Your real estate investment portfolio may be filled with multifamily homes -- and for good reason. These properties generally offer an excellent bang for your buck, with money flowing in from multiple tenants versus just one. However, there’s still room in your portfolio for single-family homes, according to Investar USA. Why? Let’s take a peek at the advantages of adding a single-family home to your multifamily rental portfolio this year.
As a general rule of thumb, single-family homes are easier to maintain than multifamily buildings are. This makes them extremely attractive to landlords who have no intention of employing property managers. After all, the older you get, and the wealthier you become, the more you want to minimize your staffing overhead.
On top of this, single-family homes may offer higher returns than multifamily homes in your area. According to investors, a major advantage of a multifamily building is that it offers economies of scale, or the lower per-unit costs enjoyed by larger entities. However, in some situations, you may find a single-unit property that provides you with a much better return than a multifamily property would. After all, the latter still comes with more expenses, features higher turnover, and demands more management.
Also, note that a multifamily property’s value depends on the property’s generated income. However, a single-family home’s value isn’t based on the income generated; instead, it’s based on what a buyer is willing to pay for it. This means that if you find a real estate market featuring higher rents compared with home values, you could generate more money with a single-family home than you would with a multifamily property.
The overall lesson here for real estate investors? Don’t discount the power and value of a single-family home in today’s rental market.
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