Real Estate Investing Basics

Single Family or Multifamily: Where Should New Investors Begin?

Expertise: Real Estate Investing Basics, Personal Development, Landlording & Rental Properties, Real Estate News & Commentary, Business Management, Flipping Houses, Real Estate Deal Analysis & Advice, Personal Finance, Real Estate Marketing
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Let’s talk about multifamily and single family homes: Which one should you start out with as a real estate investor?

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OK, guys. There is absolutely no doubt in my mind which one you should choose to start with: single family homes. Now, before I tell you why, I have a short story about me and what we did.

Doing Multifamily Deals—as an Experienced Real Estate Investor

I run a turnkey company where we have bought, renovated, and sold over 1,000 properties. And last year, we just started doing multifamily deals. We pretty much lost our butt on the first handful of multifamily deals we did.

Why? Because it’s a new type of investment vehicle for us, and it’s different from a single family home. There are multiple units, the renovations are different, the purchase price is different, and the regulations with the city are different.

Related: 4 Steps to Get Started in Real Estate Investing

Of course, we made a lot of mistakes—because we didn’t know what we didn’t know.

Unfortunately, we lost. But you live and you learn, and then eventually you don’t repeat the same mistake. Then, you can proceed in a much smarter way.

Beginning With Single Family Home Investing

I think the same things goes for single family homes, guys.

When I started my journey as a real estate investor, I started with single family homes. The same as I did with multifamily, I lost on the first handful of properties—because I didn’t know what I didn’t know.

So in my opinion (something that I have shared with a lot of investors over the years), start slow and start small. The less you invest, the lower your risk is.

starting-real-estate-investing

My advice to you is if you’re looking to buy, fix, and flip—or buy, fix, and hold—go and buy yourself a C or D-class property. I know there is a bit of stigma surrounding these areas but who cares. Once you learn how to do it in those areas, you’ll definitely know how to do it in an A or B-class area.

The Midwest is a great market, where you can find a lot of cheap deals in pretty decent areas, believe it or not. I’ve done a lot of other blogs on this topic—you can get $20,000 to $50,000 properties in solid B-class areas. So, make sure you check out one of those other blogs.

Learning All You Can—and Getting Your Hands Dirty

Look, you can only learn so much from the blogs that you’re reading or watching, the forums, the seminars, the books, or whatever you’re using to soak up knowledge. Practice makes perfect. Whenever you get your hands dirty and you do the work yourself, that’s when you’re going to get the most experience and learn the most.

Related: Investors: Don’t Begin by Wholesaling. Take One of These 7 Paths Instead

So, my opinion is start off slow and small. Pick a cheap, little property in the Midwest that is C or D-class—a single family home that you can fix up with a basic renovation. Sell it as quickly as you can, and try and make the most that you can. Even if you lose on the deal, just use it as a learning curve.

Then if you want to buy, fix, and hold, try managing those properties yourself. I can pretty much guarantee you’re going to quit very quickly, and you’re going to pass off the reins to a property management company.

All of these things are lessons learned along the way, right?

Keep doing that, and you will learn areas where you want to be and how to renovate cheaper, how to buy cheaper, how to property manage better, and how to sell for higher.

All these things will eventually propel you to the next phase, which could be multifamily (just like it was with us). It could be commercial, it could be hotels—whatever your heart desires.

It’s important to note that I think you need years of experience in mastering how single family homes run from an acquisition, renovation, management, and sale standpoint. Do that before you can truly consider yourself an expert in that arena, and then take the step into multifamily.

Guys, that’s just my opinion, and the path that I’ve taken. Some people jump into multifamily properties right away, syndications, and all the mumbo jumbo.

I’m not a fan of that and prefer to get my hands dirty myself, so I can learn the hard way. That’s pretty much it.

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What do you think?

I’d love to hear from you in a comment below.

