At the beginning of the year, it is normal for real estate investors to wonder what the best real estate investments 2019 are. There are many types of rental properties you can choose from. However, the types of rental properties should be carefully studied if you want to be making money in real estate.
There is an ongoing debate in real estate and that’s: Would buying a condo vs single family home be better for an investor’s business? In order to help you make the right choice when buying rental properties, we decided to explore which property type- condo vs single family home– would qualify as one of the best real estate investments 2019.
#1 Condo vs Single Family Home
Before drawing conclusions on whether condos for sale or single family homes for sale would be the best real estate investments 2019, it is necessary to take a look at each property type individually.
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Condos for Sale
This type of investment property is a multi family housing unit otherwise known as a condominium. Such properties can be either constructed as apartment buildings or similarly to single family homes.
In the first scenario, the condos are separate units in a large residential real estate building. The difference between apartments, however, lays in the ownership of the investment properties. While apartments are often owned by a single entity, condos are individually sold.
The second possibility is that condos are constructed as detached houses. Still, they are considered a different type of investment property than single family homes. That’s because even when condos are built as detached homes, they share common grounds such as gyms, pools, etc.
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Single Family Homes for Sale
Single family homes represent single detached dwellings. Such properties are completely separated from any other real estate properties. Single family homes often have a private yard and direct street access. Moreover, these residential properties do not share any common areas and do not require community maintenance either.
The previous characteristics of each property type are only a small part of the subject of condo vs single family home. In order to get the full picture of the matter, it is important to observe the pros and cons of both rental property types. This will make your decision on buying rental properties an easy one.
#2 Advantages and Disadvantages of Buying a Condo
Let’s begin with the ADVANTAGES of buying a condo for investment:
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Affordable Real Estate
One of the reasons why condos are considered one of the best real estate investments 2019 is the fact that they fall into the category of affordable real estate. These income properties are relatively inexpensive on the real estate market, especially when compared to single family rentals. Even beginner real estate investors can start by investing in condos and developing their rental property business further.
Related: Here Are the 10 Most Affordable Real Estate Markets for 2019
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Rental Property Management and Maintenance
Another key benefit of investing in condos is rental property management and maintenance. As the property shares common areas with other units, an investor is not required to maintain all of these areas. This job is typically done by community service providers. Therefore, the landlord should only invest time and money in the condo unit itself and pay extra fees for the maintenance of common/exterior areas. This is quite different when investing in single family homes.
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Higher Demand in the Rental Market
Last but not least, we can argue that condos are easier to rent out on the market because there is a higher demand for them. That means that they generate high occupancy rates and consistent rental income. This phenomenon can be explained by the fact that the current young generation prefers renting multi family units. Millennials start thinking about creating a family and renting a bigger space only later in life. However, this demographic typically works or studies and needs accommodation. The high demand results in a high return on investment for condominiums.
Of course, as with everything else, there are some DISADVANTAGES of buying a condo:
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Rental Restrictions
First and foremost, condos typically come with rental restrictions. Such might be imposed by the on-site community for example. Many people do not want tenants on the premises of the multi family homes as tenants might make noise, cause damage to the common areas, etc. Therefore, you need to carefully consult with the other owners or the HOA before renting out your property.
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Real Estate Investment Loans
Another problem is using real estate investment loans. Condos are affordable, yet hard to finance. You may have a hard time getting traditional mortgage lenders to give you the money for investing in these properties. Some mortgage lenders require a high down payment. Some even request the owner to live in the property for a specific period of time before being able to rent it out.
#3 Advantages and Disadvantages of Investing in Single Family Homes
In our discussion of condo vs single family home, the time has come to review the pros and cons of buying single family rentals. Let’s start with the main BENEFITS:
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Higher Real Estate Appreciation
The major pro of investing in a single family home is the real estate appreciation. You are in full control of maintaining and upgrading the rental property. This way you can constantly increase the resale value of your investment. For this reason alone, many property investors claim that single family homes are the best real estate investments 2019.
Related: How to Force Appreciation on Your Income Property
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Type of Tenant
As previously mentioned, multi family units are typically rented by younger people. It is sometimes the case that such tenants misbehave and damage the property in some way. When it comes to single family homes, the tenants are typically young families who want to settle down. This might give a real estate investor piece of mind that the rental property will be taken good care of.
Related: Tenant Screening Process: Red Flags Landlords Should Not Ignore
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The Freedom Single Family Rentals Give
Of course, the freedom associated with this type of investment is a huge advantage. You are able to sublet the property to whoever you want. You are able to manage and maintain the rental property in whatever way you like.
Yet again, there are also some DOWNSIDES that come with investing in single family homes:
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Vacancies
It might take longer to find tenants for your rental property as there is a huge demand for apartments and condos at the moment. Moreover, once vacant, your property might stay this way for a while. Investing in a few multi family units results in lower vacancy rates. Because buying multiple single family homes is a little more difficult, it can be hard to avoid negative cash flow at times.
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Cost
Last but not least comes the cost of such an investment. Single family homes are hard to finance at first due to their initial property value. Moreover, the maintenance and upgrading of the property are also more expensive in comparison to condos.
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Conclusion
Both condos and single family homes are great investment opportunities for 2019. Still, both rental property types have their pros and cons. So when deciding which is one of the best real estate investments 2019, we advise you to take into consideration the location, demand, population, and, most importantly, conduct investment property analysis.
Which type of investment property will you go for? Either way, you can find the best one with Mashvisor. To learn about your options for signing up for our services, click here.