“Why is a multi-family home a better buy to let investment than a single-family home”

“Why is a multi-family home a better buy to let investment than a single-family home”
Conor Fitzpatrick

“Why is a multi-family home a better buy to let investment than a single-family home”

If you’re looking to actively invest in residential property, most investors will consider two types: single-family home or multi-family home. With single-family, you’d be buying traditional homes built for one family or household. On the multi-family side, you’d be buying apartment buildings. Both are very attractive and popular but investors need to consider there are significant differences in terms of cashflow, risks, maintenance and returns on investment. We have explored some of these points below.


In single-family homes there is not a strong cash flow (unless you own several properties). Fewer units means less cash. You’re only getting a handful of rent payments per month, and a large chunk of those are going toward your mortgage, maintenance costs, and admin fees. However in multi-family homes you have a better cash flow and a bigger financial cushion. The extra cash that comes with multi-family real estate can help safeguard you from loss. There’s more room for error, and you may have more capital to further grow your investing business if you do it right.


“Buying a multi-family home means an instant real estate portfolio”


If you’re looking to build a big real estate portfolio single-family homes are not the way to go. A portfolio of 10 units would mean 10 negotiations, 10 mortgage applications, and 10 closings, and it would take much more time compared to multi-family properties which let you scale up with just one purchase. Buying a multi-family home means an instant real estate portfolio. You’ll have at least several units on your hands, and having the cash flow and profits that come with it isn’t such a bad thing either!


“If a tenant moves out of a single-family rental, it is 100% vacant”


Yes single-family homes are a lot easier to acquire but when it comes to growth this would be slower than the multi-family homes. Also one of the disadvantages of a single-family homes is that if the property is vacant you would have zero income until the management company replaces the tenants whereas with a multi-family home they can lose a tenant but can still produce an income with the other occupied units. It is rare to see a multi-family home totally vacant. Multi-family rental owners are also far less likely to have zero rental income. If a tenant moves out of a single-family rental, it is 100% vacant. On the other hand, if a multi-family rental owner loses a tenant, its only 10% vacant. Even after that reduction in cash flow, you’ll still have 90% of your regular monthly rental income to cover the property’s mortgage and operating costs.

In single-family homes, if you want to make repairs or improvements to the building it only increases the value of that one property as opposed to many in a multi-family property. Financing the purchase of multi-family homes is much easier than of single-family investment properties. The return on investment received by investing in single-family rentals tends to be higher than from other rental types; however, banks are more easily persuaded to give a mortgage to real estate investors for multi-family properties due to the risks being lower.


When you base it on a per-unit basis, the cost of constructing a multifamily property is more affordable than other types of real estate properties. It is, therefore, a more cost-efficient investment and relatively risk-free for first-time investors. If you choose to apply for a mortgage loan to build or purchase this type of property, you can expect lower mortgage financing rates.


The foreclosure rate on apartment buildings or other types of multifamily properties is lower as compared to a single-family unit. This explains why mortgage lenders can offer competitive rates for investors of this type of property. This reduces operating costs which will bring more revenue in the long run.


If you are thinking of investing in property as a source of alternative income, 

why not contact us today to discuss your requirements in more detail?

Phone: +353 86 325 0048 I Email:info@spirecapital.ie

Author: Deirbhile Finn-Healy

  • Property Market

    Dublin – one of the best kept property secrets in Europe

    Dublin – one of the best kept property secrets in Europe   Rents keep rising as scarcity of properties to rent persists   A massive surge in home-building is needed to stem the relentless rise in rents, latest rental market analysis shows.   The report says 500 new rental properties need to be built every single week for the next three years in Dublin alone — a total of 80,000 over the period.   Report author Ronan Lyons says the solution is to encourage private developers to build and institutional investors to become landlords.That conflicts with the view of many housing rights advocates that the bulk of new homes should be provided by the State through social housing programmes and by non-profit bodies.   Whatever the solution, the problem is clear — there are too few rental properties available to meet the demand and rents are rising far in excess of general inflation, further limiting the choices of hard-pressed renters.   According to the report, from property website Daft.ie, the average monthly rent being paid nationally is now €1,366 but there is huge variation within that figure as it covers both rural and urban addresses and properties of all sizes.   A family needing to rent a three-bedroom house faces an array of different rents depending on where they need to live.   Dublin will present them with the greatest challenge as homes in that category range in cost from €1,671-€2,210 per month in the county areas and €1,780-€2,623 within the city boundary.   Ireland offers best yield in Europe for buy-to-let landlords   For the third year in a row Ireland has been named the most attractive destination for Europe’s buy-to-let investors. Reasonable property prices, a stable economy and consistent rental demand all add up to make Ireland a very tempting proposition for buy-to-let investors. According to the third annual European Buy-To-Let League Table from WorldFirst, an international payments expert, Ireland is the best destination in Europe for landlords.   Ireland offers an average yield of 7.69%, making it very appealing for investors hoping to maximise rental returns. Hot on its heels is Cyprus, up from 9th place last year to the second slot this time around, while right at the bottom of the table is France, which knocked Sweden off the least-coveted spot.   Ireland’s success is also no doubt helped by the fact that property prices are currently soaring across much of Western Europe. Jeremy Thomson-Cook, chief economist at WorldFirst, says: “Part of the reason for Ireland’s buy-to-let success is while average house prices across the country are on the rise, they still sit some way below the country’s 2008 peak. What’s more, only Malta, Luxembourg and Sweden have experienced higher population growth than Ireland meaning that rental demand continues to go from strength to strength. Add these two factors together and you have a compelling overall proposition for buy-to-let investors”.
    Author: Conor Fitzpatrick
    Read Time: 5 mins