Posts Tagged Rental Property Types

Which Property Type Is The Best For Rentals?

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There are many property types to choose from when deciding to rent out a property. Each type has it’s own positives and negatives depending on what you want, how much work you want to put in and the location of the property. Let’s take a look at different property types and some good and bad points about them.

 

Single Family Rental (SFR)

A single family rental (SFR) is your regular everyday stand alone house. These are typically found in suburbs and country sides. You could lump condominiums and townhouses into the Single Family Rental category but I am keeping them seperate here.

The “Single Family” just means that typically you are only allowed one family living in the house at a time. So you can’t have two different families renting the house out from you at the same time. In a single family rental there is usually one of everything: one living room, one dining room, one kitchen and a set of bedrooms. One positive point of a single family rental is that there is usually no association fee tacked on to the cost of the property. Another positive of a single family rental is that it is in many cases more attractive to a renter that can’t yet afford a downpayment to buy a house but still wants to live in a house. Single family rentals usually have more square footage and storage as well as privacy than other rental types. Single family rentals are also desirable to people relocating for their job. The person relocating many times has a family and a condo or apartment may not be big enough for the temporary housing they would need. The company that the person works for may be paying the rent while the employee finds permanent housing. This is great for you and great for the tenant since someone else is paying the bill.

There are downsides to Single Family Rentals. One negative is that single family rentals usually come with property like a front yard and a back yard. The yard requires maintenance which means you have to spend money to get the grass cut, shovel the snow or keep up the yard.

Another downside to single family stand alone rental is the insurance costs are higher. You are now responsible for everything from the structure of the house to the surrounding areas. This is as opposed to a condo or townhouse where you usually are just responsible for the floors and inside walls of the property.

Multi-Family Rental

Another property type is a multi-family property. This is a property where you have multiple units in the same property like a duplex or one unit upstairs and one unit downstairs. With this property you can have multiple families living in the same structure as long as the property is legally zoned as a multi-family.

One positive point to a multi-family rental is that you can typically receive more rent. Think about a duplex. A duplex is usually about the size of many 3 bedroom stand alone single family houses (at least the duplexes in my area). Let’s say you could get about $2,000 a month in rent for a 3 bedroom single family house. If you made that same house into a multi-family duplex and made one side of the house a 2 bedroom unit and the other side a 1 bedroom unit you could probably get $2,500 in rent for that property ($1,500 for the 2 bedroom and $1,000 for the one bedroom).

One negative point to a multi-family rental is that there is more to do as far as maintenance. You are now responsible for the maintenance of 2 families. You now have twice the risk. Many landlords higher a property manager once they get into renting out multi-family properties. This also raises your costs.

Condo or Townhouse Rental

Another property type to rent out is a condominium or a townhouse. This is how I started landlording. These types of properties are usually more affordable in both purchase price and rent.

A positive point about a condo or townhouse is that there is very little maintenance as compared to multi-family properties or stand alone houses.The association pretty much takes care of all of the yard maintenance and the outside upkeep of the property. Another positive with this type of property is that you have a larger tenant pool to choose from. Because this type of property is usually a little lower priced than say a stand alone house you have a bigger group of people that can afford the rent.

One negative of a condo or townhouse is the association fee. I know I state that the association can be a positive because the maintenance is on their shoulders, but the fee can also be a negative. This fee never goes away (you can’t pay it off to get rid of it like you can a mortgage) and it usually gets higher and higher every year.

 

I hope this brief summary of a few rental property types has helped you to get a clearer picture of what type of rental property would be right for you.

Let me know in the comments which type of property you prefer or if you know of a property type that I didn’t cover here.

 

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