What type of rental properties are best for beginners?

Question

Hello, I want to get started in real estate, I've decided that I want to get into the rental property side, my goal is to eventually build up a big enough portfolio to earn enough cashflow to live off of that. Ive got enough money for a downpayment, maybe not for a 2 million dollar home, but I feel I've got enough capital, however my question is what type of properties should I look at for my first rental property? A singe family home, duplex, condo? Im located in Ontario, and id prefer to invest here for my first home since it'll be my first home and more of a passive investment rather than a priority, any advice will definitely help!!

Joe Gonzalez · Answer

Hello Jefferson,

Here is an overview:

Single Family Investment - This is the most popular investment for a beginner since the deals are easier to find. Also, if for any reason you have to exit the deal (sell it) there are a lot more families looking to buy a single family home than any other asset. When renting it, the downside is that if your tenant stops paying rent then your cashflow stops.

Duplex, Triple, Quadplex - These are powerful investments since you have multiple dwelling units. If one of your units goes vacant your entire cash flow does NOT stop, since you have more than one tenant. These can be great investments since you are under 4 units and can still apply for a conventional type of loan. The downside could be that these assets are more expensive and might require more work (rehab, property management) than a new investor can handle.

I am an advocate of starting with a single family rental, learning the ropes and gradually moving up the asset class.

Account Closed · Answer

@Basit Siddiqi

Do you have experience in all three of these areas to make this statement? Reason I ask, I’ve literally never heard anyone with experience say this and am wondering if you can tell me more.

Theresa Harris · Answer

Is this for a rental or for you to live in at least initially?  you mentioned it will be your first home, so assuming you are living in it, go for a duplex (ie not half a unit, but the whole house with two separate units).  In Canada most duplexes you only buy half.  I'd avoid condos as the condo fees and special levies can add up. They have a lower entry point, but at the end of the day you will come out further ahead with a house. Plus condo boards can change rules on rentals.

Account Closed · Answer

@Jefferson Mondragon

Define best. Highest cashflow? Most secure? Most appreciation? Ease of exit? Fewest man hours required?

Michael Noto · Answer

Very general answer but the ones within your budget that will attract the best quality tenants.

Basit Siddiqi · Answer

@Jefferson MondragonI don't think there is much of a difference between Single Family Home, Multi and a condo.I label them all under 'residential real estate'.Condo might be the easiest of the three since the condo association takes care of everything on the outside of the house.You are only responsible for the inside.

Solome Ejigu · Answer

I started with a SFH, but knowing what I know now my regret now is not starting with a duplex. Live in one, and learn how to manage the other while also getting income to pay for your mortgage. It can be a bit of a dive but you'll learn quicker along the way. If you can afford the mortgage on your own your safe, also your downpayment would be less as an owner occupy which you can use to your advantage and keep some money liquid. Rather than buying your first SFH home for 5% downpayment then your next income property for 20%. Or look for SFH homes with potential for basement suites. Thats just my personal and brief advice. Hope that helps!

Michal Liviatan Carpenter · Answer

You can read more here to get a better idea :

https://learn.roofstock.com/bl...

Toby Hanson · Answer

Single-family rentals are typically the best for beginners. Buy and hold real estate is a great way for investors to diversify their investment portfolios and achieve financial freedom over time.

While income from a rental is considered passive, rental property is far from being hands-off. Landlord responsibilities include:

• Finding a property
• Advertising vacancies and showing the property
• Screening tenants
• Collecting deposits and executing leases
• Tenant communication
• Coordinating maintenance and repairs
• Collecting rent
• Filing evictions, if necessary

One rental property may not require a substantial amount of work, but multiple rental units will. There will be ongoing maintenance and repairs that need to be addressed. Some landlords choose to outsource managing their property to a property management service.

The biggest risk is the tenant. The last thing you want is to evict someone that stops paying and ends up trashing your house. You'll want to screen them well upfront by checking their credit and doing a background check. This can be outsourced as well.

Good luck!

Bruce Woodruff · Answer

I'd start with a basic year lease SFR....not so many moving parts like BRRRs, MFRs and STRs.

Get your feet wet, make the mistakes, lick your wounds and regroup....see if you like it and want to continue.

What type of rental properties are best for beginners?

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