Investing In Multifamily vs Single-Family House

It’s times like this when I truly realize how big the real estate world is and how much it contains, starting from the different options of investments to multiple different types of properties, all you have to do is pick and choose your new stream of income.

But obviously, you can’t just aim a finger at one and put your whole capital in it, hoping for the best outcome. Choosing where to invest can turn into a big dilemma when you don’t know enough to actually realize which investment is the best for you. Which brings me to the main point of this blog post - which household is better to invest in?

Investing in Single-family house:

The single-family house is a property that is designed for, you guessed it - single tenants, which is considered as the biggest advantage of the property, as working with one tenant and meeting all their needs is supposed to be much easier for a person who is planning to become a landlord of the property, instead of investing passively in it.

However, having one tenant isn’t as great as it might seem - the chances of staying without income are too high here, you are either renting the whole property or have a 100% vacancy and no income, there is no in-between

Additionally, the studies of Dave Peniuk show that the profits generated from single-family homes are pretty disappointing and cash-flow is basically non-existent: Dave bought 2 single-family homes, together for $147,000 and total rent of both was $1,220 a month, while the monthly expenses on both houses were $1,200 leaving him with a profit of $20 a month!

$20 a month? Aren’t we investing in real estate to generate better income and turn our lives around? Is working with one tenant worth losing all the possibilities of growing wealth?

Investing in Multifamily house:

Multifamily households remain as investors favourite property to invest their capital in, as compared to any other types of property, multifamily stands out with its possibilities of generating stable cash flow, possible by multiple living units it contains, meaning that if one or two units are vacant, you are still earning money from others.

Additionally, statistics show that the average monthly rent rose 2.9% year-over-year to $1,685, up from the 2.1% growth of a year ago, which means that the income of the multifamily investors are growing daily and are definitely much more than $20! And if once again, we will bring Dave as an example, after the fail he faced with a single-family house, he generated a profit of $550 per month with a multifamily household.

The one aspect of the multifamily properties that many consider as a downside is an idea of working with multiple tenants and trying to fix their problems daily. However, you can always invest in multifamily apartments passively.

For example, more than 90% of the multifamily investors, have purchased the property through apartment syndications, where the properties are fully taken care of by the general partners (GP) of the deal, who are responsible of managing the property daily, working with tenants, generating the money for their passive investors (LP) and dividing the profits to them.

Conclusion:

If you are interested in the real estate because you are looking for the easiest and safest way of growing your wealth, multifamily apartments are definitely the better investment choice, especially if we are talking about the multifamily syndications!