| by Kenneth Chase | 2 comments

Single Family Homes vs. Apartments


What should you invest in? Single-family
homes or apartment buildings? Hi, my name is Keith Weinhold and I’m a
writer for Forbes and I’m a sixteen-year real estate investor myself, and I’ve
invested in both single-family income properties and apartment buildings. Now
we’re going to look at 17 reasons why single-family homes beat apartments. Now
apartments garner attention as wealth creators and they totally should their
economies of scale look really great when you’re running the numbers
before you buy a property, but, interestingly, for buy-and-hold income
property investors when I run the numbers after actually owning one for a
few years to look back and see what really happened, I often find that my
income single-family residences have performed better than small to medium
sized apartment buildings. There is a reason that years ago Warren Buffett
told CNBC that he would buy up a couple hundred thousand single-family homes if
it were practical to do so. Now apartment buildings do have some certain
advantages over single-family income properties for sure, but let’s look at
why investing in single-families can often be more profitable for you than
investing in apartments. The first reason is tenant quality. Single families
attract a better quality of tenant than apartments. The second one is
appreciation. Single-families appreciate better over time.
The third is neighborhood. Your property tends to be in a better neighborhood. The
fourth reason is School District. With single-families you’re likely to be in a
better one, and the fifth one is a big one – retention. Tenants tend to stay
longer in a single-family residence because it feels like their own. And, in
the apartment side more frequent turnover and make ready expenses in
vacancy they are an underestimated killer on apartment investor profits.
Better neighborhoods and school districts really help out as well with
that retention. What about common areas? Apartment buildings often have common
areas to clean and maintain. They have hallways and stairs and laundry rooms
that a custodian must service and that is another
overlooked profit drag that apartment investors miss. I missed that before I
bought my first apartment building. What about utilities? In a single-family
home the utility payments are often all on the tenant, and the larger your
apartment building is, the more likely that you are the ones stuck with the
utility costs. The next one is what I call divisibility. What if you got a
property that’s underperforming? Well, with ten single-family residences you
can just sell the one or the two that are underperforming. Now with a ten unit
apartment building you’ve got to keep all the units or sell all the units. It’s
not divisible. Think about pestilence now. Apartment building people don’t really
like to talk about this, and it’s kind of icky, but if one tenant attracts a
cockroach or a bug infestation, this really can become a diffuse condition
across the entire building and spread into other units. I recently had a tenant
bring bedbugs into a nine unit apartment building of mine. Tenants fled,
extermination fees alone were in the five figures when a single-family
residence pests are more easily controlled. What about fire? Even if
adequately insured apartment fires affect multiple units and families, in
single-family residences this is mitigated. What about drug dealers now.
We’re really kind of getting nasty here now, but in an apartment one drug-dealing
tenant can alienate and scare off a number of families, and again apartment
buildings attract lower quality tenants, so… and can you believe there are more…
there actually are some more reasons why single family homes beat apartments.
Another huge one is financing income single-family residences typically have
lower mortgage interest rates and lower down payment requirements than
apartments do. A husband and wife can each get ten single family income
property loans 20 total with those best rates in terms through Fannie Mae and
Freddie Mac with 20% down payments and there are other financing options for
you once those first 20 loans are exhausted, and departments rarely if ever
had these 30-year fixed-rate loans like single-family homes. What about vacancy rate?
It’s true that if one single-family residence is vacant, you will only have
0% occupancy now, and with a four-plex with one’s vacant you still have 75%
occupancy, but the same is true if you just have four single-family homes. What
about property management? You know, a property manager would more likely deal
with single-family dwellers because they’re more decent typically than
apartment building dwellers. I don’t really recommend that you manage for
long yourself, it’s not your best in highest use. Look at supply and demand.
Today contractors are building many new apartments and they rarely build these
sort of low to mid cost single-family residences that make the best rentals.
Rental family rather rental single-family demand vastly exceeds
supply. So, let’s look at market risk. This is another overlooked criterion. You need
to keep your rentals filled with rent paying tenants that have jobs. If you
think you’re going to be able to buy say 10 rental units in the near future,
well your 10 unit apartment building is only going to be in one location. Well,
that leaves you exposed to just one metro markets economic fortunes. With 10
single-family residences you could have 4 in Birmingham, 3 in Dallas, and 3 in
Jacksonville, and actually maintain single-family residence relationships
with some of the best providers and managers at GRETURNKEY.COM. That’s
where you can find the property, and let’s look at exit strategy. Finally
down the road when it’s time to sell your income property hopefully after
years of handsome profits, you’re gonna have a much greater buyer pool for your
single-family residence than you will for apartment buildings, and more of a
buyer pool can afford the lower single-family price than an apartment
building price. I regularly talk about how to optimize your real estate profits
on my audio show which you can listen to any time by checking out the “Get Rich
Education” podcast, and if you don’t know how to listen to podcasts, you can
download the “Get Rich Education” app for Apple or Android,
and listen there. I look forward to talking with you more on the “Get Rich
Education” podcast. Also check out GRETURNEKY.COM for the properties, and
over the years that’s where I’ve just compiled a list of the best income
property providers in investor advantage markets. Many of them single-family
rental homes where I buy myself as an investor. Again that’s GRETURNKEY.COM. Thanks so much for stopping by. you

2 Comments

Beautiful Dawn

Jul 7, 2018, 6:25 am Reply

Dear Keith, thank you so much for sharing. You are one of the best happenings in my carrier, much love and appreciation from Dubai

Amar HBMH

Nov 11, 2018, 2:05 am Reply

This should be a "Why Single Family Homes are better than Apartments" video.

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