As a new real estate investor, the question of buying either a Multi-Family Residence (MFR) or a Single Family Residence (SFR) Raleigh rental property is not easy to answer. Like most things in life, there are pros and cons for every option. You only need to know what suits you best within those two after you learn the important investing points. Real estate investing, both MFR and SFR, can be a good investment. Once you plan to accomplish a long-term goal, you can make a choice that will help you achieve success.
Why Choose a Multi-Family Residence?
At first glimpse, a multi-family residence investment may look like it generates more income. This is because more units to rent equals more money, true? But that can vary depending upon your long-term goals for your Raleigh rental property. Here are four reasons why you should choose an MFR.
Property Costs
An overall cost of an MFR will be more expensive than an SFR each time. When it comes to cost per unit, however, MFR’s cost is much lesser. Furthermore, your expenses to maintain and manage that unit will be also less on a per unit basis. For instance, you got 2 SFRs and 1 MFR with 2 units. The MFR only needs lower costs for repair and maintenance. For plumbing repairs in MFR, you can do one extensive job on both units. Meanwhile, on SFRs’ case, you pay for two plumbing jobs separately which will mean a higher cost. Also, your state may demand an onsite employee if the MFR is above a certain number of units.
Financing
One major point you may overlook about property financing is that even individuals with the best credit might see a bank impose limits about the number of mortgages you can have—usually up to 10. But if you finance 10 MFRs with 5 units each, then you can say that 50 units are under your name. Not only that, you get to benefit from the cash flow paid by those tenants.
Vacancy Expenses
If your SFR stays vacant, clearly the costs for that unit comes from your own expenses. Whereas, with a partially rented MFR, you can compensate some, if not all, of the cost from the rent of the occupied units.
Cash Flow
It may be mentioned previously, but this topic needs to be tackled separately. Usually, with MFRs, you’ll immediately earn cash, particularly with new units. MFRs age, but their appearance doesn’t noticeably age at all. Most of that initial cash flow will be paid for maintenance and upkeep. So never forget that aspect in selecting which Raleigh rental property type you wish to purchase.
Why Choose a Single Family Residence?
Knowing about MFR’s advantages, why would others still pick an SFR investment instead of an MFR? It depends greatly upon your goals. If your goal is to invest in a property and see a better return on your long-term investment, then SFRs suits you best. Here are five reasons to select an SFR.
Location
Frequently, an SFR is situated in a better area than an MFR. The location is usually a peaceful neighborhood, different from where apartments are situated. Nice property locations most likely result to lesser vacancy periods. With that, location remains to be a significant factor to consider in real estate.
Tenant Quality
Many property management companies disclose that SFR tenants are usually more watchful about their property compared to MFR tenants. The reason is that they treat SFRs as their own home instead of treating it as a mere place to dwell. SFR tenants have more concrete long-term residential goals as well.
Tenant Turnover
Tenant turnover is the main reason why real estate investors exhaust most of their money. That’s why SFRs are a better choice for a Raleigh rental property. Tenants who rent longer only mean that constant property advertising, showing, and releasing are useless.
Appreciation
SFRs grow their value by age, so the chances to gain income from property appreciation is a considerable amount.
Exit Strategy
Talking about long-term goals, with an SFR, you can sell the house and earn the income once your Raleigh rental property is paid off. You can also choose a 1031 exchange. If you manage it correctly, you can generate considerable profit at the end of your investment which can finance a retirement or other investments.
So, what type of rental suits you best? That revolves on your goals and current situation. Regardless of what Raleigh rental property type you plan to buy, a property management company must be there for you every step of the way.
Curious to learn more about Raleigh property management? Don’t think twice of calling us for more details.
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