Single Family vs Multi Family Investments: Which is Best for You?

Single Family vs Multi Family Investing Article

Kate Christensen

Summary: In this article you’ll learn about single family vs multi family investments so you can decide which is best for you. Topics also include the pros and cons of investing in single family homes, small multi family homes, and large multi family homes; how to determine your budget and important considerations for COVID-19. 


There’s a long standing debate among real estate investors between single family vs multi family investments and which is best. Historically, investments in both types of properties have produced good returns and include a variety of tax benefits. While there are a few similarities between single family homes and multi family homes, each type presents its own list of pros and cons. 

Many people have been asking if now is the best time to dip into the real estate market, given all that’s happening in the world. However, after seeing a slow down in the number of houses for sale in March and April at the onset of the COVID-19 pandemic, demand for housing continues to rise, despite the declining health of our economy. 

The great news for investors is that the real estate market is still healthy and growing,  regardless of a global pandemic, the economy heading into a recession and Civil Rights protests in hundreds of cities.

Continue reading to learn the pros and cons of investing in single family vs multi family properties…

11 Pros & 9 Cons of Investing in Single Family Homes

11 Pros of Single Family Home Investments

There are a variety of of reasons investors choose single family vs multi family investing. Here are a couple of pros of single family home investments to help you understand why.

Infographic Highlighting - Pros and Cons of Investing in Single Family Homes
  1. Less Expensive Upfront – single family homes require less cash upfront, because they’re less expensive. If you’re financing an investment property, loans for residential home buyers typically require 20 percent down. 
  2. Financing – qualifying for a mortgage loan can be fairly easy, if you have enough to cover the 20 percent down payment. Otherwise, the financing process is as straightforward as it gets, given the property’s loan is only for one single family home. Long-term fixed rate mortgages are super appealing when buying SFRs. 
  3. Easier to Sell Later – there are always going to be people looking to buy single family homes, making this type of real estate much easier and faster to sell than multi family. That’s because…
  4. High Demand – even during COVID-19, we’ve seen demand increasing for single family homes. There isn’t enough affordable housing out there, a trend that was happening long before then pandemic hit.
  5. Higher Appreciation – there is such a high demand for SFHs that they usually appreciate more than multi family homes. The value of single family homes is based on supply and demand. Whereas, the value of multi family properties is determined by the condition of the property and the rental income it produces. 
  6. Helps Diversify Investment Portfolio – Investing in real estate is a great way to add diversity to your portfolio. The housing market isn’t directly affected by the stock market, so expanding your investments to multiple industries will lower your overall risk. 
  7. Low Tenant Turnover – The age bracket of tenants renting SFHs is typically older (between 35 and 64 years old). Many of these renters are families who want to settle in and stay in one place for a longer period of time.
  8. Higher Quality Tenants – one of the reasons people like to rent single family homes is because they can make it their own home. As such, tenants will typically take better care of the property because they consider it to be more than just a rental. 
  9. You Can Be the Landlord – It is a lot easier to manage one rental property, especially if you don’t have a lot of experience. A big benefit to managing your own rental property is that you don’t have to pay someone else to do it. Rather, you can pay yourself 10% of rental income if you choose to manage the property yourself. However, if you decide to buy multiple single family homes self-managing can get more tricky. 
  10. Easier Real Estate Investment For Beginners – buying one rental property is not only less expensive than buying a multi family property, it’s also not as daunting for new real estate investors. A good strategy is to start on a smaller scale, and work your way to bigger investment properties.
  11. Lots of Exit Strategies/Liquidity – investors and families are always in the market to buy single family homes. If you end up needing to sell the rental property, chances are high you’ll be able to do so fairly quickly and easily. This makes it a relatively liquid investment for real estate.

