Real Estate Investing Basics

Why I Made the Leap From Single Family to Multifamily Real Estate Investing

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Let’s get into the reasons why real estate investors shift from single family investing to multifamily investing.

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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.

Related: How to Transition From Single Family to Multifamily Investing

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.

medium size apartment building with light gray cement exterior and lots of windows against a vibrant blue sky

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.

Related: Single Family, 2-4 Unit Multifamily, or 5+ Unit Multifamily? Explore the Benefits of Each Here!

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?

Comment below! 

Sterling is an multifamily investor specializing in value-add apartments in Indianapolis and other Midwestern markets. With just under a decade of experience in the real estate industry, Sterling w...
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    Steve B. Investor from Centralia, IL
    Replied about 2 months ago
    Another great video Sterling. Thank you for posting. Love your energy and passion for this business.
    Michael Lenahan Rental Property Investor from Philadelphia, PA
    Replied about 2 months ago
    Thank you sharing the knowledge. Can you speak a little bit about financing? Specifically on how you financed your first multifamily property.
    Allen Gregory Specialist from Atlanta, GA
    Replied about 2 months ago
    Hi Sterling. This is a great story and I would love to hear more about it. I run an online publication and would like to interview you for it. I'll send you a quick message now. Looking forward to the conversation.
    Rose Walters
    Replied about 2 months ago
    Thank you for sharing such a great success story. Looking to make that transition as well into smaller multi 20 - 50 and scale as we learn more on the management side. It would be great to hear how you structured those deals.
    Kevin McGuire Rental Property Investor from Seattle, WA
    Replied about 2 months ago
    Great post Sterling and congratulations on your success! I also started with SFH’s but my last acquisition was a triplex, for many of the reasons you mentioned (scale, control). It would’ve been good to also mention the “cons”. Since I’m investing for retirement, I still like my SFHs because of their granularity and higher liquidity: I can gradually unwind the SFH’s to access the capital in retirement, and because the audience is broader (investors and owners), the exit is easier. Still, this is what I love about REI, that it’s not “one size fits all”, with your goals differing (I assume) from my own and each developing matching strategies.
    Timothy Benford New to Real Estate from Philippines
    Replied about 2 months ago
    Kevin, I appreciate this comment. I like how you asked for the 'cons'. It is good to have a balanced perspective on the situation. I also like the idea that RE is flexible and based on needs. Great article and great comment.
    Tilmon Shields from Louisiana
    Replied about 2 months ago
    Thanks for the information. Great Read.
    Michael P. Lindekugel Real Estate Broker from Seattle, WA
    Replied about 2 months ago
    thank you for pointing out the need for professional property management. if the financial analysis does not indicate a green light with cost of professional management, then you should not acquire the asset. there is an opportunity cost for your time. if you want to self manage, then you should set up a separate management entity and pay the entity fmv fees. for economies of scale here is what is teach my in classes. you have a single family home and a fourplex with the exact same foot print and sqft roof. the fourplex is stacked. to replace the roof on the single family home the cost is $8000 or $8k per unit. the house is one unit. the cost to replace the fourplex roof is $2000/unit. multifamily also mitigates various forms of financial and market risk as well.
    Erik Verkaaik from La Mesa, California
    Replied about 2 months ago
    A Question: When you compare SFR to MF, on a single leasable space basis, after op costs, isn't SFR yeilding a larger markup? What a/b long term appreciation? Doesn't SFR win?
    Alethia Reynolds from Midlothian, Virginia
    Replied about 2 months ago
    Very interested in how you financed your very first property.
    Mbini Kutta
    Replied about 2 months ago
    Great story. Thanks for sharing.
    Anthony O. Porter Rental Property Investor from Atlanta, Georgia
    Replied about 2 months ago
    Great video Sterling White. Thanks for sharing your story. Thinking of shifting to small multifamily (duplex, triplex, quadplex ) for a start.
    Amanda Dehaas
    Replied about 2 months ago
    I thought I was going to cry when I learned how many SF deals I had to find and make happen when I realized my financial freedom number. I had only one single-family under my belt and thought of finding deals all over was overwhelming. And then managing them! We immediately switched gears to MF for the reasons stated above and my freedom number is already in sight. : )
    Rose Arredondo
    Replied about 2 months ago
    Interesting. I’ve owned multi units. Regressed when I became a mommy. Just to overwhelming in California. Never thought about the time saver subject. Yes, makes sense. I’ve often thought, if I really do want to go back into multi and hesitate. Hmmmm......plenty of perspective here. I don’t have the same strength that I had when I was 20, at 51 today. However, I do have funds that need to be invested. Thank you , Sterling White. Love this bit of information and sharing your experience. Puts the missing link into perspective. Rose Arredondo Santa Clarita, CA