When most people imagine their dream home, they probably picture a detached, single family house. But that’s far from the only option available to buyers in today’s housing market.
Multi-family homes with several units are becoming increasingly popular. They enable homeowners to live in one unit and rent out the others to offset their mortgage costs. They’re also ideal for multigenerational families who want to live under the same roof without stepping on each other’s toes.
To help you learn more about these two housing styles and decide which one is right for you, here’s an overview of single family vs multi family homes.
What is a Single-Family Home?
If you’re deciding which type of home to buy, you may be wondering, what is a single family home?
A single family home is generally defined as a freestanding residential building that’s set up to accommodate one family. It usually doesn’t share walls with another structure and has its own parcel of land that belongs solely to the owner of the home.
Single-family homes only have one kitchen and a single set of utilities because they’re meant to house one family. This differs from multi-family properties, which are designed to allow several families to live independently of each other even though they’re under the same roof.
Agents Compete, You Win.
Single Family vs Multi Family Homes: What is the Difference?
The main difference among single family vs multi family is the number of residences they contain. Single-family homes have just one dwelling unit, whereas multi-family properties have between two and four. You may hear multi-family homes called duplexes, triplexes, or quadplexes, which refers to the number of units they contain.
Each unit within a multi-family home has its own kitchen, bathroom, utility meter, address, and entrance. This enables the families that reside there to live separately, even though they share common walls and a roof.
Although multi-family homes have several units, one person usually owns the entire property. This distinguishes multi-family homes from condo complexes and apartment buildings where different people own each unit.
Because owners of multi-family homes can rent the units out, they’re popular among real estate investors. They’re also a good choice for multigenerational families who want to live under the same roof while still having their own space.
Although multi-family homes are common, there tends to be more demand for single-family homes. Nuclear families often prefer single-family homes because they have more square footage and large, private backyards, which gives them extra space to spread out.
If you’re on the fence and can’t decide which type of house is right for you, here are some pros and cons of single family and multi-family homes to help guide your home search.
Pros and Cons of Single-Family Homes
When considering single family vs multi family homes, to help you decide if a single family home is right for you, here are some major benefits and drawbacks of this style of housing.
More Space and Privacy
Single-family homes usually offer much more space than units in multi-family homes. Most detached homes are around 2,500 square feet, whereas multi-family housing units are only 1,076 square feet on average. So if you plan on buying a multi-family home and living in one of the units, you won’t have a lot of room to stretch out.
Single-family homes also offer more privacy. Since detached houses don’t have any shared walls, they’re a lot quieter than units in multi-family homes. You won’t have to worry about disrupting your neighbors by playing music or having friends over, which may help you feel more relaxed in your space. You’ll also have your own private backyard that you won’t have to share with anyone else.
Lower Costs
Single-family homes usually cost less than multi-family properties, so they’re better for buyers who have a limited budget. They’re also easier to finance and have lower down payment requirements. You’ll also spend less on maintenance and insurance if you purchase a single family, making it the cheaper option all around.
Vacancies
If you’re an investor, vacancies will hit you much harder with a single-family home than a multi-family. Since you can only have one tenant at a time, your rental income will go down to nothing when they leave. Depending on your financial situation, this could cause you to have trouble making your monthly mortgage payments.
With a multi-family property, the income from the other units can help cover the mortgage and maintenance costs while you find a tenant for the vacant apartment.
Less Rental Income
When considering single family vs multi family homes, another thing investors should consider is that single-family homes don’t generate as much cash flow as multi-family properties. You’ll only be able to collect one payment every month instead of several, so your rental income will probably be lower.
Pros and Cons of Multi-Family Homes
Multi-family homes are a good option for investors and big families. Read on to learn more about their pros and cons.
Great for Multigenerational Families
If you plan on having multiple generations live under one roof, a property with two to four units may work well for your family. Everyone will be able to have their own space while still enjoying the benefits of being right next door to loved ones.
Potential for Mortgage-Free Living
When considering single family vs multi family homes, one of the major benefits of multi-family properties is the potential for mortgage-free living. If you occupy one of the units and lease out the others, you may be able to bring in enough rental income to cover your monthly mortgage payments in part or full. This will give you more money to spend, save, or invest as you wish, which is a big plus.
More Responsibility
Although multi-family homes can be a profitable investment because of their rental potential, they aren’t right for everyone. Maintaining a large, multi-unit property takes a lot of time, which can interfere with your lifestyle.
If you plan on renting the units out, you’ll be responsible for screening tenants, executing leases, handling repairs, and more. Being a landlord can be difficult and time-consuming, so make sure you consider whether you’re ready for that commitment before you buy a multi-family home.
Less Appreciation
When considering single family vs multi family homes, single-family homes seem to appreciate at a faster rate than multi-family properties. This may be because there’s more demand for single-family homes, which drives up prices.