9 Cons of Single Family Home Investments

As I’m sure you know, no investment is perfect. Here are some of the cons of choosing single family investments:

  1. Slower Growth on Your Investment – if you are looking to grow your investment portfolio, SFHs will do that, but much more slowly than investing in multi family homes.
  2. Lower Monthly Cash Flow – owners of single family rentals will only get one rent check for each of their properties. Because there are fewer tenants paying rent, there’s often lower monthly cash flow coming in on a SFH
  3. Repairs Only Count Toward the Value of One Property – if you spend $5,000 on a new roof or any other major improvement to your rental property, it’s considered a capital expense (Note: these expenses don’t include routine maintenance and are taxed differently). These improvements only increase the value of that one property, as opposed to many in a multi family property. That said, repairs on single family homes can be much more affordable than similar repairs on larger multi family properties, so it may all even out in the end.
  4. Vacancies – owning a vacant single family rental property comes with high stakes. Because you won’t have rental income from other tenants (like multi family) coming in to help make up the difference. You’ll basically be stuck covering the mortgage until it’s rented out.
  5. You Can’t Live There Too – many new investors opt for the house hacking strategy. House hacking is when you buy a multi family property, live in one unit and rent out the other(s). With single family homes, that’s obviously not an option for landlords. 
  6. Expensive Fees for Property Managers – sometimes property managers charge more to take care of single family rentals. That’s because it’s not very efficient to manage one SFH or SFRs in multiple locations.  Multi family properties with multiple units in one location makes it more efficient to manage and usually costs less money. 
  7. Less Scalability – increasing rents every year on a SFR is a great way to keep your investment in the green. Now imagine raising the rents on a 15 unit, multi family rental property. SFRs have much less scalability than multi family. 
  8. Higher Likelihood of Foreclosure – this one relates to #4 on our cons list. Owning a single family rental property can be riskier than multi family because 100% of your monthly rental income is dependent on the occupancy of that one property. There isn’t any back up rental income to soften the blow. However, if you own more than one single family rental, then your vacancy of burden may be similar to multi family homes.
  9. High Demand Usually Means More Competition – high demand is a great thing if you’re trying to sell a single family home. But if you’re a buyer in a sellers market, there may be multiple offers to compete with that will drive the price up.

7 Pros & 6 Cons of Investing in Small Multi Family Properties (2-4 Units)

7 Pros of Small Multi Family Investing

There’s a lot of information out there about single family vs multi family investing, but not much that differentiates between large and small multi family options, which are VERY different beasts. Here are some of the pros of choosing a smaller commercial option like a duplex or quadplex.

Infographic Highlighting - Pros and Cons of Investing in Small Multi Family Properties
  1. Higher Rental Income Potential – while you can charge more for rent on a single family home, owning two to four units (at a lower rate) will usually produce more overall rental income.  
  2. Lower Vacancy Burden – multi family property owners have a safety net in that if one out of four units are vacant, landlords can still expect to receive at least 75 percent of their total monthly rental income. Which brings us to the next pro…
  3. Less Likely to Go into Foreclosure – thanks to the safety net of having multiple tenants, a vacant unit isn’t going to kill your investment. But if single family homes sit vacant for several months, foreclosure is more likely.  
  4. Can Still Qualify For an FHA Loan – properties with four or less units can still qualify for an FHA loan, if you live there too. Which means your down payment would be around five percent. We know that lenders always consider the risk before qualifying someone for a loan. Because multi family homes are less likely to go into foreclosure due to a lower vacancy burden, they can actually be pretty easy to qualify for.  
  5. House Hacking Opportunity house hacking means you can live there too. If you invest in a multi family property, like a duplex or townhomes and live in one of the units, you can qualify for a residential FHA loan. This can be a great strategy to get into real estate because these types of loans only require between three to five percent down. (Note: there are certain requirements in order to qualify, such as agreeing to live at the residence for at least two years.)
  6. Helps Diversify and Grow Investment Portfolio Faster – we already know that buying different types of investment across different industries is a good way to diversify a portfolio. The idea is spreading risk in an attempt to minimize risk. Not only does real estate help diversify risk, multi family properties offer much faster portfolio growth for investors looking to do so.
  7. More Efficient & (Usually) Cheaper to Manage – we already talked about why managing multiple rentals is more efficient when they’re all under one roof. It’s also usually cheaper too. Because multi family rentals are easier to streamline operations and create multiple streams of income (with multiple units), property managers often will charge less per unit.

