When you are ready to make an investment in a rental property, it can be confusing to know what type of property is best for you to invest in, and what will be most profitable for you. In this challenging real estate market, there are several factors to consider when deciding which type of rental property you should purchase. Here are some investment types and the pros and cons of each one to help you weigh your options.

1. Rental Houses (Single Family Residences)

Many Henderson and Las Vegas landlords choose to rent homes to tenants, or even Las Vegas vacationers, as a way to earn a steady stream of income. Single family residences (SFRs) are a great place to start if you happen to be a new landlord. It is more affordable to purchase a SFR than an apartment building or portfolio because you do not need as much capital.

Additionally, they do not require too much work because you often only have one tenant at a time. You also may be renting to a family that plans to stay for a while, so oftentimes you will not have to worry about finding a new tenant to fill the vacancy as often as you might with other rental types. Although, this benefit only applies if you have one property versus multiple rental homes.

Your rental income may not be as lucrative with a SFR compared to an apartment. If your tenant’s lease expires and they decide to move out, you are still responsible to pay the mortgage and utilities whether you have a new tenant lined up or not. It will also be more difficult to scale your investments when you have to purchase one home at a time and are limited to how many investment purchases you can make before you have to turn to commercial loans.

2. Apartments (Multi-Family Properties)

Apartment buildings are another popular investment type to consider in Las Vegas. There is an abundance of renters in Southern Nevada with numbers steadily trending upward. When you are renting multiple units in an apartment complex, you have a reliable income every month. Even when one tenant moves out, you still have rent coming from the other tenants while working to fill that vacancy.

Apartments are also strategically designed to make repairs and updates easier and more economical. For example, if you want to fix the roof, update the plumbing system, or paint the exterior, you only need to do these changes to one building versus multiple houses in a portfolio. Apartment landlords have their tenants all in one place, which often makes routine maintenance a little easier to manage.

On the other hand, the Las Vegas market is increasingly competitive when it comes to apartment rental units. Not only do you need to offer attractive rental rates, but you should also provide your tenants with amenities and services that can reduce what ends up in your pocket. It can also be more difficult to purchase the initial building because multi-family properties are much more expensive than SFRs.

3. Condos

The key difference between buying a single-family home and a condominium (condo) is that you do not own the land when you purchase a condo. Although you might own the unit and what is inside the condo, you do not own the land that it sits on. That means you share common areas with other condo owners, including the outside area, pool, gym, clubhouse, etc.

Thinking about purchasing a condo to rent it out for extra income? Just know that your tenants are often subject to the complex’s homeowner’s association (HOA) rules and fees. You will not have complete control over what rules you would like to implement in your lease agreement. Additionally, if your tenant does violate HOA rules, you, as the owner, will be held accountable. It could add an extra layer of responsibility for the landlord when renting out a condo.

If you are on a budget, however, and do not necessarily have the assets for a mortgage on a home or a multi-family property, a condo could be a reasonable option. They are often less expensive than a single-family residence and do not require a commercial loan. You will also be able to provide the community amenities the complex offers to your tenants without having to maintain them yourself.

4. Townhouses

First, what is a townhouse? Townhouses are classified as multi-dwelling properties consisting of houses that are attached to each other. In other words, each townhome shares a wall with the townhome next to it but still has a private front and back entrance. You did not see townhouses as often as other rental properties in Las Vegas in the past, but that is rapidly changing as more and more townhouse complexes are currently being built.

One of the biggest benefits of purchasing a townhouse is they are generally less expensive than an SFR. You may also be able to attract good tenants because townhouses are often built in the suburbs outside of hectic city life with communities in mind. If you are interested in renting to families or working professionals who do not mind being away from the Las Vegas Strip, you may want to consider a townhouse. However, you may have to deal with an HOA just as you would with most condos.

Choosing the Right Rental Property Investment for You

While each rental property type has its benefits, it really comes down to how much you are willing to invest and your comfort level of managing the property. For example, do you want to be a full-time landlord, or are you simply looking for a small investment property for additional income? Some property types will require a more hands-on approach and a more involved process than others. Weighing the pros and cons of each type can help you decide which type you should purchase.

When you do decide to make your investment, Black & Cherry is ready to help you make the most of your rental income. By offering professional Henderson and Las Vegas property management services, we can help streamline everything from marketing your rental vacancies to collecting rent.

To learn more about our property management services, contact our experienced property management team today!