally more expensive than single-family homes, requiring a higher down payment and potentially higher financing costs.

Management Complexity: Managing multiple tenants, leases, and potential tenant issues can be more complex and time-consuming.

Local Market Demand: The demand for multi-family units can vary significantly by location, potentially affecting rental income and property value.

If you are more interested in Class A or B properties and have a less cash flow-dependent plan, residential properties can be a simpler place to start. They may provide a more reasonable point of entry into the real estate market with consistent growth potential. However, multifamily properties may offer more considerable long-term rewards if you're ready to take on the challenges of maintaining numerous units and are interested in gradually creating a larger revenue stream.

The optimal decision ultimately comes down to your own investment objectives, risk tolerance, managerial skills, and the particular market dynamics of the regions you're thinking about. To obtain further in-depth knowledge, speaking with seasoned investors, real estate brokers, or property managers in your intended area may be helpful. What's more, comparing the financial models of the two investment kinds in the region of your choice can help you choose which one best fits your financial and lifestyle goals.

 I absolutely agree that the property type depends on what your investing strategy is. I assume you are referring to small multifamily deals (2-4 units), but these deals will be more focused on cash flow since you have better economies of scale with a higher unit count. I consider single-family homes more of an appreciation play since most homebuyers only look for one unit. These properties are more susceptible to buyers overpaying because they are emotionally attached to the house. First, I would set your investing goals and then determine which strategy and property type best align with your goals.