2 potential deals - which one?
Since the beginning of the year I've been moving forward with trying to get into this. I've looked at targeting my focus on a long term buy and hold rental strategy. So I contacted a broker I've done other business with who also has some rentals of her own. I started looking at a few places with her that have been on the market for quite a while. I have two prospects that are priced in a decent range for what they are and have potential seller financing.
First, is a small 1000 sq ft single family built in the mid 1800s. It's been vacant for a couple years and in desperate need of updates. In fact, it's going to be close to a complete rehab in order to bring it up to a livable state - not to mention up to code. I've estimated it will be around 8000 - 10000 for updates. Anticipated retal income, as it currently stands is approximately $700 in this market - per my broker. After renovations and updates, we figure it will be between $800 and $850 depending on the finished product. It's currently 2 bed / 1 bath.
The second one is a turn of the century 3 unit residence that's currently fully rented and generating around $1200 / month. It needs some major help. Foundation, plumbing, electrical, heating, etc. as well as some cosmetic updates. Based on my estimates from a cursory walkthrough, I would budget no less than $20000 to stabilize and update. I would figure on removing at least two of the tenants in order to fix the back two apartments (month-2-month with no lease, so shouldn't be an issue).
So, I'm jumping in, but I'm hesitant to bite off more than I can chew the first time out. I'm leaning towards the first house since even though there's a lot of potential work, it's a little more straight forward due to it a) currently being vacant and b) being very simple in its construction. The multi-family place seems like a nightmare to me, but it's rented and currently generating income. With investment it could generate more, I'm sure and also bring in a better quality of tenant.
I understand there have been very few details here, but given the two deals, which seems better on its face? Is it smarter to go with the multi-family due to the potential for more income even at a higher acquisition cost for purchase plus rehab, or is the single family a better starter?
Thanks