Single family homes or multi properties for newbee
Should I start out with single family homes or 2 to 4 multi unit in the Columbus Ohio area ? I am not set in Columbus but would like to invest in Ohio due to the nature of my business. Possibly may choose between Cincinnati, Cleveland, Columbus, or Toledo region. Which would be a better area ?
Currently, I live in Durham, NC and looking to move to Columbus, OH area to invest in real estate rental properties. I believe that the current market values of homes in the Durham/Raleigh and North Carolina in general is too high. Most of the properties jumped $100k in value in the last 3 years so I am not going to buy in my area. It was unfortunate that i was not in a position to buy any real estate due to negative marks on my Credit Report and score. Now, my score is all cleaned up and in the 700's range. I am willing to relocate to invest in real estate. I can provide 10 to 20% down payments.
My main goals is to eventually own 10 free and clear rental properties that will provide cash flows to allow me to work less and eventually retire early from my day job. I am looking for long term investments and do not plan to flip.
I have been researching in the pros and cons of cheap properties in not so good neighborhoods vs higher end properties in decent neighborhoods with decent schools. In the end, I concluded that cheap properties will remain cheap while the good properties will raise in value and provide a better return in the long run with both cash flow, and equity.
There will be a trade off in the small multi units vs. Single unit homes. On paper, numbers looks great with multi units properties. Most of the decently priced 2 to 4 plex units are in bad neighborhoods. Looking to spend $80k to $120k on single unit or multi-unit home. Obviously, the multi unit properties will bring in more cash flow monthly if everything works out. I am afraid these units will attrack lower end renters that are higher risks of non payment, damage to property, etc...
So, in the Columbus, OH area, which is better to invest in and why ? Single family homes in decent neighborhood or multi units in less than desirable areas ?
I don't really know Columbus, but in most major midwest markets in that price range, SFR is going to be the only thing that puts you in better (B) neighborhoods. Good small multis are very hard to find.
There are good and bad tenants no matter what zip code you invest in. If you stay with Columbus, you will want to stay on the east side for small multi families. I'm general B class neighborhoods have single families or large apartment complexes.
Something to consider with 10 sf is you have 10 of everything, with a multi, you've only got 1 roof, 1 driveway etc.
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Originally posted by @Kou Y.:Should I start out with single family homes or 2 to 4 multi unit in the Columbus Ohio area ? I am not set in Columbus but would like to invest in Ohio due to the nature of my business. Possibly may choose between Cincinnati, Cleveland, Columbus, or Toledo region. Which would be a better area ?
Currently, I live in Durham, NC and looking to move to Columbus, OH area to invest in real estate rental properties. I believe that the current market values of homes in the Durham/Raleigh and North Carolina in general is too high. Most of the properties jumped $100k in value in the last 3 years so I am not going to buy in my area. It was unfortunate that i was not in a position to buy any real estate due to negative marks on my Credit Report and score. Now, my score is all cleaned up and in the 700's range. I am willing to relocate to invest in real estate. I can provide 10 to 20% down payments.
My main goals is to eventually own 10 free and clear rental properties that will provide cash flows to allow me to work less and eventually retire early from my day job. I am looking for long term investments and do not plan to flip.
I have been researching in the pros and cons of cheap properties in not so good neighborhoods vs higher end properties in decent neighborhoods with decent schools. In the end, I concluded that cheap properties will remain cheap while the good properties will raise in value and provide a better return in the long run with both cash flow, and equity.
There will be a trade off in the small multi units vs. Single unit homes. On paper, numbers looks great with multi units properties. Most of the decently priced 2 to 4 plex units are in bad neighborhoods. Looking to spend $80k to $120k on single unit or multi-unit home. Obviously, the multi unit properties will bring in more cash flow monthly if everything works out. I am afraid these units will attrack lower end renters that are higher risks of non payment, damage to property, etc...
So, in the Columbus, OH area, which is better to invest in and why ? Single family homes in decent neighborhood or multi units in less than desirable areas ?
I think 2-4 unit properties are the best properties one can buy when starting out. Nothing beats the 30 year fixed rate loan. Issue is you only get 10 of those suckers so I think you do best buying 2-4 units so that you can maximize the amount of rental units you can buy using those 10 mortgages. I prefer to have 30-40 rental units over 10.
Hi Kou - You didn't ask for this but I'll just say, there are opportunities in every market, and while prices have jumped a lot in Raleigh/Durham, rents have also gone up a lot to support those higher prices, and projected population growth will support continued appreciation. Returns are higher along the fringes and adjacent secondary markets too.
To me, one of the most important skills an investor can have is an in depth knowledge of the local market; if you are leaving Durham after many years here and going to a market you do not know (am not saying that is the case), you will be starting all over again, which could set you back years. I'm sure you have thought it through carefully, just wanted to share that.
Hi @Kou Y., Columbus is a great area for real estate investing. There are many areas to choose from for both single family homes and multi family units. Good Luck!
@Kou Y. I'm a Cincinnati investor/agent and I've love to talk you into investing here, but more importantly, you need to makre sure you're very diligent about figuring out utility costs for multis. Single family renters in Cincy typically pay all utilities, but I'm seeing utility costs absolutely crush otherwise great deals on small multis here. Boiler heat is the primary culprit.
Some people will make their numbers work better by doing a RUBS to split up the cost of heating the building (I've done this), but it's an acquired taste.
Good luck in your investing!
@Slocomb Reed Have you seen any push back from tenants or increased vacancy initiating RUBS? In your experience are there parts of town where that is more or less likely to be a deterrent to potential renters?
@Kent Hall My RUBS is on a three-unit in a trendy part of town where I end up renting to mostly young professionals. The building only has one water heater, plus Duke Energy charges a $35 meter fee per month per meter, so I decided it would be easier and more cost effective to go down to one gas meter. I've also gone to even billing for that gas bill, so I send the tenants the same invoice 11 months of the year and the 12th month makes up for variance.
A RUBS is an added layer of complication to the landlord-tenant (or PM-tenant) relationship. I think that getting it put in place effectively will have more to do with who's managing and how well they communicate with the tenants than the neighborhood the property is in.
In my case, and in the case of almost every gas RUBS in the Cincy area, mine actually saves my tenants money when compared to them having to pay their own gas bill (that $35 meter fee gets split among units instead of $35 per unit). I make sure my tenants know that before I ask them to sign the RUBS agreement.
That said, some inherited tenants will be stubborn about you "changing the deal" on them. That, and I still don't think that multi-unit renters are going to be willing to pay for their water usage unless they're getting an uneven advantage on other terms of the lease.
Thanks for all the input. I am moving to central California because my wife got a stable job there. Real estate investments in CA are way over price so we are going to rent there. If prices does not come down in a few years, we will use our high income there to buy rental properties out of state. Most likely invest in Columbus, Ohio or Kansas City. Atleast in California, pur combined gross income ( W2) would be over 150K to 200k yearly in a few years.
As a newbie, I would probably lean toward a house or maybe a duplex, but if you go the FHA loan route, I would look to buy a fourplex and live in one unit while renting out the other 3.
