Single Family Unit or Duplex for a First Time Investor?

Question

I am a first time real estate investor trying to build my real estate portfolio. I hav some excess cash that I would like to put in a rental property. My goal is to get a little bit of cash flow and appreciation. I understand that single family units take a while before they cash flow, and I'm perfectly fine with that if the investment is right. I also want to invest in something that will not give me too many headaches. For a first time real estate investor, which option would you prefer? Single Family Units or Multi-Family?

Walter Jones · Answer

I agree with @Taz Zettergren, but for some reason I keep stumbling on the duplexes I'm up to 6 now. I do like the suburbs though - better rent growth, appreciation potential, and quality of tenant.

Samuel Diouf · Answer

You can get a great mix of cash-flow and appreciation in Columbus, OH. The city has so many factors pointing to economic growth and you can still buy real estate that cash-flows.

Brian Kloft · Answer

I agree with @Remington Lyman. If you can house hack where you are and the numbers look good it is a great way to start out.

As you have heard in the comments, a single family is typically easier to sell if you need to than a duplex; and while one tenant is technically easier than two, I don't think there is that much difference in how hard one is to own than the other. My view and my buy box is always where can I ad value? If a property is ugly and I can fix it up and make it pretty to get nice tenants at good rent rates, that is what I look for since I can force appreciation; and having forced equity and better cash flow because of now higher rents is always preferred to me.

Remington Lyman · Answer

I would recommend house hacking locally. Do a 2-4 unit. That is what I did in 2017 in Ohio.

If house hacking is out of the question then I recommend starting out with a single family. Those are a little easier for beginners

Alex Hunt · Answer

I would stick with 1-4 units starting out. Have to think when you have say a duplex, 2 units. If you have 1 vacant unit, you still have incoming rent from the other. If a single family is vacant there is 0 income.
there’s still some turnkey properties that can cash flow from day 1, very hard to find but possible. Seems you’re looking for appreciation with steady income and that’s a good approach in this current market state.
Happy to connect and see what you could qualify for!
Rentals loans/ DSCR loans are typically 20% down

Michael Smythe · Answer

@Victor Nguyen let's not assume and be clear, for most seasoned investors SFR = 1-4 family since you can get a traditional mortgage on them. FNMA, FHLMC, FHA and VA also use this definition.

MF typically means 5+ units that are only eligible for a commercial loan.

Given this, an investor typically gets a better return on 2-4 unit properties than 1-unit.

Bryce Jamison · Answer

Regardless of of what type of rental I'm looking for I always want to get, or structure, a deal in a way that creates as much cash flow as possible. Lately with interest rates being higher and inventory being lower I've found it harder to find deals with significant cash flow in an area I want to invest in.

Personally, we're okay with properties that cashflow decently, but have long term appreciation upside too. We put down large down payments and keep a beefy emergency fund.

If you're prioritizing the headache factor, having one tenant is always going to be easier than manage than two, but I think what's more important is that you're vetting your tenants thoroughly no matter what type of property you get.

Good luck!

Virginia Franzese · Answer

If you invest in multi family, will you owner occupy?

Jordan Ray · Answer

Single family all day long!

Caitlin Logue · Answer

@Victor Nguyen Awesome you are getting into the investor game!

A few questions: How much excess cash do you have? You don't need to respond publically, however, that can determine the % down payment. Multi-family is going to cost more than a single family home and might require a larger down payment.
What is your goal exactly and what does a little bit of cash flow mean to you?

Any type of rentals, whether it's single family or multi-family, will come with its own challenges and set of headaches. That's just par for the course. Even if you hire a property management company, then you take on the job of managing the property manager. Make sure you set aside a monthly budget for maintenance and have the proper insurance in place for maximum protection.

I would suggest starting with a single family unit before multi-family as you get used to the business.

Single Family Unit or Duplex for a First Time Investor?

Single Family Unit or Duplex for a First Time Investor?

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