Investing in rental property is a great way of securing a second income stream. However, there are many different types of property and some may get you a better return on your investment depending on factors such as location. One of the questions that potential investors face is whether to put their money in apartments or single family homes. There are advantages and disadvantages to either option.
The Pros and Cons of Apartments
When you invest in apartments, you're likely to enjoy benefits such as:
Lower price per unit compared to a single-family property
Lower down payment on the property if you're planning on staying in one of the units
High appeal among young tenants who prefer houses close to the city and their favorite hang-out spots and also elderly people who prefer houses with lower maintenance requirements on their part.
However, there are also several disadvantages to multi-family properties including:
Higher overall cost can put the property out of your reach or put a strain on your finances until the rental income starts to flow in.
Less privacy and space for individual renters may make it hard to attract tenants with families
The Pros and Cons of Single Family Homes
A single-family home will have advantages such as:
Low overall cost which will make an individual unit affordable enough when making the initial purchase
Larger space in the house and outside will help to attract tenants who need the extra space e.g. people with families
However, the downsides of single-family homes are also worth noting and they include:
The buying price may be inflated since the investor will be bidding against individuals looking to buy a home. Such individuals may make emotional bids and make the property unprofitable.
It will be difficult to attract individuals who prefer to be close cities and other hubs of activity
If you plan on hiring a management company, they are likely to charge you more if your properties are not in one location.
Making a Decision
As an investor, your decision should be guided primarily by the potential to make money. Whether you had your heart set on one type of property or another, you should always choose the one that you're most likely to get a good return on your investment on. Whether it's warehouse condos, flats or a single family home, you should make the decision based on the numbers at hand.