Let’s get into the reasons why real estate investors shift from single family investing to multifamily investing.
I want to start off with my story.
I started in the industry in 2009 when things were not going so well. In 2013, I was able to shift from construction to single family home investing.
I bought my very first property with no money out of pocket. I actually had negative funds in my bank account—I over-withdrew and was just not being financially smart. And my credit score wouldn’t even register when you pulled it.
I had a ton of excuses with regard to why purchasing real estate may not be possible but was fortunately able to find someone who complemented my weaknesses. So, that’s how I was able to buy my first deal—and was able to get up to 150 single families at one point!
Then, it became very management-intensive having all of those properties in Indianapolis and also Dayton, Ohio. So, I took a step back to decide: Where do I want to be long-term?
And it just made the most sense to shift to multifamily. This was in 2017.
So, these are the reasons that I believe are investors’ “whys” in terms of making the shift—and why I ultimately did. And there are several benefits to taking the leap.
Here are a few.
The Benefits of Shifting From Single Family to Multifamily Real Estate
1. Save Time
The first perk is just saving time. I was able to get up to 150 single families, and that was a lot in terms of management.
Also, when I think back about acquiring my first 46-unit apartment building, the time I spent doing that was a lot less than the time I spent on 46 single families. I certainly think I got a better ROI on time with the multifamily asset. It was one buyer, one transaction, versus with the 46 single families, it was multiple one-off deals or maybe two to three at a time. But that was a lot of transactions and volume involved with that.
2. More Control
The second is more control. What I mean by more control is a lot of multifamily is driven by NOI, which is net operating income. Buyers who are coming in who are buying that asset look at it as a business. So for you as an operator, if you are able to drive that net operating income, then that directly correlates in terms of the value that you’re able to get out of that.
With single family, a lot of the time it’s more of “this one across the street is going for this, so that’s going to be the value of my property.” ARV is heavily weighted on comparable properties in the area, as opposed to NOI.
So, there’s that on having more control.
3. Economies of Scale
And the last but not least, which is by far one of my favorites, is the economies of scale.
I just recently bought 156 units. That was the largest to date. Feel great about that, but the hard work is even more to come.
But with that I have 156 units in one location and am able to have an onsite manager, as well as multiple maintenance techs. This is in stark contrast to when I had all those single families that were scattered throughout.
Back then, I had to have a maintenance guy go over there, a maintenance guy go all the way up there, and all the way throughout the city. When you just have everything in one location and then are doing that many renovations, you’re able to purchase your products in bulk, your materials—and you’re able to get a discount.
There are so many more benefits that you’re able to get when you have midsize to larger apartment buildings. It’s much more management efficient.
So, those are the reasons why I see single family investors shifting over to multifamily and why it is so much more beneficial a space to be in.
Why do you think investors are making the shift? Did you switch over to multifamily? Why or why not?