6 Cons of Small Multi Family Investing

And here are some of the biggest cons of smaller multi family investing:

  1. More Expensive Upfront – buying any multi family home almost always comes with a higher down payment. BUT, properties with four or less units are still considered residential (not commercial) and therefore qualify for an FHA loan, if you live in the property. This means that investors will have to bring more money to the table for down payment than an SFH, but it’s only around five percent.
  2. Higher Tenant Turnover – rental properties with multiple units under one roof inherently experience more turnover. The demographic of people living in multi-family homes is generally younger and tends to be nomadic. Some renters outgrow the space or yearn for more outdoor space, etc. Basically, people feel less rooted to apartments and condos. This can present an expensive problem for landlords because it costs money to get a unit rental ready for the next tenant. Each time there is tenant turnover, money is coming out of your pocket.
  3. More Wear and Tear – with higher tenant turnover, there will inevitably be additional wear and tear. Many tenants may also be harder on a rental unit than they would a single family home.   
  4. Harder to Sell/Less Liquidity –  multi family properties are more difficult to sell because the pool of buyers is much smaller. When you buy this type of property, you are investing in real estate. Not everybody wants to or is ready to do that.
  5. Fewer Exit Strategies – with a smaller pool of buyers there will be less demand. Selling these types of properties usually takes longer than a single family home, so make sure to plan ahead. 
  6. Experience is Recommended – this isn’t necessarily a con, but it may be a roadblock for some. While it’s not absolutely essential to have experience in real estate investing prior to buying a multifamily property, it really helps. (Investor Tip: find an experienced investor to help you through the process.

5 Pros & 3 Cons of Investing in Mid-Sized to Large Multi Family Properties (5+ Units)

5 Pros of Mid to Large Multi Family Investing

If you’re still not sure about single family vs multi family investments, here are some pros of multi family to inspire your decision.

Infographic Highlighting - Pros and Cons of Investing in Mid-Size to Large Multi Family Properties
  1. Grow Portfolio Faster – just as small multi family homes can grow an investment portfolio faster, mid to large sized multi family homes accelerate growth even more. For example, investing in a five unit multi family property will grow your real estate portfolio five times faster than with a single family home. 
  2. More Monthly Cash Flow Potential – let’s say you own a property with 10 rental units. At full occupancy, that’s 10 streams of rental income every month. And while rents will usually be less for each unit compared to a single family home, when multiplied by 10, monthly cash flow can be significantly higher.
  3. Economies of Scale – or reduced costs per unit is a major advantage of owning multi family rental property. For instance, let’s say you replace the roof on your 10 unit property. This will increase the value of all 10 units, because they’re under one roof. Some other economies of scale benefits include: you only need one insurance policy, your properties are in one location, thus easier to manage. In fact, multi family property managers usually only charge between four and eight percent of rental income per unit. Additionally, you’ll be able to negotiate better discounts when you need carpets cleaned in 10 units instead of one. That’s the beauty of economies of scale.    
  4. More Control Over Income and Asset Values – the value of multi family properties with five or more units is based on net operating income (NOI). On the other hand, the value of SFHs and multi family property with four or less units is based on comparable sales. Property owners can increase rents at their discretion, offer internet service, laundry, etc., at a lower, bundled rate and take advantage of having all of your rentals under one roof. There are tons of ways to increase the efficiency of operations and save both time and money. Once again, economies of scale can be a beautiful thing.
  5. Unemotional Real Estate Investing – for investors who buy, manage and sell big multi family properties, it’s considered a business or income transaction. It’s much less emotionally driven as it’s simply based on numbers. With an investment this big, buyers and sellers are typically sophisticated and experienced, making the entire process quite efficient.

