Thursday, February 14, 2013

Rental Property Investing - Single Tenant vs. Multi-Tenant

This is a debate that has gone on for years – do you opt for a Single Tenant property or do you consider only Multi-Tenant buildings.  Lots to consider here, and as with everything in real estate investing, ONE SIZE DOES NOT FIT ALL!

Look back at your objectives and confirm what you are trying to achieve.  Is it ROI? Is it minimal management? Best opportunity for price appreciation?  Risk tolerance? Income growth through lease rate expansion? Mid-long term lease commitments? Triple A Covenants Only?  These may be some of the key criteria which you have identified.

Now let’s look at which Property Type, each of the above tends to favour.

ROI                        -  Multi-Tenant more likely
Price Appreciation   -  Multi-Tenant more likely
Management           -  Single Tenant less management (if any)
Risk                       -  Multi-Tenant more likely (spread across multiple leases)
Income Growth        -  Multi-Tenant more likely (given multiple leases)
Long Term Leases   -  Single Tenant more likely
Triple A Covenant     -  Single Tenant more likely

You can see the benefits of each, given the criteria that we’ve set out – but it all comes down to what you are prioritizing. There are clearly advantages to both and again as we’ve said many times, it is a set of property objectives that must be aligned with your particular market. For those of you keeping score, the above comes out 4-3, in favour of Multi-Tenant investments.

As always, seek out experienced commercial realtors within your market to assist in reviewing the available Single Tenant vs. Multi-Tenant opportunities.


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