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Single Family vs Multifamily Property Investing—Finding a Perfect Tune

Blog to Go: Tap to Listen Anywhere!

We're jumping into an exciting topic that's similar to choosing your next chess move—single-family homes vs. multifamily real estate investing. Just as each musical piece has its unique qualities, these two investment options have their own distinct characteristics.

So, let's dive into the differences and discover the financing options that can turn either of these real estate investment strategies into a pleasing tune that’s music to your ears!

The single-family home — your go-to solo performer

Investing in single-family homes is a bit like finding a solo artist who nails every note—impressive in their standalone performance. These properties appeal to a broad market, making them a pretty popular choice for renters. Single-family homes also tend to have lower entry costs, providing an easier stepping stone for budding real estate investors.

Financing a single-family home can be straightforward too. Traditional lenders often have favorable terms for these types of properties, and private lending options like Kiavi can offer flexible, quick, and straightforward financing solutions. From fix and flip loans to DSCR rental loans, you'll find a variety of ways to finance your single-family investment that align with your strategy.

Investing in a single-family home can sometimes feel like a one-person band—it's easier to manage, but the income stream comes from one source.


The rhythm of the single-family rental market

Let's shine a spotlight on the single-family rental (SFR) market of 2023. The melody here could be perceived as less of an explosive solo and more of a soothing rhythm, with rent growth patterns potentially settling into a familiar and predictable beat.

After an impressive crescendo of around 6% to 7.5% annual rent growth in 2021-2022[1], the symphony of the SFR market is now following a more consistent and steady rhythm. It's like our market has found its groove and is jamming along to it, ensuring a solid and sustainable performance.

Below we're breaking down the upcoming setlist with some interesting predictions from the John Burns May 2023 SFR update[2]:

  • A comfortable 3% rise in asking rents in 2023, which is the market's way of keeping the beat going without overwhelming the band.
  • A slightly more energetic 3.5% increase in 2024, signaling the market is confident in its performance and ready to take the spotlight.
  • A crescendo to 4% growth in 2025, showing that our SFR symphony could be gaining momentum and captivating the audience.
  • And finally, a grand finale with a bold 5% increase in 2026 ending the performance on a high note and left the audience eagerly awaiting the encore.

This stable, gradual increase in rent could reflect the SFR market's normalization trend, showing us that it's not about sudden dramatic drops or sky-rocketing numbers. Instead, it's all about maintaining a steady rhythm, and that's music to any real estate investor's ears.

Multifamily investing — a harmonious chorus of income streams

On the other side of the coin, investing in multifamily properties is akin to directing a harmonious choir. Here, you've multiple units under one roof, all working together to create a symphony of income streams.

One of the biggest perks of multifamily investing? Even if one unit is vacant, the others can still generate income, adding a layer of security that's as reassuring as knowing there's a spare key under the doormat. Plus, managing multiple units within one property can be more efficient than managing scattered single-family homes—it's like having all your sheet music in one binder.

As for financing, multifamily properties can involve a larger investment, but they also often boast higher potential returns. Financing these types of properties typically requires a commercial loan, but fear not! Kiavi is here to help navigate the financing waters with expertise and a friendly smile. With options from bridge loans and fix and flip loans to rental loans and rental portfolio loans, we're here to help ensure you can hit the right notes with your multifamily investments.

Multifamily market: orchestrating a harmonious shift back to pre-pandemic rhythms

If 2022 was the crescendo, some industry experts think that 2023 is shaping up to be the calming and steady melody that follows. Several factors have come together to orchestrate a symphony of changes since the market's peak in the second quarter of 2022.

Consider the influx of fresh talent—large deliveries of newly constructed multifamily units in 2021 and 2022—adding depth and complexity to the market's composition[3]. Add to that the drumbeat of rising inflation rates, hints of recession-related fears, and the crescendo of soaring rental rates. The music might sound intense, but let's not forget—every great composition includes its dramatic moments.

But let's strike a hopeful chord here. Fannie Mae forecasts a resilient rental property market in 2023[4]. Picture it as a soothing harmony, with rents rising but at a more modest and manageable tempo. This mellower rhythm offers real estate investors a sense of steadiness and predictability, like a familiar song to which you can't help but tap your foot.

Adding to the chorus, CBRE reports that the multifamily market is entering a period of normalization[5]. It's like our market composition is turning the page, with melodies more reminiscent of the pre-pandemic period rather than the unpredictable rhythms of the past couple of years.

In essence, the multifamily market's symphony is evolving. But it's not stopping. And as the notes change, the melody continues to inspire, offering new opportunities for investors to join the ensemble.

Single-family or multifamily: which stage do you want to play on?

Both single-family and multifamily investments have their encores. Single-family homes often promise lower initial costs, broader market appeal, and simpler management. Meanwhile, multifamily properties offer multiple income streams, vacancy protection, and management efficiency.

Choosing between single-family and multifamily investing is like choosing between a solo performance and conducting an orchestra—each has its own rhythm and tempo. It's all about knowing what kind of music you want to make in the real estate investment world.

At Kiavi, we're here to help you tune your investment strategy, providing professional guidance and flexible financing solutions that fit your unique rhythm. Because in the end, it's not just about hitting the right notes. It's about creating a symphony of successful investments. And we're thrilled to be part of your real estate investment ensemble every step of the way!

 

Sources
1,2 John Burns Real Estate Consulting, "Single-Family Rental Survey," John Burns Real Estate Consulting, accessed June 15, 2023.
3 Raiven, "Top Multifamily Trends of 2023 and What They Mean to You," Raiven, June 15, 2023.
4Fannie Mae, "2022 Mid-Year Multifamily Market Outlook – Demand Remains Resilient," Fannie Mae, June 15, 2023.
5Rebusiness Online "CBRE Report: There's Still Room for More Multifamily Rent Growth — for Now," Rebusiness Online, June 15, 2023.

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