Since more buyers are interested in detached houses, they’re also easier to sell. If you ever need to get rid of your multi-family property, it may sit on the market for longer, which is something to keep in mind.
Make Sure You Can Afford a Home
Before you look at single family or multi-family homes, you need to know whether you can actually afford to own either one. Mortgage payments are generally higher than rent in most states. And even when the prices are close, there are other costs associated with owning your home instead of renting.
Your property taxes will be added to your monthly mortgage payment. And if you put down less than 20% for a down payment, your lender will probably require you to pay for private mortgage insurance (PMI) as well.
You’ll also have to pay some costs that you might not have had to pay while renting: utilities, cable, garbage pickup, and any necessary repairs.
Make sure you can comfortably afford not just your mortgage but also any additional expenses before buying your first home.
If you’ve run the numbers and decided that yes, you can afford homeownership, your next step is to meet with a mortgage lender. You can discuss the different types of mortgages and decide which would be best for you. You’ll also want to be pre-approved for a mortgage before you begin house-hunting.
To get pre-approved for a mortgage, you’ll have to share your financial and employment information with the lender. They’ll require documentation such as tax forms, pay stubs, and more. Once they review and verify your information, they’ll determine whether to approve you for a mortgage. If they do, they’ll let you know your mortgage options and terms.
The lender will also issue a pre-approval letter. You can show this to sellers when you’re looking at homes, to let them know that you’re able to secure financing.
Be Prepared to Negotiate
It’s more than likely that the seller will come back to you with a counteroffer regardless of the home type. That’s just part of the negotiations. It’s up to you whether you can comfortably accept their counter, respond with your own counteroffer, or walk away.
Keep your finances in mind and don’t let yourself get carried away in the excitement of buying your first home. No matter how much you might think a house is perfect for you, if you can’t comfortably afford it, it’s time to think twice.
Remember buyers: you need to know what a home will require in order for it to be up to your expectations of build quality. Houses may need a few things fixed either prior to purchasing a home or immediately after. It’s important to be aware of these issues, as it may cause a headache further down the road after you’ve purchased the house.
Often, if the seller is motivated enough to sell the house, they might work with you and include fixes and light renovations as a stipulation in the contract for the sale of the house. Making sure you have inspectors and independent contractors to inspect the house for any major issues can help save you a headache in the long run.
You also need to be aware of the market surrounding the house. If you look around at the neighborhoods close to the home you’re considering, you may find other locations that may be a better price, closer to an important location, or simply newer than the one that you’re considering. Ensuring that you’re aware of the area and not focused on one house can help make sure that you’re making the best choice possible when putting in an offer, and not necessarily choosing the first one on the list.
Ensure you don’t bid either too high or too low on the house. Bidding too high will probably get you the house quicker, but you may end up paying over market value for the home and will probably have to recoup that cost before you can be in a suitable position to generate equity into the home.
Offer too little and the buyer may outright refuse and will greatly decrease your chances of landing the home that you want to purchase. When in doubt, consult a professional Realtor who knows the market.
Both single and multi-family homes have their merits, which can make it hard to decide between them. A qualified real estate agent can give you guidance and help you choose the best option for you.
Above all, remember that your Realtor should be there to aid in your home buying process, not just to show you listings. Helping you avoid the wrong time to buy, the wrong location or the wrong house for your budget can all go a long, long way in making sure that you’re happy with the end result. Beyond that, realtors aren’t all the same, and you will need to find one that gels with your interest as a home buyer before choosing to go the length of the field with them.
UpNest, whichis owned by parent companyRealtor.com, uses a proprietary agent matching system that considers closed listings, location of listing, and other factors to provide the customer with 3-5 individual proposals.
The proposal includes commission information, marketing techniques, a Q&A about the agents, local trends, reviews, and more. Once agents start using UpNest’s platform, the matching system evaluates their performance with UpNest, including conversion rates and response time.
UpNest is a no-cost service for home sellers and buyers to find the best real estate agents locally. The UpNest platform allows you to compare multiple agents in your area so you can compare reviews, commission rates, previous sales, and more.
Our network agents have been carefully vetted and often offer competitive, lower than average commission rates to UpNest customers. There is no obligation to sign up with one of our network Realtors, but when you can potentially save thousands on commission – why wouldn’t you? If you’re ready to get started, just enter your zipcode below!
Agents Compete, You Win.
Is it better to buy a multifamily or single family?
While multi-family homes usually have a better cash flow and are a better investment opportunity, it’s up to your personal preference. You’ll get a better return on investment on many multi-family homes, but you’ll have to share walls if you live in the property. You’ll also have more cash flow for rent if you’re between tenants.
Is it worth buying a multi family home?
A multi-family can be an excellent investment. A duplex or four-family unit provides multiple rental units that provide additional cash flow than a single-family. If you live in one of the units, you can engage in house hacking, a fantastic real estate investment technique.
