Why Do You Focus on Single Family Real Estate?

I have specialized in single family residential real estate for a few different reasons. First though, I should define what single family real estate means in the context of investing. Many people do not realize just how broad the category actually is. In Canada, a single family home can generally be defined as a property that features anywhere from 1 to 4 separate residential units. That’s right, a duplex, tri-plex or four-plex is actually lumped into the same classification by appraisers and mortgage lenders as a standard “one family” dwelling like a rancher or bungalow.

That means you can get a standard residential mortgage from a broker or bank to purchase one, just like you would for the rancher or bungalow that most people picture in their minds when they hear the phrase “single family real estate”.  Often mortgage rates for single family real estate are 1-2 full percentage points less than the interest rates on commercial property loans. That can be equivalent to hundreds of dollars per month in extra cash flow. Single family mortgage loans also require smaller minimum down payments than equivalent commercial loans. This increased financial latitude is the first reason why I primarily focus on this type of real estate to invest in.

On a somewhat related note: Multi-family properties are not considered to be “commercial” until they have 5 or more units. Also if a property features any type of retail or agriculture based business it is typically classified as commercial real estate. So for example a two story building which has a retail storefront like a variety store on the first floor and a single family apartment on the second floor would by default be classified as a commercial building.

The second reason I focus on single family properties is because it is the real estate class that I (and most of my JV partners) are most familiar with. Most people live in single family houses and will rent or purchase one at some point in their lifetime. There is a relatively large supply on the market and renting out a house or suite to someone in return for a monthly fee is a familiar concept to most pretty much everyone.