Engelo Rumora, a.k.a."the Real Estate Dingo," quit school at the age of 14 and played professional soccer at the age of 18. From there, he began to invest in real estate. He now owns real estate al...
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    Kevin McGuire Rental Property Investor from Seattle, WA
    Replied 7 months ago
    Great article Engelo. While people often get focused on upside, they forget about risk management, which I think you laid out well here. A related aspect to consider is exit. It can be difficult to unwind a multi family but it’s relatively easy to sell a SFH since the audience is broader (could be for investment, could be as primary residence). The smaller granularity also helps. For my goal, which is around retirement, this allows me to gradually unload my properties to free up the equity, should I choose.
    Engelo Rumora Specialist from Toledo, OH
    Replied 7 months ago
    Thanks Kevin and agreed. There is nothing wrong with starting small and slowly building up from there. The less capital one invests, the lower this risk. It's that simple. Much success.
    Alice Harris
    Replied 7 months ago
    I purchase my home 2005 mortages have changed I have a ballon mortage and modification. I want to sée if I can get low monthly payment. I was't very knowledge when purchase i really didnt know. Balance owing is 16,000. How can get my payment lower without new 30 year term
    Engelo Rumora Specialist from Toledo, OH
    Replied 7 months ago
    Hi Alice, Have you tried reaching out to a mortgage broker? Thanks
    Ryan Lin
    Replied 7 months ago
    Great article! It was really useful for me to get started with multi-family investments! Thanks a lot!
    Engelo Rumora Specialist from Toledo, OH
    Replied 7 months ago
    My pleasure Ryan, Glad the article helped you. All the best.
    Phil Denton New to Real Estate from Cincinnati, OH
    Replied 7 months ago
    I've not made my first investment purchase yet, but the goal is to do so this quarter. I have been thinking I want to buy a multifamily property for income potential, but I do need to shore up my knowledge of appraising and rehab. Solid points for going with SFH instead of multi-family - learn cheap lessons on cheap properties.
    Engelo Rumora Specialist from Toledo, OH
    Replied 7 months ago
    Thanks Phil, Start slow and small. It takes a lot longer to recover from a big mistake than a "missed opportunity". Take your time and don't rush. Much success
    Salvatore Lentini Rental Property Investor from Doylestown, PA
    Replied 7 months ago
    I started with single families, then a duplex, couple 4 units, 6 units, 14 units, 43 units etc... I'm at 127 and soon to be 147. I'm happy with the path I took. Learned a lot from the single families. Buying that first one is tough. Big leap of faith. That's why I've started developing an online course to teach others how to buy their first real estate investment. Looking to give back :)
    Engelo Rumora Specialist from Toledo, OH
    Replied 7 months ago
    Awesome stuff mate and well done. That's a great way to go about investing and scaling. Much success
    Elliott Kleiman
    Replied 7 months ago
    Great article, Engelo! I agree with starting with single family homes. For a moderately experienced investor going at it full time, about how many single family homes could be managed by one person?
    Engelo Rumora Specialist from Toledo, OH
    Replied 7 months ago
    Thanks Elliot, Don't trade time for money. Get a PM asap and focus on scaling your portfolio and not dealing with the day to day $#@% that comes with PM lol Much success
    Anthony Angotti Real Estate Agent from Pittsburgh, PA
    Replied 7 months ago
    20,000 - 50,000 properties in B class areas? Even in the Midwest I think we have different definitions of B class. . . .
    Engelo Rumora Specialist from Toledo, OH
    Replied 7 months ago
    It all depends on how you are born and raised I guess. I'm a blue collar working class guy so for me B class is an area with a mix of owner occupied homes and investor owned. Good infrastructure. No riff raff on the streets. Homes and yards are neat and tidy. Everyone is employed and the rent is paid online. My B class is Z class for someone use to Beverly Hills. Much success
    John R. Schobel from North Carolina
    Replied 7 months ago
    Thanks Engelo Rumora for the useful information. One of the biggest sticking points for newbies (like me) is pulling the trigger on your first property. With limited funds, it is the risk of potentially losing money while learning the ropes. I have read many books and blogs, but convincing the wife that taking this risk is worth it is the next big hurdle. She is risk adverse and messing with our potential retirement money scares her. Hopefully learning and reading more will help me to get her to understand the benefits of Real Estate and the cash flow which could supplement our retirement is worth it. Again many Thanks!!
    Engelo Rumora Specialist from Toledo, OH
    Replied 6 months ago
    Thanks John, Glad you found my blog useful. Something that has helped me become a better person and to pretty much live without fear is the thought of "death". We are only on this planet for a very short time before it's all gone. Our money, house, love, hate, happiness and sadness, etc... It will all disappear. You have nothing to loose so live in the moment. Do your best to make your life the best it can while you are still living hehe Real estate is a great tool for that. Sorry for my philosophy but it's a mental trick I use to be more at peace with my thoughts. Much success
    Patrick McMahon Investor from Parkland, Florida
    Replied 7 months ago
    My wife is the same (risk-averse), which I initially thought was a negative. However, now I see this as a positive, because it forces me to prove to her that the numbers work. It must be a solid investment to get her onboard. For example, the investment must be able to have positive cash flow (after all expenses) even if the rents were to drop 20%.
    Junho Jeong from Wroclaw
    Replied 2 months ago
    Thank you so much. I am a beginner and this article was able to set me how to head on real estate investment well from the bottom.