What type of rental property to buy in Tampa
If you’re an investor wondering what type of rental property to buy in Tampa, we are looking specifically at the differences between multi-family and single family homes. By multi-family, I mean anything from a duplex to a large apartment building. I personally have owned rental properties for more than 30 years, with both single and multi-family properties in my portfolio. We have also provided Tampa property management for hundreds of properties for our customers. So, we understand the pros and cons of multi-family property investments.
Advantages to Owning Multi-Family Property
The first advantage of multi-family property is you’ll have lower maintenance costs. There are economies of scale with multi-family properties; there’s one roof and one yard. If you send a maintenance man over to check the flapper valves in one toilet, they can go through all the units that are there without driving to different properties.
The second advantage is that the income is more consistent. If you own a fourplex and one unit goes vacant, you still have rent from the three other units coming in. With a single family home, a vacancy means no income at all.
Also, for a given amount of income that’s generated, you’ll pay less when you purchase the property. With a multi-family property, you are only competing in the purchase with other investors. With single family investments, you’re also competing with owner occupiers. They aren’t looking at cash flow, they pay what they are willing to pay because they’re going to live there.
Disadvantages to Owning Multi-Family Property
We found over the last 15 years, that tenants stay about half as long in multi-family properties as they do in single family properties. That can be significant because if you have a good tenant, you want to keep that good tenant. It provides better cash flow and you can avoid the cost of vacancy and finding new tenants and getting the property ready for the market. On average, the turnover costs equal about three months of rent, and sometimes as much as five months of rent.
Another negative is they take longer to rent than single family homes. Usually, you can expect a vacancy that’s twice as long. You’ll also spend more time doing tenant compliance and enforcing your lease. For example, the lady in unit A may have a young child and the young woman in Unit B plays music too loud when the child is sleeping. Or, your tenant in Unit C parks in the space that’s assigned to the tenant in Unit D, and they argue. You’ll need to deal with issues like that.
Finally, we saw that multi-family has a higher legal cost than single family.
There are more frequent evictions and defense of civil actions.
Multi-family makes good rental properties, but there are many more moving parts compared with single family. If you’re less experienced, consider a single family property instead, or work with a good property management company. You should also seek advice during the purchasing part of your investment. About 15 years ago, we were hired to manage five apartment buildings. We spent the entire first year working with police to eradicate drugs and crime before we could get good tenants. Be careful in how you purchase.
In Part 2 of our blog on this topic, we’ll tell you about single family homes. For help with property management in Tampa, please contact us at Hoffman Realty.