Are you wondering if you should invest in single-family homes, a duplex or other multi-family property in Chicago? We will help you take a look at the pros and cons of both! Check out our guide for investors to find out what is right for you!
Whether you want to purchase a single-family home or a duplex, it is likely both will qualify under an FHA loan. This means you won’t need to put a fortune down on the property to get your foot in the door. Some investors swear by single-family houses, while others focus on multi-family properties. The goal is to find the property that will bring in the most profit while being the easiest for you to manage.
The Pro’s of Single Family Investment Property
Single-family properties are usually the easiest type of property to manage. They attract high-quality, long-term renters and are popular with a wide array of prospective tenants. This makes the property easier to sell when the time comes. The maintenance is usually easier with a single-family home as compared to a multi-family home. You’re likely to be more familiar with how things work and won’t have to repairs and replace things as often. It is typically easier to acquire a single-family home as opposed to a multi-family rental.
The Con’s of Single Family Investment Property
You won’t be able to off-set any vacancies as easily. With a multi-family property, even with a vacancy, you will still likely have income coming in from your other tenants. Management costs are usually higher compared to multi-family properties. If you have multiple single-family homes and need to liquidate your portfolio, it can be much more difficult to sell 20 homes as opposed to 1 20 unit apartment building.
The Pro’s Of Multi-Family Investment Property
In contrast to a single-family house, vacancies in a multi-family property are more easily offset. Even if you lose one tenant, you will likely still have another. Management costs are usually lower, at only 3-4% per unit. A single-family home can cost upwards of 10% in management fees. It is much easier to handle 10 units under one roof than it is to run around to 10 different single-family homes.
The Con’s Of Multi-Family Investment Property
A multi-family property is usually harder to sell than a single-family home. Quite simply, there is less of a market for these types of properties. If you are managing the building yourself, you will have many more people to deal with, which means the possibility of many more phone calls at all hours of the day.
What To Watch Out For
Tenant Quality – no matter how you choose to invest, the quality of your tenant is one of the most important factors in your success. Seek properties that are in good neighborhoods and that will attract high-quality tenants. If you own a multi-family property, keep in mind that a bad tenant will drive away a good one
The Rules – There are always tenants out there who don’t want to follow the rules. Maybe they don’t get permission and paint the walls bright red. Or maybe they decide to relandscape to their liking. To avoid major issues, make sure everything is ironed out in the lease. Also, try not to micromanage too much. Remember, this is where they call home and having the freedom to repaint and make other personal touches goes a long way in keeping your tenants happy.
Every property and every investor are different. It is up to you to find the property investment that is right for you! When you are ready to buy, we can help! For advice on your investment strategy, speak to your accountant or financial planner!