Individual Room vs. Whole Building
Merits of Individual Room
Possible to start with a small budget
Possible to diversify risk by having multiple individual rooms
Demerits of Individual Room
Reoccurring costs like management fee & repair reserve fee would bring yield down
Need others’ confirmation to do repairs to public areas
Hard to get financing
Merits of Whole Building
Huge cash flow
Risk can be controllable
Possible to lower vacancy rate since all vacant is unlikely to happen
Faster to build up assets
Demerits of Whole Building
Needs to deal with different sorts of risks (disaster like earthquakes, less lease demands due to a factory withdrawal etc. )
Need to manage both land and building
Investing in an individual room is either 0 or 100 because when someone is living in it, that’s 100% revenue whereas when no one is living, its revenue is 0. Because you as an individual room owner have to pay those property management fee and repair reserve fee, if the rate of these fees is too high comparing to rent, it wouldn’t be a good investment. However as long as a tenant stays and pays rent, it needs just a little work to run.
As for a whole building, it would be easier to get financing for it and faster to building up your assets. You might be able to make capital gain if you would be able to sell the property that you have purchased at the lower price when it had many empty rooms.
Investing in individual rooms can be initiated with a small money and having multiple rooms can diversify any risks.
Having a whole building makes it faster to build up your assets and makes it possible to generate big return.
Having a mix of a single room and a whole bldg is of course preferred. Consult with your own investment strategy to choose the best selection.