One of the first characteristics of income property investing you should convey to your customers is that all properties are not created equal. Knowing and understanding the difference between single-family, multi-family, and commercial income property can be the difference between success and failure as an investor. And trust us, there is much success to be found through this type of real estate investing but there is also a resounding crash waiting for you if you don’t understand what you’re getting into before you pull the trigger on that first deal.
Single Family: Exactly what it sounds like. Single family investments are those that are intended to house one family living under one roof on a piece of property. Visit any suburban neighborhood or rural area and you’ll see plenty examples of this. Single family, residential homes are the bread and butter of the beginning income property investor.
Multi Family: Multi family dwellings would include layouts like duplexes, townhomes, and apartment buildings, where several families live together in separate units but beneath one roof. While multi family investing allows you to concentrate landlord duties in a central geographic location, keep in mind that owning a single apartment building does not count as being diversified. For that you should own properties in different cities, which is sometimes difficult to swing financially when starting out.
Commercial: Commercial real estate property is anything used for business purposes, as opposed to residential. Office space and manufacturing warehouses are good examples. Commercial investing is not usually the best place to begin for the newbie investor. While appealing for sometimes high cash flow characteristics, commercial investing usually requires higher capital investment and high occupancy to make the numbers work out.
These are the basic categories of income property classes and the differences are critical for both you, as the realtor, and your customer, as the investor, to understand.
The AIPIS Team
Flickr / Hoboken Condos