Single-Family Rental vs. Apartment Investment: Anaheim Property Management Advice

It is estimated that there are between 10 and 11 million individual investor landlords in the United States. Considering the rising costs of real estate in Anaheim (and around the country) in the wake of the COVID-19 pandemic, many people are considering whether or not they should put some of their money into real property, as well.

When it comes to investing in residential real estate, though, you basically have two options. You can purchase a single-family house and rent it out or you can buy an apartment building.

So, which is better when you compare investing in a house vs. apartment building? Let this property management company guide you through the pros and cons of each to help you decide what is the right investment for you.

House vs. Apartment: What Are the Pros of Each as an Investment?

First, let’s take a look at the bright side of things. When comparing an apartment vs house investment in the Anaheim area, you might find that some of the pros are quite convincing one way or the other depending on your particular circumstance and funding options.

Pros of Purchasing Single-Family Rentals

Purchasing single-family rental properties is common for new investors because they are more affordable than larger apartment buildings. This means that they are more accessible to people at the early stages of real estate investment.

This allows you to scale your rental portfolio slowly. You have the ability to move as slowly or as quickly as you like when it comes to adding to your portfolio.

Another benefit is diversification. Since they are cheaper to purchase, it means that you can buy more single-family homes in different markets or locations around Anaheim if you chose to.

Lastly, single-family homes offer more flexibility when it comes to leverage and liquidity. You can leverage or sell individual properties as needed as you grow your portfolio. When it comes to apartment buildings, you could end up jeopardizing your entire income stream if you find you need to sell.

Pros of Purchasing Apartment Buildings

There are also some pretty compelling arguments for purchasing apartment buildings when you’re investing in real estate.

For one, you’ll be able to produce more cash flow more quickly when you have a multi-unit building. By purchasing one building, you can create the same cash flow that you could only achieve after purchasing a number of single-family homes.

On top of that, you are sheltered from the problem of vacancy with apartment buildings more than single-family homes. Even if 20% of your units are currently vacant, the rent you are collecting from the other 80% can offset that cost. That’s not a luxury you have when it comes to single-family rentals.

Lastly, buying an apartment building also lets you benefit from an economy of scale. This means that the costs are spread over a higher number of rental units. The holding costs and property expenses of an apartment building tend to be much lower than for a portfolio full of single-family rental properties.

What Are the Down Sides of Buying an Apartment Vs. a House as an Investment?

Now it’s time to take a look at the drawbacks of buying an apartment vs a house. When making any investment, it’s important to consider the potential risks and whether or not the potential rewards outweigh them.

Cons of Investing in a Single Family House in the Anaheim Area as a Rental

One major drawback of single-family houses compared to apartment buildings is that management isn’t as simple. With an apartment complex, all of the units are in one place. It can become arduous to manage a number of different single-family rentals in different markets or locations.

Another downside is the prospect of vacancy. If you have a vacancy for longer than you anticipated, it can have a major negative impact on your return on investment.

Property expenses can also add up quickly if you own several single-family rentals. Things like insurance, property taxes, and ongoing maintenance and upgrades can get pricey all added together.

Cons of Investing in Apartment Buildings

Probably the biggest downside to buying an apartment building is the cost. It can be expensive to buy multifamily units and they typically require more capital upfront. If you buy in the Anaheim area, you should expect to be able to put down around 20% of the purchase price of the property.

Another drawback is management. While it is convenient that all of your tenants are located in one place, it can also be a lot to handle to have a number of tenants at once. This means you’ll have more responsibility, potentially more problems more often, and will require more organization.

Hiring a property management company can help to eliminate this drawback. If you’re wondering how to budget for Irvine rental property management, check out our article on the topic here.

Apartment Vs. House: Either Way, Property Management Makes Being a Landlord in Anaheim a Breeze

As you can see, there isn’t a set answer when comparing a single-family house vs. apartment as an investment. The right choice for you will depend on your particular circumstance and what type of landlord you want to be. Some people might find that single-family homes offer the right amount of flexibility and diversification, while others might appreciate the economy of scale that is accessible with apartment buildings.

If you’re planning on becoming a landlord, the property management aspects of the role can start to build up quickly. This is particularly true once your portfolio grows, and you are managing many properties in the Anaheim area at once. Hiring a property management company can make your “passive income” source truly passive, rather than turning into a second full-time job.

Are you looking for a property management company in the Anaheim area? If so, contact us at Genuine Property Management today.