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Rental house or apartment: how to choose

Peter MillerThe Mortgage Reports Contributor

In this article:

When looking for a rental, you’ll need to decide between an apartment and a house. You’ll need to weigh the pros and cons of each option:

  • Large apartment complexes are likely to have professional management. This means someone is usually available to quickly address issues, answer questions, and collect rent. Additionally, larger complexes may have amenities like gyms, swimming pools, or party rooms. However, this means the costs of renting in a larger complex may be higher.
  • Rental houses are more likely to be managed by the house’s owner. The owner may be willing to charge a little less in rent if the tenant is willing to take care of the house. Single-family homes also provide more privacy than large apartment units. However, if you don’t want the responsibility of house maintenance, lawn care, and more, you may be better off in a larger complex.

What’s better: a rental house or apartment?

In most real estate markets today, you can get either a rental house or apartment, but is there a reason why one might be better than another?

Figures from the National Multifamily Housing Council show that among renters, 43 percent live in single-family homes, 17 percent in small rental properties with two-to-four units, 5 percent in mobile homes, and 35 percent in larger apartment properties with five or more units.

There are big differences between a rental house and apartment, differences which can significantly impact your economics and quality of life.

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Larger complexes vs individual homeowners

Large apartment properties are likely to have professional management. This means there is a representative of the landlord on the property, often someone who actually lives there. Their role is to acquire tenants, make sure that required services are provided, and collect the rent.

Rent-to-own homes: Move in now, buy later

Alternatively, single-family rental houses are often self-managed, not by the owner but by the tenant. The lease will spell out who is responsible for what, and this can be a very good deal for renters. Essentially, this is a situation in which the owner says, “Let’s make a trade. You live here, you take care of the place, and I’ll keep the rent at a reasonable level.”

In such situations, what owners are really saying is that if you self-manage, there’s no need to pay the rental manager. The result is a lower cost for the owner, and thus a greater ability to hold down the rent. There’s a mutual interest both parties have in keeping the deal going.

Rental house or apartment: pets

There are tens of millions of dogs and cats beloved by their owners. But, alas, for landlords, pets can present problems.

Homebuyers in the doghouse: Survey says pets play a big role in decision to buy a home

Landlords may have difficulty getting homeowners insurance for rental units if certain dog breeds are on the property. Single-family landlords may be more open to pets than large apartment complexes because they can adjust lease requirements to individual properties.

Amenities

A large apartment complex is likely to have more amenities than single-family homes, whether owner-occupied or rented. No doubt amenities are nice because they increase opportunities to socialize and make friends. That said, there are single-family homes with pools, especially in warm weather areas. Having a private pool certainly a luxury.

If you like privacy, single-family rental houses are the way to go. There’s no one at the front desk, there are no cameras in the hallways, no passes for parking areas, and there’s no mail room to share. Single-family homes provide separation and distance. There are no strange cooking smells and no loud arguments involving other people.

Finding a mortgage for an “unapproved” condo

By their nature, houses tend to have more space than apartment units. This happens because stairs, laundry areas, and HVAC systems are often outside apartments but within single-family homes. Apartments with a single bedroom are common while stand-alone houses routinely have three bedrooms.

RentCafe reports that apartments built in 2016 typically had 934 sq. ft. On average, units built today are 8 percent smaller than apartments constructed in 2010. In late 2017, the average new home had 2,571 sq. ft. of floor space, down from 2,736 sq. ft. at the start of 2015.

Rental house or apartment versus buying

If your real interest is not to rent at all, single-family homes may have a hidden attraction. About a quarter of all single-family homes are now owned by investors. Whether the owner is a single investor or a massive hedge fund, you have to figure that most have an end game which includes the sale of the property.

Live in your own rental building and call it a primary residence

As a tenant with a good payment history, you might find that some owners are willing to sell to a qualified buyer with a lease option or by carrying the loan for a year or two — enough time for you to put yourself in position to be approved for a mortgage, while getting into a home before prices rise.

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