Investar USA focuses on placing capital in real estate deals in select markets. The company has even started a series of blogs to educate and inform everyone about all things real estate and investment. Today’s blog is a great example of this as it explores apartment buildings and single-family homes and compares them as investments.
The truth of the matter is that there are a lot of people out there who want to invest in a single-family home. After all, the market seems perpetually vibrant, with many individuals looking at having a single-family home as one of their top goals in life. However, for investors, putting their money in an apartment complex with over four units may seem just as tempting.
While many real estate and financial experts mention that there isn’t a concrete answer on which investment is better, investors, especially young ones, may put the situation against a context of factors that influence them.
For example, in the finance industry, there is a huge difference between residential properties that have one to four units as opposed to apartment buildings with five or more units. Investors of the former will follow the Residential Lending guidelines, while the latter will have to go by the Commercial Lending guidelines. While the guidelines can be found online, it’s best to consult with real estate professionals on the matter, especially if investors are looking for the right lenders. There’s also the fact that not every bank can finance both types of investments.
As far as valuation is concerned, residential buildings with one to four units use the Comparable Sales Approach. The price of the property will depend on the sales prices of neighbors who are selling or have sold their properties. As for apartment buildings with five or more units, the Income Approachof valuation will be used to determine the market value. Investar USA explains these approaches as being dependent on the net operating income of the entire building.
Investar USA is a leading North American residential and commercial property developer specializing in renovating and repositioning diverse properties throughout the U.S. and Canada.
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