Hello, property and potential property owners! Welcome to the RPM Distinguished Care blog, where we provide practical advice about property management! If you’re a return visitor, welcome back. We sincerely appreciate your support! RPM Distinguished Care specializes in managing successful rental properties in and around the Charleston area. We’re here to make your lives easier by giving you the resources you need to maximize profitability and have a successful rental property. We provide comprehensive property management services at every conceivable level. From advertising and marketing, to responding to applications, to inspecting and maintaining properties—there’s nothing we do not do. Further, we ensure tenant compliance, handle necessary evictions, and report directly back to you about revenue and profit potentials. We aim to make owning rental property as easy for you as possible, for as little money as possible. Check out the rest of our site to meet our team and discover what makes RPM Distinguished Care the best property management company in Charleston!
Our last article acts as a precursor to this article. Therefore, if you haven’t already, we highly recommend checking out ‘Long-Term vs. Short-Term Rentals.’ We extensively covered the positives and negatives of both short-term and long-term rental properties. Depending on your unique goals as an investor, one type of property might be better suited for your needs than the other. RPM Distinguished Care is well-versed in handling both! We took the time to provide a few facts and figures to help you assess the short-term and long-term rental market here in Charleston. Finally, we left you with a few essential questions, which can help you clarify your priorities and streamline your decision. If you’re investing in your first property or looking to step into the short-term rental market, our last article is a great place to start!
In this article, we hope to elucidate the major differences between single-family and multi-family rental properties. While our last article was concerned with the length of time a rental unit could be occupied, today’s article is concerned with the structure of said rental unit. In real estate, a single-family home is classified as a “structure maintained and used as a single dwelling unit.” Conversely, a multi-family home is classified as a “single building that’s set up to accommodate more than one family living separately.” Both terms have legal implications. We’ll discuss in further detail the specific attributes each type of home must showcase to be recognized as such. Next, we’ll detail the pros and cons of investing in a single-family home or a multi-family home. Then, we’ll quote a few statistics from the Charleston area to give you a better idea of the current rental landscape. By the end of this article, you should be one step closer to deciding on your next rental property!
What is a “single-family home”?
While the definition given above is technically correct, there are quite a few characteristics which make a home “single-family.” For example, a single-family home cannot have any common walls (i.e. walls shared with another property) or common spaces. Usually, single-family homes are located on a lot which is also owned by the homeowner. These homes are detached and stand-alone. These types of homes feature an entrance and an exit which are both direct and private. All utilities are sourced to the home and are not shared. There is only one kitchen. And, namely, one family resides within. Although this last aspect is optional (i.e. an individual or a couple may reside within), the other aspects typically are not. The absence or alteration of even one of these characteristics could mean the home isn’t classified as a single-family home by local zoning regulations.
What is a “multi-family home?”
While single-family homes are rather exact in their execution, multi-family homes come in a variety of types. These types are united in their purpose: the accommodation of more than one family. Therefore, a row of townhomes might be considered multi-family, as might a condo, a duplex, or an apartment building. As opposed to single-family, multi-family homes are characterized by their common walls, common roofs, and common spaces. These homes are attached and stand together. These types of homes feature an entrance and an exit which are not private, like hallways and lobbies. Generally, utilities to the building are shared (e.x. plumbing, electric, HVAC), even if residents are billed separately. There can be multiple kitchens and, namely, multiple families reside within. Similar to single-family homes, however, the intrinsic characteristics of a multi-family home are subject to local zoning ordinances. For example, if a multi-family apartment complex owned by a single investor exceeds four units, the building becomes commercial property. Commercial rental property is a different beast altogether.
What are the pros of investing in a single-family rental?
Single-family homes are typically lauded for their privacy. As they are detached and isolated to a privately owned lot, the residents of a single-family home have full use of every aspect of the building, including entrances, exits, garages, attics, and surrounding property. A lack of shared walls means less noise and an increased sense of seclusion. Single-family properties often attract long-term tenants. (Therefore, many of the positives associated with long-term rentals could be applied to single-family homes as well!) Detached homes tend to carry a lesser property tax burden and maintain their resale value, assuming the property is well-kept and located in a prosperous neighborhood. As of December 2021, there are 217 single-family homes listed in the Charleston real estate market. These properties tend to spend about 105 days on the market and sell for an average of $495,000.
What are the pros of investing in a multi-family rental?
Many first time investors in rental property gravitate towards multi-family rentals because they offer an opportunity for the owner to live in one of the units. This allows the owner to manage tenants’ needs in a timely manner and offset their own living costs. Since their home is also their workplace, these living costs might even be written off as a business expense, with part of the owner’s mortgage interest payments being prorated. Class A multi-family rental properties are “well-located in primary markets, and… tend to be located near major employers, universities, hospitals and arts and cultural activities.” These types of multi-family properties are among the safest, low risk real estate investments–as it is assumed people want to live in these areas. Another advantage to investing in multi-family rental property is consistency. Multiple tenants means a pretty even flow of cash, even when one tenant decides to end their stay. Whereas, when a single tenant in a single-family home decides to leave, the owner is left without cash flow until a new tenant can be found. Multi-family homes tend to be easier to finance, as this consistency helps assure the bank of the investment’s viability. As of December 2021, there are 112 multi-family properties listed in the Charleston real estate market. These properties tend to spend about 141 days on the market and sell for an average of $685,000.
What are the cons of investing in a single-family home?
Unless a single-family home is a part of a neighborhood association or has amenities on the property, tenants might miss out on the perks associated with multi-family properties (i.e. pool access, gym access, etc.). As previously mentioned, the single-family rental property is always at a higher vacancy risk, which can contribute to inconsistent cash flow. When you invest in single-family properties one at a time, it can take years to build a sizable portfolio. For this reason, single-family homes are considered to be less scalable.
What are the cons of investing in a multi-family home?
The lack of privacy afforded to residents of multi-family properties is a concern. As well, multi-family rental properties, in addition to being easier to finance, require a larger upfront investment than a single-family home. If you decide to live-in and manage your multi-family property yourself, you might find this to be a 24/7 job. Multi-family properties can be a bit more difficult to sell than single-family properties because of the sheer coordination involved. Finally, you’ll need to have a chunk of cash stashed away for emergencies, which are more likely to occur when you have multiple units.
There are desirable aspects to both single-family and multi-family rental properties. We hope this article has given you a basis on which to proceed with your decision-making. As always, we wish you the utmost success! At RPM Distinguished Care, we work alongside our clients for however long it takes to reach their unique goals. We levy every asset at our disposal, including over thirty years of experience and a dedicated team of individuals, to be of assistance. From tenant screening to leasing to inspections to marketing—there’s nothing we do not do. We believe in full-service and comprehensive property management. That’s why we take the time to understand each of our clients and help identify their most closely-held goals. Use our website to request your free assessment and meet with our expert team! Thank you for taking the time to read this article and we hope to hear from you soon!
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