Single or Multi Family

22 Replies

Hi I’m Cole from Wichita, KS my wife & I are brand spanning new to the invest game. We are looking to make our first purchase we are just curious as to what advice y’all would have on buying a single family or multi family property to begin with. We will not be moving into a side to house hack. Thanks!
For me it will be totally cash flow based.. run the numbers... in general you will likely get a better return with multi.. on the flip side when it comes time to dispose you will have a broader buyer base for a single family with investors and end users vs usually only investors for multis.. really depends on your plan and goal..

Hi Cole!
Welcome to BP! I think you'll find that everyone will have different things to recommend.  I would simply say pay attention to the market and see where that takes you. SF is probably going to be the path of least resistance as there are more of them, but you may find a great MF deal and go with that.  Some folks like the volume that MF can bring immediately, as opposed to the slower growth of adding one SF at a time.  From what I have read, however, competition for MF is getting pretty heated, so I guess you'll have to check your local market.

We started with SF and that was nice because we could kind of gauge the maintenance, repairs, and capex expenditures from the beginning.  I knew what cashflow I needed to make the deal work, and understood the ins and outs of the house.  Since then we've branched into small MF (4-plex) but it was a process for us. 

I think you can be successful either route, just do your homework. Best of luck!

Lost of investors in the area love a good duplex, but the sheer amount of deals for MF vs SF makes a good SF deal come across more often. Just run the numbers and make sure it’s a good deal.

I'm a value add buyer so when people say run the numbers it isn't just cash flow.  Where does the opportunity lie the most?  Can you buy a fixer and either do the work or hire others to do it to maximize your dollars and refi out?

Thank you for the responses! It’s looking like we will have to start with a SF and work our way up to some multi-family properties. I like the idea of multi-family properties because we can get multiple doors on 1 loan, which as SF is 1 door per 1 loan...just my opinion from what I have read and learned so far. I know there are multiple ways to get money for a project but I prefer traditional to get started

If you’re just starting I’m a big fan of single family to start, then residential multifamily and so on

It depends on your goals.  However small multi families are a good way to start.  You have multiple incomes so in a way you are reducing your risks. 

It's best to start with a 300 unit complex. You will never have to work another day in your life.

More realistically start where you can. I think it is probably more important to get a great deal than it is to decide where or what kind of deal it should be. 

@Cole Cherryholmes - goals come first, asset type comes second. As @Jimmy Dang pointed out: "it depends on what your goals are." I recommend setting your goal(s) first, then circling back to decide which type of property to focus on. That said, here are some more thoughts..

we started with a duplex and I think it was a great way to start. I think anything in small multifamily (2-4 units) is the *ideal* strike zone for new investors. Btw, we also bought our duplex locally, which I don't think you need to. It's 100% do-able to buy sight-unseen, despite what some folks might say (you'll have to put in more work to overcome the lack of personal market knowledge though).

Why? Because a 2-4 unit property will serve as a forcing function to drive a multifamily deal with "training wheels," so to speak, before moving into larger multifamily deals (where folks should ultimately aim to focus in their bigger strategy, in my opinion). 

Here are a handful of things you get practice with: 

  • deal analysis - in order to actually find a deal that meets your financial criteria, you will have to hustle and analyze dozens, if not hundreds of deals. By the time you are closing on the first property, you will have honed the fundamentals
  • negotiation - it will feel like you have to think about a lot of things all-at-once, and it will all feel new. truth is, its not really that difficult, it's just the new-ness that can overwhelm folks at first. 
  • networking - talking to folks in the business and finding your voice: agents/brokers, property managers, fellow investor

We own some SFR investments, as well... but we didn't learn nearly as much buying them, as when we purchased a duplex. We've since invested in much larger deals and I can confidently tell you that the learnings from the duplex were more applicable to the larger multifamily deals.

Then again, if you really really want to buy some single family homes... more power to you and best of luck! There is definitely something to be said for the ease-of-access and gentler learning curve. 

@Philip C. - sure is. Demand is market-specific... and even sub-market specific. Determined by drivers like job supply and renter demographics. 

Re: 2 BR vs 1 BR - 2 is markedly more flexible and attractive than 1. (3 is even better, obvi) You’ll have a very hard time putting a family in a 1 BR

@Philip C. this is where we step firmly into the 'it depends' arena. If the property is 2 blocks from a university, in a block that is largely populated by students... rent rates will likely reflect student lifestyles. Student lifestyles and property conditions may not meet expectations for a family. Wish I could give something for definitive for you on this, but it depends on the submarket 

If I were to do it again from the beginning I would have bought 10 Four-plexes so that I could have 40 doors = 40 income streams all with 30 year fixed residential loan rates. Then upgrade/sell as you go. I burned up all those loans on SF and now have to use pricier loans. Just my 2 cents.

Originally posted by @Philip C. :

Thank you @Grant Rothenburger I hadn't thought of Census.gov. So far, only Trulia seems to have percentages of homeowners vs. renters broken down by City. And I'm not sure how accurate their stats are. What do you think?

 I really don't know. I would assume that they pull the information from reliable sources, but no personal experience with them.