Sacramento Single-Family Homes vs. Multifamily: Which Investment Is Right For You?

So you’re ready to invest in your first or possibly your next property in the booming Sacramento market?

That’s fantastic!

However, you may be wondering whether or not you should be setting your sights on single-family homes or a multi-family venture.

You’re not alone!

With all of the exciting activity in the Sacramento real estate market right now it’s important that you weigh the pros and cons of single-family properties versus multi-family from an investment standpoint. In today’s post, we will walk you through the considerations that you need to make before deciding which type of property will be the next best step for your portfolio.

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Initial Investment Versus Long Term Returns

It should come as no surprise that you will generally pay a higher price tag upfront for a multi family property versus a single-family property. On the flipside though, you will usually also yield a lower amount of revenue from rent on a single-family property versus a multi-family property. In some cases, you may already be eliminated from the option of purchasing multi family properties in the current Sacramento housing market. However, if you have the financial means to have both as an option, you’re going to need to weigh the big picture numbers against your long term financial goals. For example, although you may currently have the liquid capital to purchase a large multi family property you may also want to have that capital available to you down the line for a separate investment. It’s important that you take the big picture into consideration before making a snap decision on a property that will hinder your growth potential down the line.

Are You Planning To Sell In The Near Future?

Another important factor for you to consider is how long you realistically want to hold onto this next investment property. If this is a venture that you hope to conclude in 10 years or less, you should be reviewing the forecast for how each type of property will either appreciate or depreciate within that anticipated time frame. However, if you’re hoping to make this a more permanent member of your real estate portfolio then you won’t have to worry about short term appreciation versus depreciation all that much. You do still need to perform your due diligence homework to predict if the current rental rate is stable or likely to crash and whether or not that will severely damage you.

What Are Your Cash Flow Goals?

Let’s assume for the moment that you have the financial means to purchase either type of property. You need to ask yourself how important cash flow is to you both now and down the line. 

Are you willing to dump a large sum of money into the property to help it appreciate over the next couple of years? 

Are you willing to do what it takes in order to raise the current rent rate on those units to meet the market maximum?

Is there something specific, like your retirement, that you’re looking to fund with the cash flow from this investment? 

All of these are vital questions that you need to be able to answer before you can make a responsible decision about whether or not a particular property is right for your overall portfolio and investment strategy at this juncture.

You Can Live In A Multi-Family Property

One potential benefit of investing in a multi family property such as a duplex is that you will have the ability to live in one side of the property while renting out the other. Of course, this is no requirement. However, it is a wise way to cut down on your overall costs while ensuring that the property is being maintained the way you intended. Therefore, if you are on the fence about being able to afford a multi-family versus a single-family property, you may want to consider the possibility of moving into one of the units in a multi-family property in order to make the numbers work for you.

Need Help Choosing The Best Sacramento Properties For Your Retirement Portfolio?

Ultimately, deciding on single-family investment properties versus multi-family investment properties in the Sacramento market will depend on a great deal of factors. Unless you are an extremely seasoned investor with a strong hold on your overall financial strategy, you would be very wise to enlist the help of an experienced professional to help you make the best decision. For more information about how Alpha Property Management can help you optimize the performance of every property in your portfolio and assist you in selecting the ones that will help you grow even further give us a call or shoot us an email today. Remember, in real estate time is money and you have neither to waste.