What Should I Own for an Investment?

I’ve written about the theories of Single Family Homes vs. Multi-Family Homes before. But it has been a while so I thought I would cover it again since it is one of the more frequent questions people seek council on.

Single Family Home

• + Appreciates with neighborhood, not rents.
• + More people want to live in SFH than MFH so easier to rent.
• + SFH rents seem to take a little more pride in the home, IMO.
• + Resale can be to just about anybody.
• – Money down will usually have to be more to get it to break even or cash flow.
• – Rents for a lesser value on the Gross Rent Multiplier.
• – 6 units of SFH could be all over the place instead of in one location.
• – 6 units means 6 roofs that will need replacing, 6 lawns that need mowing…

Multi-Family Homes

• + More security for many investors. After all, if one unit vacant still have other income.
• + For newer, young investor it’s great to live in one side, rent the other (helps when qualifying for loan) and then you can move on and rent other side.
• + Maintenance all in one place. Only 1 roof per “x” number of units.
• + Can cash flow at a much greater rate than SFHs with much less invested.
• – MFHs can be in the middle of “rental” neighborhoods thus limiting their selling power to only other investors.
• – Tend to appreciate along with the value of rents not neighboring properties.
• – When purchasing over 4 units you’ll need a commercial loan with a very large down payment and the bank will want landlord history.
• – Dealing with many more tenants and thus may want a property manager.