What does one buy first single family or small multi

Question

In order to diversify my portfolio I want to have cash flowing properties along side with heavy appreciating properties for equity growth. Now my question is to begin with is it a better idea to buy the cash flowing property first save my profits along with my W-2 job an then has time goes on purchase, say a single family property in a great appreciating area. Or do you start with the high appreciating property an as time goes on reap the benifits of equity an then purchases the small multi to protect yourself an have some cash flow coming in more so then the single family?

Thank you

Cory J Thornton · Answer

Hey @Angelo Llamas - Investment decisions, like many other decisions, are not something intrinsically right or wrong. Everything has a trade off. If you are focused on appreciation, at the expense of cashflow, then you are increasing your risk in pursuit of a net worth jump through equity (not good, not bad, just a trade off). If you are focused on cashflow, then your risks are usually better covered, it may take longer to build wealth, but your chance of loss is greatly reduced.

If you are investing for appreciation then try and find a market where the number of new jobs moving to a market is outstripping the pace of development. Pick up the local business journal, talk to the local chamber of commerce, find out how many companies are expanding their footprint or moving to a market. The more information you can build will help strengthen your conviction on which market to pick for appreciation.

Personally, I am looking for cashflow on every deal. Given the economic horizon, I want to be sure all my debt is easily covered by rents. I have even diversified the source of my rents and pushed a few properties into the section 8 program.

Every investor is different. An approach that fits for one investor may not be great for another.

We are also entering a market where if you have dry powder (cash), and you put in the work to find a motivated seller, you may not have to choose between cashflow and appreciation.

Best of luck on your investing journey! Keep us posted.