New to the world of real estate investment? You’re probably wondering about the pros and cons of single-family vs. multi-family rentals. Although experienced investors have strong opinions on the matter, it really comes down to your business goals, resources, and level of comfort with financial risk. We’ll explain the benefits and drawbacks of each option, so you can make an informed decision for yourself.

What Is a Single-Family Home?

Before we get into the differences, let’s begin with a single-family vs multi-family definition. Single-family homes are structures with no shared spaces or common doors/entryways. They usually offer more privacy and square footage to residents. Examples might be a free-standing home, townhouse, or rowhome.

What Is a Multi-Family Home?

In a multi-family home (also referred to as a multi-dwelling unit or MDU), there are separate housing units contained within one building (or several buildings within one complex). Each unit has its own distinct living quarters. Multi-family homes could be as large as a 200-unit apartment community or as small as a duplex. They may have shared amenities like laundry facilities or a swimming pool.

What Is the Difference Between a Single-Family & Multi-Family Home?

As an investor, the physical difference between single-family and multi-family homes boils down to how many housing units you have. You can purchase a single-family home and rent to one family or an apartment building and rent to ten families, each with their own private living area.

Let’s look at how these differences play out in terms of income potential, investment costs, and other important factors.

Rental Income

Unless you own several single-family homes, a multi-family property will provide greater monthly cash flow because you have more tenants paying rent. Your income will also depend on the location of your property. For example, you’ll earn more from a single-family home in the affluent suburbs of New York City compared to one in rural New Jersey. Just remember that cash flow doesn’t equal profit. You’ll need to carefully consider the property cost, as well as maintenance, insurance, taxes, and financing to make an accurate comparison.

Property Cost

For first-time real estate investors, a single-family home can be appealing because they cost less to purchase and maintain. For example, the median price for single-family homes and condos in the United States was $270,000 in 2019. A multi-family unit, depending on size and location, can be upwards of a million dollars. Coming up with the capital is often challenging unless you have financing or partners.


Mortgages for multi-family housing are also more expensive. If you’re purchasing a building with more than four units, you’ll need a commercial real estate loan. These usually require 25-30% down, compared to 20% for conventional mortgages. Commercial real estate loans also have higher interest rates, further increasing the cost. And lastly, most commercial lenders require 6-12 months of cash reserves.


Naturally, your insurance costs for a multi-family property will be higher since there’s more to protect. For a single-family home, you can purchase a standard homeowner’s insurance policy. Four-plexes and larger buildings like apartments, townhomes, and condos require a Dwelling and Fire policy. This covers the structure itself in the event of a fire or other disaster. However, be sure to require that your tenants purchase renter’s insurance to protect their own personal belongings.

Maintenance and Renovations

Similar to insurance, your costs will be higher with a multi-family property because there’s more square footage to maintain. In addition, since there’s more turnover, you’ll need a larger budget for cleaning and prepping units. On the positive side, certain improvements add value to all your units at once. For example, the cost of replacing the roof or installing a swimming pool provides a greater return on investment when you have a multi-family building.


Next, let’s look at single-family vs multi-family taxes. In this case, single-family homes have the advantage. Not only are they generally assessed at a lower rate, but owners can also deduct property taxes. However, keep in mind that most multi-family investors incorporate this cost into the rent, so the expense is covered. This works well – as long as you don’t have too many vacancies.


Speaking of vacancies, single-family homes usually have higher retention rates. In many cases, these renters are families, so they’re more likely to put down roots. However, having one tenant can be a problem when they do decide to move out. You’re left with no income until there’s a new renter. Plus, when they leave, in addition to losing rental income, you’ll have expenses related to repairing the space, marketing the rental, and screening applicants. Multi-family rentals are less risky from this standpoint.

Housing Market

When you’re debating a single-family vs multi-family investment, you might assume that most rental properties are multi-family. However, single-family homes make up 35 percent of all rental housing across the United States, according to Bloomberg. And the demand is growing, particularly for millennials with heavy student loan debt and stagnant wage levels. For those with new families, single-family rentals are a viable alternative.


Multi-family properties have many benefits when it comes to efficiency. As with most purchases, greater volume creates discounts. You’ll find that property management services are less expensive and you can buy maintenance or renovation supplies in bulk. It also means less complexity at tax time and a single insurance policy. And even if lenders need to examine your financials more closely for a commercial loan, it’s a lot easier to close on one multi-family property than numerous single-family homes.


If you’re just starting out and/or you don’t have significant cash reserves, you’ll want to have a clear exit strategy. In this situation, single-family homes offer a better option. They’re quicker and easier to sell since there’s a larger buyer pool. Plus, they generally appreciate faster than multi-family properties.

Income Potential

It’s important to note that multi-family properties are valued on their net income, not comparable sales like single-family homes. By improving operational efficiencies, adding amenities, making smart upgrades, and increasing rent, you have more options for boosting your income compared to a single-family investment.

Which Is A Better Investment For You: Single-Family Home or Multi-Family Home?

As you can see, the question of whether you should pursue multi-family vs single-family investing doesn’t have a single answer. It depends on your circumstances and goals.

For example, if you’re looking to test out property management, a single-family home makes more sense. It’s less expensive and requires less maintenance. Plus, you’re more likely to find a buyer if it’s not working out.

On the other hand, if you have some experience and feel confident about your plans to pursue real estate investment, a small multi-family property might be a better fit. Especially if you have the capital for a down payment and cash reserves or a partner to offset the costs.

Both single-family and multi-family homes offer great potential for real estate investors as long as you understand the costs, benefits, and risks. Ready to get started? The real estate professionals at BHHS Fox & Roach can help you navigate the research process, evaluate properties, and find the perfect investment opportunity.