One of the most common and important questions when making your first foray into real estate investing is deciding which property type is worthy of your investment. Typically, people invest in the following types of property:
- Single Family Home
- Multi-family Structure (e.g., Duplex)
- Commercial Apartment Building
Deciding which type of property to invest in primarily depends on an array of factors unique to you. For example, the best property type will differ from person to person depending on your financial situation, experience in real estate investing, geographic focus, and available time to actively work on your real estate portfolio.
Let’s look at each property type and discuss some of the inherent positives and negatives to each.
Investing in Single-Family Homes
If the property’s purchase price is extremely important to you, then the best property type for your investment would be a single-family home. Why? Because single-family homes comprise the largest supply of all property types in the US, which means they typically have the lowest price point (especially in comparison to purchasing a multi-family structure or apartment building). It is also much easier to secure hard money loans in Los Angeles and elsewhere in California, along with loans from banks to purchase a single-family home.
Investing in Multi-Family Structures
Multi-family structures have unique features that provide the tremendous earning potential for investors. They are attractive because multi-family structures are allowed to access similar rates as single-family homes while also benefiting from the economies of scale associated with commercial apartment buildings.
Investing in Commercial Apartment Buildings
If you are focused on rapidly growing your real estate portfolio, investing in commercial apartment buildings may make sense. Why? Because it is typically easier to scale a real estate business and increase the overall value of an investment portfolio with a property that can accommodate multiple tenants who will generate monthly income for you.
Another benefit is the lower cost of maintenance. In contrast to single-family homes, commercial apartment buildings have shared or common features throughout the property, which can result in maintenance being much less expensive on a per-unit basis.
A negative associated with investing in a commercial apartment building is the significant upfront cost. For example, securing a loan for a commercial apartment building typically requires a down payment of between 25 and 30 percent, cash reserves that can last between six and 12 months, and higher interest rates relative to the single-family housing market.
Deciding the best investment property for you will depend on factors and considerations unique to you and your goals. Whether you choose to invest in a single-family home, multi-family structure, or commercial apartment building will largely come down to what you value most and what you are trying to accomplish with your real estate investments.
Have Questions? Contact PB Financial Group Today
Deciding what property type is best to invest in can be extremely difficult, along with assessing what property type is viable after securing a hard money loan in Los Angeles. PB Financial Group is here to help. We are proud to provide hard money loans in Los Angeles and throughout California. we have been providing quick, efficient funding to real estate investors and flippers since 2006. For further information or to schedule an appointment please contact PB Financial at 877.700.3703 or visit www.CalHardMoney.com to learn more.
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