What Are the Differences Between Single-Family Homes & Multifamily Homes?

There are differences between single family and multifamily homes.
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Whether you want to buy a property for your family or rent it out as an investment property, you can choose between multifamily and single-family homes. While both types of houses can serve either purpose, you'll want to consider the differences in the physical structure, market factors, costs, financing and pros and cons of each. You'll also need to think about how you plan to use the property and which ongoing responsibilities you'll have as a resident or landlord to decide which option makes sense for your situation.

Looking at Basic Physical Differences

Generally, residents get the most privacy when they have a single-family home since they don't have anybody directly above, below or beside them. Along with the lack of shared walls, the land also belongs just to the family in that building, and having fewer people accessing the house comes with a sense of security for the owner. Such homes also usually have just one kitchen and living room since they're made for one family, and residents may have more space to store items and more freedom to customize the outside of the property.

The major difference with multifamily homes is that they're divided into units where each family gets their own space, often with a private entryway, kitchen and living room alongside other typical rooms. This leads to less privacy with shared walls and floors, and the land also is usually shared between residents so there's less opportunity for customization. Since units tend to run smaller, residents get less space for their stuff. Due to these features, multifamily homes are more often rented out, but large families may also have them.

Considering Property Availability Differences

The market usually has many more options for single-family homes, so you can have an easier time finding a property quickly and getting the features you want most. You can also find these properties in just about any area you desire.

On the other hand, multifamily homes tend to be harder to find due to fewer of them built, and you may need to look in certain neighborhoods to find any options at all. And if you need a specific number of units, your house hunt can turn into a challenging experience.

Comparing Financial Aspects Between Houses

Whether you're a renter or buyer, you'll likely that find a single-family home comes at a lower cost both in terms of the down payment and purchase price, and this could work favorably for mortgage qualification. This can make it easier to get your first home or to get a start in real estate investment, and such houses tend to be easier to sell later due to higher demand. If you plan to rent out the house, you can also enjoy stabler income since you'll have less turnover to worry about versus a multifamily home with many tenants in separate units, but there's still a risk when you're dependent on a single tenant. Further, it's easier to have a profitable investment portfolio since you can diversify with multiple single-family homes with less money.

Multifamily homes usually require a higher mortgage due to a higher cost, but the lender can often consider potential tenant income if you're planning to rent the place out. You can benefit from a steady income stream if you find reliable tenants, but turnover can be a problem. Selling the house later can take more work due to less demand, and you may not have enough money to diversify with this more expensive type of property. You'll also need to consider the extra time and costs to keep up such a property along with the higher taxes, insurance and utilities.

Multifamily vs Single-Family Home Decision

When deciding between single-family and multifamily homes, consider your needs and purpose for the house.

If you're just looking for a place to buy for your family, a single-family home can fit your budget, give you privacy and offer the most flexible options when browsing the market. However, buying a multifamily house can provide separate spaces for large families who can share expenses and stay together with some privacy. In either case, there's always the potential to rent out part of the house for some extra income, but multifamily houses make it easier.

If you're an investor, you'll want to think about your budget and need for diversifying your real estate portfolio along with preferences for managing as a landlord. While multifamily homes offer the best potential for rental income due to multiple units, keep in mind they'll require more work and money to manage, and you'll need to consider potential issues that can come with managing multiple tenants, needing to sell a less marketable property and paying higher upfront and ongoing costs.

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