The Different Approaches To Realty Management

Realty Management

Frequently during property management training the topic comes up about whether single family or multi family properties make the better investment.

Much of the answer to this is really a question of realty management, your specific real estate investment objectives, and whether or not the individual tasked with managing your rentals has the necessary property management training.

Single and Multi Tenant Properties Realty Management Review

Some of the common discussion about realty management cover these points:

Consider whether or not the market has really bottomed out. Are there too many properties on the market for the available buyers, or are unsophisticated investors bidding up property values while the smart money stays on the sidelines?

Think through the exit strategies available with each investment.

With single family properties you can:

• Sell to your tenant
• Sell to an owner-user who is not your tenant
• Sell your portfolio to another single family investor, although this is the toughest of the three to do and often times easier said than done

With multi tenant properties the exit strategy is more limited, but also more clear cut:

• Sell to another multi tenant investor
• Go condo, split up your multi tenant property into individual units for sale, and sell to either the current tenant, another owner-occupant, or a beginning residential investor

Realty Management Differences

There are big differences in the type of realty management required for each of these product types.

Here's what I see the top three being in each:

Single Family Realty Management

The realty management of a group of single family homes becomes much more difficult if they aren't close to each other.

On the other hand, the amount of ongoing repairs required is probably going to be less, since tenants in single family homes tend to have more of a "pride of ownership" in their property, even though they're renting.

But when repairs are needed, they are probably going to run on the high side, in particular when the property needs to be turned over to another renter. There's simply more of everything that needs to be spruced up or replaced, compared to a small sized multi tenant rental.

Multi Family Realty Management

The realty management of multiple units is almost always easier, since each grouping of units is right next to each other. Even if you have a real estate investment portfolio that's spread across town you've still got multiple units right next to each other.

You may have a higher level of on-going repairs, since tenants in multi family property may take a lower "pride of ownership" view than those in single family properties.

When repairs are needed, the costs are probably going to be lower due to the smaller sized units, when compared to a single family home.

The Impact Of Appreciation

I've seen a lot of real estate investors purchase property with the idea of building a legacy that they can pass onto their kids. Their intent is to never sell.

Sometimes this happens, sometimes it doesn't happen, for various reasons.

My point is that buyers of investment real estate should always think through the potential selling exit strategies of each and every investment they buy, in addition to the ease of realty management.

Here's where to start when you think about selling before buying.

Multi Tenant Investors

With multi tenant properties, you'll most likely be selling to another investor who is driven by financial performance, CAP rates, or cash-on-cash return. There won't be a lot of emotion involved with this type of sale.

So, your type of realty management should be developed with this in mind.

Single Family Buyers

Here you're most likely selling to an owner-occupant, either the existing tenant who wants to own, or an end-user who wants to buy.

With single family, other than the ability to finance the property, emotion is probably the number one driver for most buyers. The color of paint, carpet or flooring, the type of appliances, and much more all come into play.

Your realty management of the property should be done with this emotional twist in mind.