Whether you’re investing in real estate as a business venture or to generate passive income, it’s important to understand the difference between single-family vs. multi-family properties. Single-family properties are typically more expensive per unit than multi-family homes, but they offer more flexibility, privacy, and space.
Multi-family homes are often less expensive per unit and single units are typically easier to maintain, but they can also come with restrictions that limit your ability to make a return. Ultimately, the decision comes down to budget and investment objectives. Here’s what you need to know when considering the purchase of a single-family home vs. multi-family home.
What Is a Single Family Home?
A single-family home is a type of residential property that consists of one dwelling unit. Single-family homes are typically stand-alone structures, though they can also be attached to other dwellings. This type of home is typically owner occupied, but can be an excellent option for real estate investors who prefer to purchase and lease out standalone homes.
While these homes are usually occupied by one family, some single-family homes may have multiple levels—each with its own dwelling unit. For example, a house with a basement apartment would be considered a single-family home, and a duplex (two units on one property) can be converted into a single-family home by knocking down walls.
What Is a Multi-Family Residence?
A multi-family home is a type of residential property composed of two or more dwelling units. These homes can be attached or detached, and they are typically owned by one person or entity. Multi-family homes are often used for rental purposes, though they can also be owner occupied.
Multi-family homes can come in many different forms, the most common of which is an apartment building with multiple dwelling units on one property. Other types of multi-family homes include condominiums, townhouses, duplexes, and triplexes. Multi-family residences come in all shapes and sizes, from small apartment buildings to large complexes with hundreds of units.
Which Is Right For You?
The decision of whether to purchase a single-family home or a multi-family home depends on your investment objectives, needs, and preferences. If you’re looking to limit your per-unit cost, individual units in multi-family developments might be right for you. If you want larger structures that offer tenants more privacy and freedom, a single-family home might be a better choice. Ultimately, the decision comes down to what you value most in an investment.
Why Choose a Single Family Home?
There are many reasons why someone might choose a single-family home over a multi-family home. Single-family homes tend to be more affordable than multi-family complexes (though not individual units), and they often command higher rent than multi-family units. This is because they offer more privacy and freedom than multi-family properties.
And, if you own a single-family home, you won’t need to worry as much about complaints from tenants related to noisy neighbors or shared spaces. Likewise, many single-family homes aren’t subject to invasive homeowners associations (HOAs) that may assess your property or restrict how it is used. Keep in mind, however, that some single-family homes are subject to HOAs and there may be restrictions on use—such as whether homes must be owner-occupied.
Why Choose a Multi-Family Home?
Multi-family homes offer several advantages over single-family homes. First, they’re often considerably more affordable on a per unit basis—though this can vary by market. Multi-family homes also offer the opportunity to split certain maintenance expenses with other owners, as well as responsibilities for care of common areas (things like yard work or snow removal).
Benefits to tenants of living in a multi-family residence include shared common areas, such as a lobby, pool, or courtyard, and the opportunity to meet new people. However, there can also be drawbacks, such as noise from other residents, limited parking, and more restrictions on how the property is used.
The Difference Between a Single-Family Home vs. Multi-Family Home
A single-family home is a residence that houses one tenant or group of tenants. These may consist of individuals, partners, parents with children, or other groups. Single-family homes are the most common type of housing in the United States. They are usually detached homes, meaning there are no shared walls with neighboring homes.
A multi-family residence is a housing unit that contains—in separate units—more than one tenant or family. Multi-family homes are less common in most markets than single family homes, but they have become more popular in recent years as the cost of housing increases.
The main difference between single-family vs. multi-family homes is that single-family homes are designed for individual families or tenants, whereas multi-family homes are designed to house many different groups of people. From a real estate investing standpoint, single-family homes are seen as stable long term investments, while multi-family residences are seen as being more volatile.
From a resident’s perspective, single-family homes usually have more privacy and space than multi-family homes. Multi-family homes often have amenities, such as community pools, laundry facilities, and gyms, that single-family homes do not.
Pros and Cons of Investing in Single-Family Homes
- Easier to manage than multi-family residences
- Typically more affordable (on a per-unit basis) than multi-family residences
- Provide renters more privacy than multi-family residences
- Often easier to sell than multi-family residences
- Easier to finance than multi-family residences
- Maintenance and repair costs are not shared with other owners
- Yard work, snow removal, and other property management services are the owner’s or resident’s responsibility
- Fewer tenants are willing or able to pay the higher rent
Pros and Cons of Multi-Family Homes
- Can provide more regular rental income than single-family homes
- Rent more quickly than single-family homes
- Units often appreciate faster than single-family homes
- Less to manage, if common areas are handled by associations or managers
- Common areas may require more management and maintenance
- Mechanicals are often older and less energy-efficient than in single-family homes
- May have higher insurance costs than single-family homes
- Complexes are considerably more expensive to purchase than single-family homes
- May be more difficult to sell multiple units than a single-family home