There are many things to consider when you want to purchase single and multi-family units. Asking questions and doing your research can help narrow down what you want to do.
Of course, when you purchase a multi-family home it's essential that you like who is living in the property with you. If you are a first-time buyer and are wondering the time it takes to close, there is little difference between each housing choice. The time frame for closing will be more dependent on the financing used to purchase.
Sometimes buyers confuse the closing time frame thinking tenants will need to be removed when buying a multi-family. That's not the case. Unfortunately, you have to honor any rental agreements in place at the time of your purchase.
Let's take a deep dive into all the differences between single and multi-family housing. Read through this overview of five different tips to grow your knowledge in these types of living spaces so you can prepare better for your home buying experience.
Different Physical Appearances
Single-family options are often the traditional choice people think of for their first residence. These structures typically have enough space for one family without sharing walls with other buildings.
No one lives directly below or above the tenants. Bills come in one form since everyone uses the same water and electricity. The home is on a plot of land that comes with the property.
Multi-family homes have separate rooms inside one large house. Occupants share the same walls and floors, yet everyone lives independently in their section. This type of housing could be:
One person typically owns the entire building, and that individual often lives in one of the units. Each person gets personal bathrooms and a kitchen, and they are responsible for their part of the utility fees.
Affordability is Something to Consider
Because you are only paying for an individual housing unit, single-family homes can be less expensive to purchase. There’s also more demand for these types of residences on the market. If you decide to sell the property at a later date, it’s easier to put it on the market due to the high requests for this type of living space.
With a multi-family property, you have the advantage of many people living in your available spaces. These houses are rarer to find, but some experts predict their popularity to rise 33 percent in 2021.
Steady income from your occupants helps with the costs of repairs and maintenance. While this option can be more expensive at first, there is a significant return on investment since several tenants pay their rent at the same time.
Financing Differences Explained
When it comes to financing loans, both choices have differing rules for their respective properties.
For example, multi-family homes with units exceeding five approved sections are one form of commercial estates. Loans for these options revolve around a specific time frame and the condition of the building involved. The requested money can take a while to get approval, and owed amounts often have shorter repayment periods.
On the other hand, financing single-family buildings are purely residential. In this case, you can buy these houses with mortgages, and it can be easier to get a loan for them.
Your Realtor can help explain the financing process involved for the housing type you’re looking to buy. Shopping for a mortgage is essential and certainly something worth paying attention to.
Insurances Are Important
For both options, it’s essential to know what kind of insurance is necessary for you and the occupants. There are several kinds of policies specifically for each type of residence.
Multi-family homes require many types of insurance plans because of all the tenants that live on your property. A few of these choices are:
General liability: This plan helps fund the cost of any accidents that happen to the residents in the area.
Property insurance: If there is any damage to your buildings, property insurance covers those issues.
Business income: If something happens to the property, the flow of income is interrupted. Several business income policies pay you according to your chosen plan for unexpected events that occur.
Umbrella liability: You can ensure no loopholes happen with the general liability once the umbrella policy is in place.
Since you pay for many policies, this can cause a hefty price in multi-family coverage due to the number of items you want to protect.
Single-family homes generally don’t need as many plans as multi-family units do, lowering your overall cost. As the owner, you can choose between several quality levels of insurance policies.
You don’t have to have as many plans since it’s only one piece of property. These are residential housing areas, so most occupants pay for their own renters’ insurance that protects their belongings.
Insurance is a vital part of any home buying process, so talk with your real estate agent and other professionals to get the policies that are right for you.
Maintenance and Upkeep With These Housing Choices
Single-family homes need more funds directly from you dedicated to their maintenance and repairs. When something stops working, you have to be the one that repairs it at your own expense.
Plumbing and electrical work often require the need of a professional, and you would have to hire a technician to fix those appliances on your dime.
With multi-family housing, you often have the help of other companies to provide upkeep and other services. You also have the assistance of your tenants to detect anything out of the ordinary in individual units.
Employees working with you help take care of any questions your occupants have, so it’s not solely your responsibility.
Is One Option Better Than the Other?
There are many pros and cons to buying multi-family and single-family homes. The truth is, there isn’t one best choice. Whatever you decide to purchase depends entirely on your purpose behind it.
Do you want to rent out several units at once? Are you interested in only leasing a single house? Ask yourself these questions to find your real intent for your ownership journey.
Buying a Single or Multi-Family Home
Now that you know more about the differences between these housing types, you can come more prepared to your realtor for your decision. Single-family homes are perfect for managing smaller buildings, while multi-family options generate more income and a more significant return on investment. Start your homeownership today with either one of these great properties.
All that will be left to do is plan your move whether it is from an apartment or from the family homestead.
About the author: The above article comparing single-family homes vs. multi-family homes was written by Rose Morrison. Rose is a home improvement and real estate writer. She is also the managing editor of Renovated.