Is It Better To Buy Single-Family or Multi-Family Rental Property?

Most property management training and property management consultants start with a real estate property that’s already owned by the investor.

In today’s article I wanted to take a step back, ignore what you already own, and think about potential future purchases.

As a property management consultant I’m often asked if single-family or multi-family investments are the better choice.

There’s not a right or wrong answer to this question and I think a lot of this answer comes down to what your personal preferences are regarding residential rental property investments.

=> Property Management Training Manual

Is This The Time To Buy?

Either way, as I advise my property management consultant clients, there will certainly be strong opportunities coming up in the residential investment market, on both the single-family and multi-family investment side.

I don’t have a crystal ball, and I’m not ready to advise my property management clients to move just yet.  Instead, I think it’s time to keep an eye on the market, do some on-going investment analysis, so that when the time is right you’re ready to pull the trigger and make decisions you’re comfortable with.

My personal view as a property management consultant is that the market hasn’t bottomed out yet.

The way I define a bottomed out market is When there are 10 properties for every one buyer.

Don’t get me wrong, I never suggest trying to time the top or bottom of the market.  I’ve personally tried to do this – maybe it’s human nature – and the results are never good.

The definition I like to use of a bottomed market is, "When there are 10 properties for every one buyer."

So while we're not at the bottom yet I think we soon will be, and there will soon be excellent investment opportunities for rentals, short-term buy-rent up-flip, and long-term hold positions.

Back To Our Original Property Management Consultant Question

Is it better to invest in single-family or multi-family residential property?

=> How To Rent My House

A good property management consultant will go through the investment process step-by-step.

To try and answer this question, let's start from the end first and take a look at potential exit strategies:

Single-Family Investments

With single-family rental investments there are three main exit strategies:

1. Sell to an owner-occupant, with the first step being to sell to the tenant renting your home
2. Sell to an owner-occupant who’s not your tenant, which means you’re probably going to need to do a lot of updating and some improvements before you put the single-family rental back on the market.
3. Sell your single-family portfolio to another investor, and let them go through the first steps above.  This exit strategy is easiest to do if you own your rental homes free and clear, since you won’t have to deal with each of the lenders involved on the individual properties.

Multi-Family Investments

With multi-family investments your exit strategies are a little more limited, but also require a little less work.

1. Sell to another multi-family investor
2. Try to “go condo”, assuming planning and zoning allows this and you’ve got sufficient upside to through the time and expense in doing this.
3. After you go condo, sell the individual units using the methods I covered in single-family exit strategies.

Property Management Differences and Investment Appreciation

Two other factors to consider in single-family vs. multi-family investments are the differences in property management and the appreciation between the two property categories.

I’ll cover these topics in future articles.

I hope you’ve found this property management training article useful on determining whether single-family or multi-family residential investments are the better choice for you, and have gotten some good information to discuss with your property management consultant.

Jeffrey Roark

Property Management Training eBook

Tips To Rent A House