3 Cons of Mid to Large Multi Family Investing

And finally, here are the cons of multi family investing:

  1. The Most Expensive Upfront – multi family properties with five or more units are considered commercial real estate. As such, most commercial lenders will ask for a minimum of 30 percent as down payment. Many of these types of properties cost millions of dollars, which means a 30 percent down payment would be a substantial amount of money. 
  2. Fewest Exit Strategies/Least Liquid/Hardest to Sell – the pool of buyers is even smaller with large multi family properties because it’s a huge investment. There aren’t a ton of people who 1) are able to afford the down payment, and 2) want to take on a large multi family property. Compared to single family and small multi family properties, this is the least liquid real estate asset because it’s the hardest to sell.
  3. High Risk for Inexperienced Investors – as larger multi family rentals are a huge investment, there’s a lot more to lose. This is a high risk investment if you don’t have much experience in real estate.

How To Determine Which is the Best Option for You

As we’ve learned, there are several pros and cons of single family vs multi family to consider before investing. With all of that knowledge, our next step is to decide which type of investment is best for you. Here are several questions to help you put together a budget and decide what type of real estate to invest your money in:

What is your budget?

There are a lot of variables to consider when investing in single family vs multi family. Ideally, your budget should not be one of those variables. Don’t budge on your budget. We all know life is unpredictable and things can change in an instant (cue: COVID-19), so it’s always wise to stick to your budget and have a nice cushion of cash to fall back on… just in case

How much of a down payment can you afford? 

If you can’t afford the down payment and ongoing expenses on a multi family home, then a single family home is likely best for you. Simple as that.

How much monthly rental income do you hope to get?

Analyze a few potential properties and perform a comparative market analysis (CMA) on each of them. If one, two or three single family homes won’t produce the rental income you hope for, consider looking at multi family homes. If you can afford it, a multi family home may be a better option for you.

What demographic are you trying to attract? 

Consider the market you want to invest in and who lives in each type of home. Different types of rental properties attract different types of tenants. A single family home in a nice neighborhood almost always attracts higher income and higher quality tenants that tend to occupy the rental for a long time. 

On the other hand, multi family homes can sometimes attract tenants that stay for shorter periods of time. Keep in mind, this isn’t usually true for larger, more expensive, markets like San Francisco and New York where it’s difficult for many people to afford buying homes. It’s also not always true for smaller multi family homes, like duplexes, triplexes, townhomes, and condos in less expensive markets

Will you be the landlord or hire a property manager?

Whatever you decide, make sure you take into account both the expenses and time associated with hiring a property manager vs being a landlord. Being a landlord isn’t as easy as it may sound. There are a ton of responsibilities, sometimes including 24-hour availability. 

Check out this article to learn more about how to be a landlord.

Are you new to real estate investing or are you looking to grow your portfolio?

Experienced real estate investors looking to grow their portfolio beyond single family homes may seriously consider taking a step into multi family rentals. It’s less risky for beginner investors to buy single family homes, because there’s less money to lose and demand continues to be high. However, it’s all about preference and whether the numbers work for you or they don’t. 

Do you want to keep your rental property long-term or sell it in the shorter-term?

Whenever you’re thinking about making an investment or any financial decision, for that matter, it’s important to consider your long-term and short-term goals. Short-term and long-term investment strategies can look very different. It sounds like a no brainer, but make sure your financial and investment goals are aligned both in the short and long term. Keep in mind that single family homes are easier to sell than multi family homes. 

Important Consideration: COVID-19

In many markets people are massively preferring to live in single family homes instead of apartments right now, (if they can afford it). Which is why it might be the best time to invest in single family or small multi-family properties that have yards or outdoor space. 

Note: this may not be the case for larger, more expensive, markets like San Francisco, New York and Los Angeles where people can’t necessarily afford to live in single family homes. BUT as jobs continue to convert to remote work, people may be moving farther away from big cities and into the suburbs. Keep an eye out for this trend when considering markets to invest in.


Both single family and multi family investments can produce great returns. Bigger multi family homes with lots of units will increase the size of your returns. On the other hand, single family homes to buy or rent are in high demand right now and we expect that trend to continue as supply tries to catch up. The bottom line is that both properties can be great investments, but your strategy should be based around your goals and which markets you are looking to invest in.