Success in real estate depends on investing in the right location and buying the right property.
As you look for potential investment opportunities in Palm Desert, you certainly have the location piece of the puzzle covered. This is a great market for investors, whether you’re hoping to rent out long-term homes or short-term vacation properties. There’s a lot of demand, a pool of well-qualified tenants, and home values that are appreciating even as rents rise.
The property you choose will depend on your investment goals. Are you looking for property investment options that offer high returns without too much hassle? Is vacancy risk a serious concern for you? Are you buying a property that you may use as a retirement home some day?
We’re always stressing the importance of investment goals to our Palm Desert real estate investors. You have to know why you’re investing in order to know what kind of investment property you’re seeking.
Let’s take a look at single-family homes in Palm Desert versus multi-unit complexes to determine what type of property will bring you the desired outcomes.
Investing in Palm Desert Single-Family Homes
Single-family homes are especially popular in Palm Desert when it comes to property investment and tenant demand. There are several good reasons for this.
- Single-family homes offer a sense of ownership and privacy for tenants that can be hard to find in multi-unit complexes and apartment buildings.
- Single-family homes have the added benefit of a higher resale value.
- It’s easy for rental property owners to increase property values by making significant upgrades.
Many investors find that single-family homes are easier to maintain than buildings or units within a complex. Tenants are often more willing to help with general maintenance and landscaping around a single-family home.
You’ll also find that tenants tend to stay in place longer when they’re renting a single-family home. This will contribute to your tenant retention plans and protect you from high turnover costs.
However, single-family homes do provide a disadvantage in that they tend to be more expensive to purchase. You might have to wait for the cash flow to turn positive when you’re investing in Palm Desert single-family homes. While your rents may be higher than they would be for an apartment unit, you’re still facing larger mortgage costs and potentially higher management fees, too.
Buying Multi-Unit Complexes in Palm Desert
Multi-unit complexes are buildings that house multiple rented units. They can be apartment buildings, duplexes, or other buildings in which investors typically own the property and rent out multiple units to tenants.
This property type offers an excellent opportunity to generate significant cash flow, making them a popular choice for investors who are interested in collecting as much rent as possible right out of the gate. Additionally, multi-unit complexes provide you with more units to rent out, making your cash flow more consistent than with single-family homes.
Multi-unit buildings are typically located in high-density areas such as downtown or near high-traffic areas. There’s less of a vacancy risk. When your tenant moves out of a single-family home, all rent is lost. When you have a vacancy in your multi-unit building, there is still rent coming in from other tenants, leaving you less financially vulnerable.
However, multi-unit complexes come with additional management responsibilities such as dealing with tenants, maintenance and repairs, and higher marketing costs. You might find the day-to-day requirements are far more intense when it comes to managing units in a multi-family building.
Evaluating Which Property Type Works for Your Investment Goals
There are several factors that you’ll need to consider when you’re choosing a property type in Palm Desert. These include:
- Price. Single-family homes are typically more expensive than multi-unit complexes. However, single-family home mortgages are often more accessible than commercial loans, so you’ll want to think about how you plan to finance your purchase before you decide on a property type.
- Maintenance costs. Single-family homes may require less maintenance than multi-unit complexes requiring maintenance on a per-unit basis.
- Vacancy Rates. Although single-family homes have better cash flow, estimating the number of vacancies is harder to predict because they are only available to one tenant. You have less risk of vacancy when you’re renting out multiple units.
- Cash Flow. Multi-unit complexes provide steady cash flow that’s often more reliable than single-family homes because of having multiple tenants.
What should you choose?
The choice between single-family homes and multi-unit houses is dependent on your investment strategy goals and finances. Suppose you prefer to maintain lower responsibility and prefer the potential for a more significant resale value. In that case, a single-family home may be a better investment option. If you desire to have a steady and long-term cash flow stream, multi-unit complexes are the best choice.
Our advice, always, is to diversify your real estate portfolio as much as you can. When you can find a way to invest in both multi-family units and single-family homes, you’re strengthening the value of your portfolio and establishing some real wealth while protecting yourself from risk.
If you’re looking for your first investment home, however, or making a strategic decision to add one property type to what you already own, you’ll have to decide between a multi-unit investment and a single-family home. It’s not always easy. But, if you use your investment goals as a guide, the answer should become clear after some reflection, market information, and a financial review.
Overall, Palm Desert's real estate market is performing very well, making it a prime area for real estate investors. Deciding between single-family homes and multi-unit complexes is heavily dependent on your financial goals and investment strategy. Single-family homes offer a sense of ownership for tenants and can earn you a higher resale value, while multi-unit complexes generate steady cash flow and require more responsibility.
If you’d like to talk about your investment goals and how different property types might fit into them, we’d love to take a look at your specific needs. Please contact us at Xepco Properties for help with this and any of your Palm Desert property management needs.
