Single-Family is better than Multifamily

Yes, you are reading that correctly! There I said it! Single-Family investing is better than Multifamily investing. Want to fight about it?

Ok, now let’s get serious. I don’t know about you, but I hate real estate gurus, fundraisers, and influencers that act like whatever they are selling or investing in is the best thing ever and you’re an idiot if you do anything else…no thank you!

In reality I believe there’s a strong case for both single-family and multifamily investing and you should probably have both represented in your real estate portfolio…I do!

But that being said, let’s take a few minutes to explore the 7 key benefits of single-family compared to multifamily, as well as the one major benefit multifamily has compared to single-family and how companies like us are replicating that benefit in single-family investing.

1. Single Family demands higher rents compared to Multifamily

In December 2024, single-family rental (SFR) prices reached an average of $2,174, marking a 20% premium over multifamily rents, the largest gap since 2018. Over the past five years, SFR rents have surged by 40.6%, outpacing the 26.2% growth in multifamily rents. This trend underscores the increasing demand for single-family rentals, driven by factors such as limited housing supply and rising homeownership costs.

2. Single-Family have less turnover compared to Multifamily

Data indicates that single-family rental (SFR) properties experience lower tenant turnover compared to multifamily units. Tenants in single-family homes tend to stay longer, with turnover occurring approximately once every five to eight years. In contrast, multifamily properties often see higher turnover rates, with tenants moving more frequently. This lower turnover in SFRs contributes to more stable cash flow and reduced costs associated with tenant turnover.

3. Single-Family has lower maintenance cost compared to Multifamily

When comparing maintenance costs between single-family and multifamily properties, it’s important to consider the unique factors influencing each. Multifamily properties often have shared spaces and common areas that require regular upkeep, such as hallways, elevators, and lobbies. These shared amenities can lead to higher maintenance costs due to the need for consistent cleaning, repairs, and general maintenance.

In contrast, single-family homes typically lack these shared spaces, resulting in fewer areas that require regular maintenance. This absence of common areas can lead to lower overall maintenance costs for single-family properties.

4. Single-Family has higher quality tenants compared to Multifamily

Single-family rental (SFR) properties often attract tenants seeking long-term stability, such as families and professionals desiring more space and privacy. These tenants are typically more financially stable and tend to treat the property with greater care, leading to longer lease durations and reduced turnover. In contrast, multifamily properties may attract a more transient tenant base, resulting in higher turnover rates.

This tendency for single-family homes to attract higher-quality tenants contributes to more consistent rental income and lower maintenance costs for investors.

5. Single-Family is easier to resell compared to Multifamily

Single-family homes are generally easier to resell compared to multifamily properties. This is because single-family homes appeal to a broader market, including both investors and owner-occupiers, providing greater flexibility when it’s time to sell. In contrast, multifamily properties primarily attract investors, narrowing the potential buyer pool.

Additionally, single-family homes are typically more affordable, making them accessible to a larger number of buyers. This affordability contributes to higher liquidity, allowing for quicker sales.

6. Single-Family is easier to finance and the financing has better terms compared to Multifamily

Financing single-family homes is generally more straightforward and comes with more favorable terms compared to multifamily properties. Single-family homes typically qualify for conventional residential mortgages, which often feature lower interest rates, smaller down payment requirements (usually around 20-25%), and longer loan terms (30 year fixed rate), making them more accessible to investors.

In contrast, multifamily properties with more than four units are classified as commercial real estate, necessitating commercial loans. These loans often come with higher interest rates, larger down payment requirements (typically 25-40%), and shorter loan terms.

7. Single-Family has lower vacancy rates compared to Multifamily

Data from the U.S. Census Bureau indicates that single-family rental properties tend to have lower vacancy rates compared to multifamily units. In the fourth quarter of 2023, the vacancy rate for single-family rentals was reported at 5.6%, while multifamily properties with five or more units had a higher vacancy rate of 7.7%.

This lower vacancy rate in single-family rentals can be attributed to factors such as longer tenant stays and higher demand for standalone homes, contributing to more stable occupancy rates for investors.

So, what is the major benefit Multifamily has over Single-Family?

Built in Economies of Scale.

What are Economies of Scale? Economies of scale are cost advantages that a company experiences when it increases its production volume (units under management). This happens because the cost of production (operating expenses) is spread out over more units.

Multifamily has “more units” right away, they are literally built in. Whereas single-family is just that a single unit. But here’s the thing, you can create Economies of Scale in single-family investing by purchasing more than one! When you grow your single-family portfolio Economies of Scale are created. Look at Invitation Homes, American Homes for Rent, Tricon Residential these institutional single-family investors have acquired hundreds of thousands of single-family homes to create Economies of Scale and spread their operations cost across their entire portfolio and not just one single-family home.

This is why we raise capital

Growing our portfolio and creating Economies of Scale is exactly why we raise capital at GSP REI. The capital we raise through our 506c fund offerings is used to acquire blighted and value add single-family homes and redeveloped them (that’s how we create equity). When you invest with us, we are able to acquire new units and increase our Economies of Scale (and create more equity and rental income). That’s what we’ve be doing over the last 5+ years. Growing our portfolio and operations team.

We’ve grown our rental portfolio to over 100 units throughout Philadelphia metro and suburbs, Baltimore City, and South New Jersey.