Buying a Rental Property? How to Choose Between Single-family and Multi-family Homes

Buying a Rental Property? How to Choose Between Single-family and Multi-family Homes 

Entering into the real estate market requires time and monetary commitment. The purpose for purchasing rental property determines whether you should invest in a single family or multi-family dwelling. In either case, you should prepare short or long term goals, be cognizant of your financial health and monetary comfort zone, and conduct a comparative market analysis before considering a real estate investment.

Here are some of the things to consider when choosing between single-family or multi-family:

Short Term Versus Long Term Investments ⏰🔒

For investment purposes, a multi-family dwelling provides the owner with more potential rental income than a single family dwelling. However, if the purpose is to claim the new location as a future domicile, then investing in a single family dwelling provides the buyer with time for relocating. One should be aware, however, that rentals are not eligible for homestead exemptions. With the exception of Delaware, Pennsylvania, New Jersey, and Rhode Island, all states offer some type of homestead exemption for primary residences. As a result, if changing one’s domicile is part of the long-term goal, then considering the purchase of a single family for a temporary rental, until one is ready to change domiciles, may prove advantageous.
 

Investment Considerations 📥💵

One must be prepared for the initial rental preparation. Plumbing and sewage lines must be in working conditions to avoid impending disasters. Adequate electrical service and outlets, in combination with internet access, attract financially secure tenants. If one depends on registered, licensed, and insured contractors to provide the necessary workmanship, one must also be prepared for delays in the delivery of goods, inspections, and completed work orders. If one’s finances are not stretched beyond his or her monetary comfort zone, then time may present the only obstacle.

Location Versus Location 📍

Any real estate investor must consider location. One should look at the demographics of an area, the percentage of violent versus non-violent crimes committed in an area, and the future plans for development of any surrounding areas. Usually the rating of the local high school will also provide insight into the stability of the surrounding communities.

 

Consult A Reputable Agent 👩‍💼

Before making an investment, one should consult a licensed and experienced real-estate agent familiar with area rentals. The agent should provide information regarding long term versus short term available rentals. In addition, if there are deed restrictions, the agent should provide the prospective buyer with the necessary information.

Want to learn more tips and things to consider before buying a rental property? My 30-Day Action Guide provides a step-by-step process on how to get started! To get a copy, click the link here.