There is a longstanding debate among real estate investors. What is a more lucrative investment: single-family homes or multifamily homes. While both types of properties produce excellent returns, including tax benefits, the rapidly changing housing market and economic conditions have significantly impacted them. Over the years, the popularity of multifamily homes has grown enormously. It’s typically because they offer a more cost-efficient way of living.
However, those who prefer more privacy certainly go with single-family homes. Although there are some similarities between single-family and multifamily homes, both types of properties also have striking differences. Let us delve deeper into it.
Single-family homes vs multifamily homes
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Space & privacy
Single-family homes offer better privacy and more space than multifamily homes. Generally, most single-family homes are around 2,500 square feet, whereas apartment units are only 1,706 square feet. Thus, buying a spacious single-family home or multifamily home depends on how much space you need. In terms of privacy, single-family homes offer better privacy as such housing units do not have shared walls, making them much quieter than multifamily units. You do not have to worry about neighbours bothering you with music or having guests over.
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Investment
Single-family houses are less expensive than multifamily properties. However, when it comes to financing, multifamily homes edges. Investors seeking to invest in multifamily properties get easy loans from banks as there is a constant cash flow from an apartment building due to rents.
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Property Appreciation
Although single-family homes have a higher appreciation rate than multifamily homes, the growing demand for the latter is gradually changing the scenario. In recent years, the need for multifamily properties has significantly increased as it provides a cost-efficient way of living. If a multifamily home in good condition is producing high rental income, it will have a better property appreciation.
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Maintenance Costs
Maintenance and repair costs for a single-family home are significantly higher than for multifamily properties. However, the maintenance costs for multifamily properties could increase if there is more than one unit. However, with multifamily houses, the income from the other units can help cover the mortgage and maintenance costs so long as you find a tenant for the vacant apartment.
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Rental Income
There is an excellent scope for rental income in both single-family and multifamily houses. While single-family homes fetch higher rental income, apartment spaces are easier to rent. The average age group for single-family homes on rent is between 35 and 64. On the contrary, the average tenant age group is anywhere between 18 years old and 70 years old. As a result, if you own multiple units in an apartment, you are likely to earn more rent.
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Tenant Turnover
While single-family homes are still in demand, finding a new tenant is challenging. This is because the average rent for single-family homes is higher than for multifamily homes. As per Dwellsy.com Data, single-family home rents have increased by 37% since 2021. On the other hand, finding a new tenant for multifamily homes is comparatively easier.
Final Thought
Investing in single-family homes or multifamily homes is lucrative and offers. However, you can invest in multiple units from a multifamily property. The returns are far more lucrative than in single-family homes. That said, before investing in any of those properties, do your market research.
Homz Fund is the first-ever national multi-family housing fund in the US. It is developing wellness-centric multi-family housing communities through its sister company Homz Global. Homz Fund offers an excellent opportunity to invest in some of the best real estate properties across the suburbs of the US. These properties will provide a dual benefit of rental yield in the short-term and capital appreciation in the long term.
