Investing in the Charlotte real estate market offers plenty of opportunities in diverse neighborhoods. Whether you’re an experienced investor adding to your growing portfolio or you’re a new investor thinking about your first rental home purchase, you’ll have to decide what type of property you want to buy.
In Charlotte and the surrounding areas, you’ll find there are single-family homes in established neighborhoods as well as newer, HOA neighborhoods, and multi-family buildings that have two, five, or even more than 100 units.
Deciding which type of investment is best for you depends on several factors.
Consider Your Unique Investment Goals
Every investor is different, and so is every property.
Before you decide what to buy, it’s a good idea to revisit your investment goals and consider why you’re buying rental real estate. For example, if cash flow is your main objective, you’ll probably do better with a multi-family investment property that already has tenants in place who are reliable, have strong lease agreements, and are likely to stay in place for the long term. This will allow you to maximize your rental income every month.
However, if an appreciating property and long term ROI is really what you’re after and you’re looking for an investment that you plan to hold onto for 10 or 20 years, consider a single-family home. If you own a well-maintained property and keep up with the updates and upgrades that reflect market demand, you’ll have high occupancy levels and you’ll watch the value of your investment increase over time.
Plan for Vacancy Risk in the Charlotte Rental Market
You’ll also have to consider your tolerance for risk. In the Charlotte rental market, vacancy isn’t currently a problem. Good tenants are always looking for well-maintained, attractive homes in desirable neighborhoods. But, vacancies do occur and markets do change. Tenants move out, and when they do, you’ll be faced with vacancy and turnover costs.
A multi-family property will help you manage that risk better than a single-family home. When you invest in one single residence, all of your income relies on the tenants in that one property. But when you have a duplex, you have two income streams. If one tenant moves out, you’re still earning something. If you have a six-unit building or a 10-unit building, there’s even less of a risk that you’ll be hurt financially when a tenant moves out. This is a good argument in favor of multi-family homes.
Tenant Pools are Different in Multi-Family and Single-Family Homes
Demographics are changing among the renters we’re working with, and that has an impact on whether single-family homes or multi-family properties are better investments. Tenants who want to stay in one place for several years are more likely to seek single-family homes. These may be active and older adults who are retiring and want to give up the responsibilities of home ownership but still value privacy and space. Or, single-family tenants could be large families with children and pets who need extra space and a yard.
Tenant retention and stability is a good reason to buy a single-family home; you’ll always have high quality tenants interested in your property, especially if its location and condition are enviable. You can charge the most rent and be as selective as you want with your rental criteria.
Think About Per-Unit Maintenance Costs
You also have to consider the costs involving maintenance and repairs. Typically, single-family homes will cost more to maintain. When you have a building or a selection of multi-family units, you can have all the preventative work and the service checks and the inspections done at the same time. This will save you in the long term. Vendors won’t have to run to different parts of the city to get to all your properties; they’re in the same place.
If you’d like some help considering the opportunities to invest in both single-family homes and multi-family properties, please contact us at AM Realty. We would be happy to help with your investment decisions and with any of your Charlotte property management needs.