When you are first thinking about investing in real estate, many people will tell you what types of properties that you should invest in. Will you invest in single family properties or multi-families? It depends who you ask.
What you need to also consider is what your exit strategy is. Are you planning to fix and flip or buy and hold?
Buying single family homes is more affordable than buying apartment buildings. Many people have the cash themselves to slowly accumulate single family properties over time. BUT, single family houses may be more expensive to manage.
You can get great returns on single family rentals if you buy properties below market value. Good deals can be hard to find but are out there if you know where to look. Single family homes can be less stressful and time consuming. There can be many times where chasing rents and possible evictions come up. If one of your rental houses is vacant, then you have a total loss during the time of vacancy.
There is a benefit to building long term wealth with investing in multifamily homes. 2-4 family homes generate income and provide an almost instant cash flow. Multifamily Apartment Buildings give you the opportunity to earn more money in a shorter period of time.
A client of ours recently told me about a great deal on a 4 family home located in Barrington, RI. There aren’t many multi-family properties located in this town and the returns on it were impressive. It is fully rented out and has a history of on-time payments from all tenants. The units were recently renovated by the current owner and the cash flow is a positive $3,600. per month. To him, it was a no-brainer and he went into contract to purchase it.
To buy and hold properties, keep in mind that you will need a good FICO in order to qualify for an alternative conventional loan. At RCN Capital, we offer loan programs from 18-24 months for our buy and hold borrowers. And when you want to start venturing into commercial properties of 15+ units or some mixed use properties, we are also your lender.
Regardless of what you choose to invest in, know your numbers inside and out. It’s a personal decision whether you choose to invest in single Family or multifamily housing and I think it’s important for you to invest in what you know and are comfortable with.