So you have decided to invest in real estate. It may turn
out to be a great decision because real estate has the capability to provide
greater ROI. Now, you may wonder what option to go for. You have the option to
invest in multifamily or single-family homes. If you want to start with small
investment and want to build cash flow in a gradual manner, you can go for
single family investment. It is largely perceived as a safer option. On the
other hand, you can go for the multifamily investment if you want to get
lucrative return on investment. Nevertheless, the investment in multifamily real
estate can be a bit challenging.
Here, you may think what path is the better one. It is worth
explaining answers of a few questions in this regard.
Can I invest on my own or do I need partners?
This is the question that you may ask yourself while
investing. If you are expecting the ROI to be lower, it would be a bad idea to
involve other investors in the business. More specifically, you do not want to
share your profit when you are planning to have income from a single family
home because this mode of investment doesn’t provide bigger cash flow.
On the other hand, multifamily investment will require you
to look for other investors because it would be a large investment to make.
Moreover, you may not want to deal with the multifamily challenges on your own
because there are plenty. Involving other parties in the business will help you
share the burden. The lucrative return on investment can be divided, and you
will be able to get a reasonable chunk from the profit.
Who is going to manage the property?
This one remains to be a complicated question to answer for
many people. Typically, you will not want to go for the professional property management if you have invested in single family home. More specifically,
hiring professional management for such properties is largely perceived as a
bad idea if investor has free time to manage the property. However, you will
have no option other than hiring professional management if you do not have
free time to manage the property.
Managing a multifamily building is, however, a completely
different animal. Whether or not you have free time, you are always going to
require the services of professional property management team because there is
a huge difference between managing one unit and managing 12 units.
Comfort level with the risk
This one is a tough question to ask but it is something
worth asking yourself. You may want to go for the safer investment options but
you have to keep it in mind that safety typically means reduced cash flow. On
the other hand, if you are capable of managing the risk, you can earn something
bigger. Now, you can fit this question in scenario of single family vs.
multifamily investment.
