The real estate world is still thinking about the age-old question of investing in apartments vs investing in single family homes. There are so many different advantages and disadvantages to each property type.
Either type of property can be easier in terms of investment property financing. One property can give you easy ways to make money in one situation and not in the other. Therefore, investing in any one of these property types pretty much solely depends on your situation and which property works best for you. Mashvisor provides you with the following comparisons that might give you a better idea about which investment property to choose.
Investing in Apartments vs Investing in Single Family Homes: The Millennials Trend (Generation Y)
A first-time real estate investor might neglect to do proper research before going into an investment venture. The types of real estate a beginner chooses to invest in should be based on the current real estate market trends. One of the most noticeable trends in today’s real estate market is the movement of millennials into the adult world. Unlike previous generations, millennials are choosing to marry, start families, and buy real estate later in life. For the real estate market, this means a huge increase in potential renters.
Since Generation Y individuals are skipping building a family for a while, they are not in the market for single family homes. In fact, millennials are simply looking for affordable apartments. Given the increase in this demographic of renters, investing in multi family homes might be the better idea for the time being. A first-time real estate investor can definitely have a quick return on investment with an apartment investment property as the result of this trend.
Related: The Current Housing Market in the US: Pros and Cons for Investing in Real Estate
Investing in Apartments vs Investing in Single Family Homes: The Baby Boomer Trend (Generation X)
The shift of Generation X individuals from single family homes to multi family homes is changing the real estate market. The parents of millennials are choosing to be near other elderly people in their old age. Baby boomers in the millions are selling their single family dwellings and renting out apartments in multi family homes. This is another great reason to choose multi family rental properties over single family rentals. You will have a huge demographic of tenants to choose from thanks to this trend. So, if you aren’t up to renting out to young single people, rent your apartment to the elderly couple from down the street.
Investing in Apartments vs Investing in Single Family Homes: Tenant Pool
Single family rentals bring in different tenants than multi family homes. The people renting out a small apartment will definitely differ from those willing to pay more to rent out a big single family home.
Depending on the demographic in the area you are looking to invest in, it might be better to invest in an apartment. If, for example, you are living in an area where there are universities, it is a good idea to buy an apartment. Apartments attract university-aged kids whose parents will pay quite a bit to house them. On the other hand, if you are investing in an area where there are a lot of young families, it might be a better idea to invest in single family homes because that is what the renting demographic is looking for.
Investing in Apartments vs Investing in Single Family Homes: Appreciation Potential
Many real estate investors want to buy residential real estate for two reasons. The first being that residential real estate is a great way to make consistent rental income each month. This is a great way to get a return on investment quickly. Others are investing in real estate of this type to sell it at a higher price point in the future. The best investment property type if you are looking at resale value is a single family dwelling.
Investing in Apartments vs Investing in Single Family Homes: Affordability
Depending on whether you are buying one investment property or several, affordability can differ. If, for example, you are buying one apartment vs one single family property, the apartment will likely be much more affordable. If you are looking at investing in several apartment units or one single family home, then the single family is cheaper to buy. Affordability is important. Maybe you can only afford a loan for a small apartment and not a big house; this will definitely affect which property type you choose.
Related: Investment Property Loans: Friends or Foes?
Investing in Apartments vs Investing in Single Family Homes: Property Management Differences
A huge difference between investing in a single family home and a multi family property is the type of property management you are willing to get. If you buy several units in a single building, then it may be okay for you to manage the property yourself. On the other hand, if you have several single family properties, it may be very difficult to manage them all at the same time. Depending on your situation, you may need to opt for professional property management.
Investing in Apartments vs Investing in Single Family Homes: Rental Restrictions
The great thing about owning a single family rental property is the freedom you have with it. Freedom in a single family investment property comes in many ways. The most important of those is your ability to rent out the property in pretty much any way you like. Yes, of course, you will have some municipal restrictions, but that’s about it. You can rent single rooms or a full house. Also, you can rent long or short term, depending on the Airbnb laws in your area. You can even choose whether you will allow tenants to sublet or not. This freedom is most definitely restricted with apartments. If you own a single apartment and not the whole complex, you will have to abide by the rental restrictions.
Investing in Apartments vs Investing in Single Family Homes: The Tool to Rule Them All
Investing in the real estate market is all about finding easy ways to make money. Whether or not investment property financing is difficult for a property type or whether it attracts bad tenants are not the only important things to consider. At the end of the day, what matters most is that you get your ROI quickly and consistently. The only way to really understand these margins for any property type is to use an investment property calculator. The real estate investment property calculator will give you the margins which you can use as the final deciding factor between the two property types.
Related: 8 Secrets to Making Money with Your First Rental Property
To find out more about investing in apartments vs investing in single family homes, read more on Mashvisor. Be sure to always do your own research when deciding to invest in any property type. What works for some investors may not work for others. Be sure to have all your calculations in order as well by using Mashvisor’s investment property calculator.