When it comes to buying an investment property in Ohio, what to choose - single-family or multi-family? Should you be investing in single-family rental properties or multi-family rental properties? When it comes to investing in residential real estate, this is always a hot topic.
When investing in a rental property, you should be looking at the Effective Gross Income (EGI), which is an essential element in determining the value of a property. EGI is income generated by a property including base rent and miscellaneous income like laundry, pet fees, less vacancy, and collection losses.
You can sift through multiple online forums and websites, and even experts and everyone will have a different opinion. However, this article can help you choose which one to go for. Here, we list all the advantages each property possesses:
Single-Family Rental Properties in Ohio
1. Less expensive to start with
Single-family rental properties are best for novice real estate investors, and it costs less and requires less capital, to begin with. Compared to multi-family buildings, single-family rental properties cost a lot less.
2. Better resale opportunities
As easy it is to buy a single-family commercial real estate property in Ohio, it is easier to sell too. This is helped by its comparatively lower price and lower barrier to entry. The buyer pool for such properties is higher too because you can sell to real estate investors as well as traditional homebuyers.
Single-family rentals are one of the fastest-growing segments in real estate, and it is predicted to rise in the coming years. Single-family rentals are attractive to people who are facing student loans, credit card debt and lower wage levels. Also, such properties experience less tenant turnover compared to multi-family rentals.
Single-family rentals have a larger buyers pool and cost less than multi-family apartments in general. Therefore, it is easier to sell one and reinvest elsewhere whenever there’s a market fluctuation.
Multi-Family Real Estate Properties in Ohio:
1. Faster scaling
If you wanted to grow your real estate portfolio by five units, you would have to buy five separate houses in case of single-family rentals. Whereas with multi-family rental properties, you can buy a 5 unit apartment building and that’s that! Even the hassle of acquiring a 5 unit apartment building will be a lot less compared to purchasing five different single-family houses.
You have benefits, with it comes to economies of scale. Since all the units are under one roof in a multi-family apartment, fixing that roof benefits all the houses. Also, there are advantages like you need only one insurance policy; property inspections require driving to only one destination, etc.
3. Higher cash flow:
Unless you own multiple single-family rental properties, multi-family property investment will always translate into higher rental income. Also, when a tenant moves out of a multi-family unit, say 1 out of 10 units, you will lose out on 10% of your income. This is not the case in single-family rentals!
4. You can live there
This is one of the most significant advantages of multi-family investment properties. You can avoid rent by taking up an empty unit in your property. You can also avoid having a second mortgage on a separate primary residence!
However, investing in apartment complexes should be a long term commitment. Multi-family apartments also take longer to sell in the market.
Any investment is a balance of risk, work, and reward. But if you are ready to take on a more significant challenge and move to the next level of investing, then a multi-family project might be the right bet. If you like it simple, then single-family rental properties are your choice! If you need assistance with commercial real estate investment, hit us up anytime!