Rental Properties: Pros and Cons with Less Than 6 Units

Rental Properties: Pros and Cons with Less Than 6 Units

Rental properties:

Some kinds of investment properties are not suitable for property owners.

For some property investors, single-family homes are the best.

However, for others, commercial properties may be more suitable.

Rental homes with fewer than six apartments are also good.

In most cases, they are small rental properties.

Are you interested in investing rentals with less than six units?

If yes, you must understand certain things about such investments.

These include the types of rental properties with less than 6 units.

Also, you should know about the advantages and disadvantages.

Rental properties
Advantages and disadvantages

Different types of rental properties with less than 6 units

If you want to invest in the properties, you have many options. These options include:

Single family home: This type of rental property is just for a single tenant.

Typically, it consists of a kitchen and a main egress or entrance.

Due to its layout, only a renter can use the rental property with his family.

This is basically a small rental property.

Two family home: This rental property is available for two different groups of renters.

Traditionally, it has two living spaces, which are often on different floors.

Also, each of the units has its own bathroom, kitchen, and bedrooms.

The egress or entrance to each unit is different too.

In general, there is a unit on the main living level.

The other unit may be found on the top floor or in the basement.

This kind of home offers several advantages for landlords.

The house owners can use one unit while a tenant uses another.

Duplex: This rental property is another form of two-family homes.

However, the rental units are not on each other.

They rather stand side by side.

Mixed-used building: This type combines commercial units with residential units.

The building may have a restaurant on the floor with residential units over it.

Traditional unit building: Here, only residential rental units make up the whole building.

The layout and size of the rental determine the number of units on each floor.

Typically, there may be one, two or three units on every floor.

Advantages of Rental Properties with Fewer than 6 Apartments

These properties have lots of advantages for landlords. These advantages include:

You may have an exemption from fair housing regulations

Homeowners managing their rentals must know Fair Housing rules.

Generally, house owners should treat all current and prospective renters equally.

Also, they should never discriminate against their tenants.

The fair housing rules exempt owner-occupied rentals with four or lesser units.

To avoid any problems, ascertain your local laws concerning this.

You may not require state security deposit rules

In some states, the laws exempt the owners from the state security deposit.

In most states, one month’s rent is the maximum that a landlord can charge as a deposit.

Rental properties
Security deposit

However, homeowners with six or fewer units can collect any amount.

Notably, there may still be some conditions that are applicable.

So, one important tip for landlords is to always check their state laws.

You can manage the property yourself

If you own small rental properties, you can manage it on your own.

This will help you save lots of money.

In addition, you will get day-to-day information about your rentals.

Even if there is an issue with the property, you can respond quickly.

All these are great advantages for landlords.

Rentals may partake in maintenance

Unlike bigger rentals, small rental properties usually have a homey feel.

Every tenant often feels committed to taking care of the property.

Resultantly, they may willingly maintain the units.

These may include mowing the lawn or clearing the garbage.

In a few circumstances, the renters may maintain the property for free.

Otherwise, they may ask for some rent reduction.

Or they may trade maintenance for other amenities.

You can diversify on a small scale

Rental properties with six or fewer units are usually not too expensive.

Consequently, property owners can buy lots of them.

They can buy in different or the same areas.

Similarly, it lets landlords go into other property investments.

Rental properties
Property investments

These investments may include commercial rentals.

Also, property owners can use it to test the waters.

With this, they will know if property investment is suitable for them.

Disadvantages of Rental Properties with Fewer than 6 Apartments

You should note the disadvantages of rentals with less than six apartments.

It often requires the landlord to manage them

Hiring a property manager or agent does not make sense financially.

Since they are small rental properties, property management fees will be too much.

In fact, the fees may take a large chunk of the whole profits.

As a result, homeowners have to handle lots of issues such as:

  • Collection of rent
  • Tenant disputes
  • Daily maintenance
  • Repair requests
  • Evictions of renters
  • Apartment turnover
  • Disputes concerning the security deposit
  • Finding new renters

These issues are not only challenges, but they are also time-consuming.

So, if you have a full-time job, you should think about the self-management carefully.

Vacancies affect the income hugely

Typically, small rental properties have just a few units.

Therefore, when there is a vacancy, it will affect the income significantly.

For instance, if it has two units, one vacancy reduces the income by half.

So, the landlord must fill the vacancies fast and screen effectively.

This can reduce evictions of tenants and damage of the property.

It lacks live-in superintendent

Many tenants like living with a building superintendent.

A superintendent can provide a quick response to an emergency.

Renting top floors may be difficult

There is usually no elevator inside small rental properties.

This makes it necessary for tenants to use stairs to get to the top floors.

For elderly renters and tenants with kids and/or health issues, this may a problem.

As a consequence, they will avoid such rental properties.

Do you need an affordable manager for your small rental properties?

Do need an expert to provide you with legal tips on investment properties?

If yes, get in touch with us at Reneza.

We are here to provide you with fool-proof real estate solutions.

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