Saturday, 20 October 2018

Short Comparison between Single Family and Multifamily Investment

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.

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