Multi-Family or Single-Family?

In this article we compare and contrast multi-family properties vs. single-family properties as investments.

No Simple Answer

There is no simple answer to the question, "Is multi-family or single-family a better investment?" We believe that the property type is not important. What is important is whether the property meets the following criteria:

The property that best meets the above criteria is the property you should buy. Also, the best property may change over time even in the same location. The best buy today may be a single family and a month later a multi-family. Let the numbers be your guide on property selection, not any pre-conceived bias.

Objective Differences

The following table shows some of the more objective differences between single-family and multi-family. Note that the comparison is based on a four-plex or less. If there are more than 4 units, the transaction requires commercial financing, which is a more complex and expensive proposition.

Single Family Multi Family
Financing 20% down If 4 units or less, 20% down
Primary market value determination Market value of similar homes Cap Rate
Vacancy consideration All or nothing Incremental - Each unit is a separate residence
Cost to rent One fee Each unit costs the same a single family home
Market competition Other single family homes Condos and apartments
Typical tenant Families with children Individuals or couples without children
Tenant stability Very stable due to children Less stable, nothing ties them to the location
Future buyer Home buyers or investors Only investors
Maintenance cost $ $$$

Subjective Differences

In Summary

We do not believe that the type of property matters. What matters is satisfying the three property criteria. Always look for the best property, do not let pre-conceived bias cloud your selection.