Buying real estate is becoming vogue again, most people are wondering what type of housing unit to purchase. Our comparison of single family homes and multi family homes, would at least give any first time home buyer what to expect.

Just for clarity sake, the word multi-family refers to two to four family homes. Both types of real estate investing comes with some advantages and disadvantages. There are a lot more single family homes, and most times, the prices are lower than multi-family buildings.

If you’re new to real estate, and want to know if this is the best time to buy any property, you should checkout this article.

A single family house is designed to be occupied by just one family, while a multi family home will have additional units that can be rented out for income.

As long as the multi-family home if within two to four units, acquiring a mortgage is not that difficult. In some cases, it might be easier to get a mortgage for multiple units, than just one unit housing.

Investing in Single Family Homes

When asked to define single family home, the best answer that comes to mind is that, it’s a building designed with enough rooms for a single family to occupy.

Now that might be too simplistic, because I have seen some single family properties with enough space to accommodate several families.

So to make it easier, a single family is known as such, if the certificate of occupancy, states likewise. So regardless of how big the house is, the CO is the ultimate judge of the number of units.

Single family dwellings, if you can buy them in bulk, do come with some unique advantages. If you look in any real estate market, single family homes are plentiful, and that’s what most first time home-buyers are looking for.

On average, single family homes tend to have stronger appreciation over the long haul, than multi family buildings. In fact, there are some communities where single family homes is the only accepted form of housing.

The community might grant you permits to add more space to your home, but it will still be a single family building.

A single family residence will have lower taxes and home insurance cost. Since you’re not renting out any unit in the residence, your insurance premium should be much lower, than if you owned a multi-family building.

Single Family Dwelling – Pros

They tend to show faster appreciation in value, than a multi family home.

The pool of potential mortgage bankers vying to lend you money is vast, and unmatched by any other type of property. Your home loan rate is also very competitive, and with good credit score you should get the lowest interest rate for any type of real estate investment.

Since majority of buyers are looking for single family properties, they tend to sell much faster than a multiple unit building.

Nothing is shared with any tenants, thus eliminating any potential for conflicts.

If you do buy one as an investment, you can have the sole tenant responsible for all cost associated with running the property.

Single Family Homes – Cons

When you break down the per unit cost, you pay a lot more for a single family home, than you would if you’re trying to invest in a multi family property.

If you do rent it out, getting a management company to take care of the property is next to impossible, due to not enough units. And if you do find one, you’ll be charged a much higher maintenance rate.

Any vacancy can become fatal, financially. If your well screened tenant is now unemployed, they can stay in your real estate property for many months free of charge, while you try to evict them. Meanwhile you still need to make the monthly insurance, and mortgage payments.

Sometimes, you might not have enough income to qualify for the needed mortgage, simply because you have no additional unit that can bring in extra income.

In a bad real estate market, you’ll be competing with all the other one family dwellings for the small pool of buyers, which then leads to much lower prices.

Multi Family Real Estate

If you have the right attitude and principles in place, real estate investing can be the vehicle to much needed financial freedom. Just like every other investment, timing is everything.

You should be seeking to purchase multi family buildings during a down real estate market, while selling when all the buyers wake up from their financial amnesia.

A multi family is any residential real estate with more than one unit. With the right combination of units, you can have the tenants pay off your mortgage in due time.

With several multi family buildings in your portfolio, you can hire a management company, and live almost where you choose to.

Multi Family Homes – Pros

Multi-Unit Properties comes with much lower per-unit acquisition cost, as compared to a single family dwelling.

You’ll have greater income diversification. One tenant moving out, will not leave you with zero income. Your other remaining tenants rent should help with your housing bills, including mortgage payment.

It’s much easier to find a management company for your multi family property. Do make sure you screen any potential firm thoroughly, as there are a few “bad apples” that can ruin your real estate property with bad management.

If kept for a long time, you’ll experience tremendous appreciation in value, especially if the area rents has gone up tremendously.

It is much easier to find a tenant for a unit in your building, than trying to rent out a whole house.

When you go for mortgage financing, the additional income from the other units will be added to you yearly income, thus substantially increasing the amount of mortgage you can afford, and qualify for.

Multi-Family Building – Cons

You’ll have to do landlord duties, and that sometimes has no time limitation unless you contract it out, which adds to your monthly expenses.

If you’re weak, and cannot say no to other families in time of dire need, you might just lose your building.

The bank holding your mortgage expects to get the monthly payment, regardless of your financial condition, and you have to have the same attitude with your tenants, or you’ll go broke.

If you lack the will to confront a tenant that just lost his or her job for your rent, then please stay away from multi-family buildings, or buy one and contract out the management to an outside firms.

You pay higher home insurance cost, due to the additional tenants.

You have to do a much better job of screening new tenants, as one bad person can drive away the other tenants, in your multi family building.

You might experience higher turn-over ratio, especially in good economic times.

Real estate will always be one of the best ways to create your own fortune, but you have to learn when to buy, and when to sell.

Regardless if you’re searching for a one family home or a multi family building, knowing the underlying principles that makes real estate appreciate in value, is what’s needed for creating lasting wealth.

A single family home is sometimes easier to acquire, because there are many available for sell. But it might not serve you well, if you’re looking to rent it out. Your tenant moves, and you’re stuck still paying the mortgage and utilities.

Multi family dwellings might initially cost you more, but the per unit cost is much lower, when compared to a single family home. Do not buy a multi family building, if you lack the wherewithal to deal with tenants a certain way.

Real estate investing is still a good way to make lots of money, provided you have a plan, and go with the type of property that compliments your finances, and adds to your positive strengths.