Owning rental real estate is a business, and like most businesses, comes with a substantial to-do list of tasks. A landlord can sometimes save some money by self-managing property. But that means taking on maintenance, rent collection, and tenant screening themselves. If the landlord has a full time job or doesn’t live nearby, even a single home will be hard to manage without help.
Hiring a property management company is another option. Many people think that management companies are only for large apartment complexes, but this is not the case. Even landlords who have just one house to rent can pay a management company to take care of all of the details.
This is how many people in the St. Louis region handle single-family rental property. For example, all around Scott Air Force Base in Illinois, military families buy homes that they must leave when they are deployed to another state or overseas. It is common for them to hold onto the home for a few years and return after their assignment ends. In the meantime they rent out their houses, providing a great option for families new to the area (for example).
Or, anyone might decide to keep a home when the market is depressed and they have trouble selling it. Until the market improves, or the military family returns to the area, they can hire local property management companies to find tenants, maintain the homes, and collect the rent. Professional property management companies provide a nice investment opportunity without the need for personal involvement for any rental property owner.
Driving through a neighborhood, it is not obvious who rents and who owns the homes. Advertising a house for rent is a necessity, unlike an apartment complex with a rental office or the ability to simply post a sign with contact information for potential tenants. Management companies can handle advertising available homes and screen applicants, or owners can do it themselves. Screenings are a crucial part of the rental process.
Finding good tenants who take care of the property and pay their rent on time is not easier or harder when renting a house as opposed to an apartment. But the tenant profile might be slightly different. The fact that houses tend to be in neighborhood settings, are larger with more bedrooms, and often have yards and garages, means they are more likely to draw families with children. These people may want the stability of a home where their kids can play and ride bikes, and settle into a school.They may be looking for something quieter, for example, than a city-center apartment near the hustle and bustle of an entertainment district.
One drawback of owning a single house instead of a multi-unit apartment building or even a duplex is that vacancies will hurt the owner’s bottom line more. The revenue for an empty home is zero. For a multi-family dwelling, there will still be other tenants helping cover the owner’s mortgage, taxes, and other expenses.
The landlord is responsible for maintenance and upkeep of an apartment building. This could include landscaping, shoveling snow, and mopping or sweeping hallways. If they provide coin-operated laundry facilities, they will need to maintain those too.
With houses for rent, the tenant might take care of some of the maintenance. They may be responsible for mowing and keeping the yard neat. They might bring their own washer and dryer, so that is theirs to maintain along with keeping the entire dwelling clean. Something like changing furnace filters might be up to them too. These things would be spelled out in the lease with the owner’s expectations and details about who will pay. For example, the landlord might provide a lawnmower or reimburse the tenant for furnace filters.
The landlord or their property management company still needs to respond to repair requests and emergencies at a house for rent. But compared to an apartment, much of the upkeep might be in the hands of the tenant.
In most cases, it will cost less to buy a house than an apartment building. But buying a house to rent out is different than buying a house to live in. It is considered investment property, so most lenders will insist on a 20% down payment.
Apartments as an investment have the advantage of “economies of scale”. Property taxes, insurance, etc., may not be much different for a house vs. a small apartment building, but just as it does with vacancies having several tenants to help cover the costs makes a difference. There is the chance to, that there will be tenants living in an apartment at the time of the sale. A house may take longer to find a tenant and start making money.
Selling a house that was a rental, however, is often easier. Prospective buyers might be people wanting to live there, another investor who will continue to rent it, or even the tenant who has taken a liking to the place. In fact, a rent-to-own agreement can be drawn up, allocating a portion of rent each month toward the purchase of the home.
If a landlord owns several different single-family houses, they also have the ability to sell off one or two and keep the remainder of their portfolio intact. An apartment building may be a harder sell, and needs to stay as one entity.
Whether a house for rent or an apartment for rent is more appealing depends on the tenant.
Apartments, especially ones with on-site property managers, offer tenants the ease of moving in or out without much hassle. Maintenance and problems are handled routinely. Utilities might be included in the rent amount, and even if they aren’t, it is usually cheaper to heat and cool an apartment than an entire house. And luxury complexes might include amenities such as a concierge, pool, gym, tennis or basketball courts, and playgrounds.
Houses for rent offer different advantages. Tenants can get more square footage with more bedrooms and bathrooms. They may also have a basement, laundry room, garage, and yard that are their own and not shared with neighbors. Privacy in general is better in a house without thin walls or noisy corridors.
Both houses and apartments have a lot to offer renters, depending on what they are looking for. Whether a landlord can find a good tenant has less to do with the type of rental and more to do with its location and how well it is maintained. For help with property management in the St. Louis area that includes maintenance as well as marketing, background checks, writing leases, and collecting rent, contact Select Leasing & Management. We will help fill your house or apartment to make the most of your investment.
Cover photo by Ravitaliy by Canva.com
12851 Manchester Rd., Ste 110
St. Louis, MO, 63131
