If an investor wants to buy residential property right now, should they opt for private houses, condominiums or multifamily? Each one has a good news/bad news list of characteristics. Which is best for the investor depends on finances, emotional preferences, and time. Following are summaries of the advantages and disadvantages of each.

From a management perspective, as a general rule, unless you own a total of ten private homes and/or condominiums, the economics don’t work for hiring a management company. For multihousing, fifteen units is the threshold for hiring outside management. Managing on your own real estate means collecting rents, keeping books, taking calls in the middle of the night and leasing on the weekends. There is nothing wrong with this approach, except that you need the skill, temperament and time to do it.

From an economic perspective, when a condominium or private home is occupied, it is 100% occupied. Conversely, when either is vacant, they are 100% vacant. Condominiums have covenants, conditions and restrictions (CC&Rs) which govern the community. The condominium owners elect directors to manage and oversee the property. The directors’ skills and abilities will reflect on the condominium’s value. Lawsuits can arise that will affect the value of the condominium. Multihousing offers a diversified source of revenue and has less of the financial complications presented by private housing and condominiums.

Whichever you buy, it has to start with cash flow and grow from there. In the final analysis, that’s what is going to determine value.