Single Family Vs. Multi-Family Rental Properties

Hello this is The Atypical Hustlers. We are slowly increasing our rental portfolio and we have both single family residences as well as multi family properties. We have certainly seen the pros and cons of each side of things. So if you have officially pulled the trigger or finally got the spouse talked into investing in real estate then this might be the first question that arises. Which type of property is the best? Its certainly not a get rich quick scheme by any means. Especially if you’re looking to invest in rental properties for you to hold onto for the long term.

There are so many variables that go into finding the perfect rental property. Location, property values, rental rates, and much much more. We want to toss most of this out for this discussion. Since we are strictly focusing on the benefits of each of the property types.

Are you managing the property yourself?

When we talk about Multi Family properties we are talking about properties that are from 2-4 units. More than this is more on the small apartment side and then you start looking at full time manager and other employees. Then obviously less is just a single family home. The plan on rather or not to manage the property yourself can be used in determining which property is for you. If you are a truck driver, over the road, and only home once every two weeks, then maybe a 4-Plex wouldn’t be for you. On the flip side, if you’re planning on living in a unit and that will be your full time job then a 4-Plex is probably perfect for you. This is an excellent investing strategy by the way. This decision doesn’t have to be made right off. If you can get your cashflowing numbers to pencil out then maybe hiring a property management company is the way to go.

Single Family Vs Multi-Family

Single family residences is obviously less work. In a comparable neighborhood the Single family residence will probably be cheaper on the purchase price. The game changer for us in the debate is the vacancy rates. When we project out if a property is going to be a good investment we look at properties vacancies and how that affects the cashflow of the property. We calculate a 16.67% vacancy rate while determining a properties worth. This percent is equivalent to 2 months. We have been investing for several years and we sure don’t want to spread ourselves too thin.

Here’s the difference. From a cashflowing perspective, we could have around 2 months of no money coming in on a single family residence. With the Multi-Family properties we typically always have money coming in every month even when we have periodic vacancies. Ideally we don’t want any vacancies, and sometimes we go an entire year and have none. We just like to be realistic.

Single Family ResidenceRent IncomeExpencesCashflow
January $1,000$400$600
February $1,000 $400$600
March $1,000 $400$600
April$1,000 $400$600
May $1,000 $400$600
June $0$400-$400
July $0$400-$400
August $1,000$400$600
September$1,000$400$600
October$1,000$400$600
November$1,000$400$600
December$1,000$400$600
Totals:$10,000$4,800$5,200

Multi FamilyUnit 1Unit 2ExpencesCashflow
January $500$500$400$600
February $0$500 $400$100
March $0$500 $400$100
April$500$500 $400$600
May $500$500 $400$600
June $500$0$400$100
July $500 $0$400$100
August $500$500$400$600
September$500$500$400$600
October$500$500$400$600
November$500$500$400$600
December$500$500$400$600
Totals:$5,000$5,000$4,800$5,200

We used identical income and expense numbers for the sake of the argument. The point of these tables is to point out the negative cashflow on the Single Family Residence. Notice that the Single Family Property has -$400 in the months of June and July. This is why The Atypical Hustlers prefer the multi family route opposed to the Single Family property. Most of the time we are always having positive cashflow on the multi unit properties.

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