Queens NY · Member since 2018 · 22 posts · 8 votes
So I'm just figuring out that single families has potential to cash flow more if not equal to multi families. I always thought multi families were a go to because each year rents raise which also means each unit pays perhaps a additional 50 every year.
What is the pros and cons of single family to multi family? What do investors prefer when starting out (Especially out of state investing since I live in New York).
I am seeking a high cash flowing property with minimum 12% ROI and 9% of cash flow. Is that a possible number to look for when investing in townhouses/condos in let's say Florida?
Thanks!
You're comparing apples to apples...but not the same type of apples.
Think of it this way. A multi family is just a group of SFH...stacked together.
If you have 12 SFH, and a 12 unit multi, you have 12 units either way.
I have found that in the same market, each unit of SFH usually rents higher than its multi counterpart.
Also, multi unit rehab is generally more expensive for the same thing. Here are a couple of examples:
1 - If you have to replace a roof on a single family, you are replacing one roof. You can't replace one unit's roof on a multi. You have to replace the entire building's roof. So, if you have 3 4-unit buildings, you are replacing 4 units of roof.
2 - If you have to replace the driveway on a SFH unit, you replace one driveway. You don't replace driveways in multi units. You usually replace parking lots. You also have to seal parking lots, which you don't need to do with a SFH.
You're comparing apples to apples...but not the same type of apples.
Think of it this way. A multi family is just a group of SFH...stacked together.
If you have 12 SFH, and a 12 unit multi, you have 12 units either way.
I have found that in the same market, each unit of SFH usually rents higher than its multi counterpart.
Also, multi unit rehab is generally more expensive for the same thing. Here are a couple of examples:
1 - If you have to replace a roof on a single family, you are replacing one roof. You can't replace one unit's roof on a multi. You have to replace the entire building's roof. So, if you have 3 4-unit buildings, you are replacing 4 units of roof.
2 - If you have to replace the driveway on a SFH unit, you replace one driveway. You don't replace driveways in multi units. You usually replace parking lots. You also have to seal parking lots, which you don't need to do with a SFH.
I have found that single family rentals in my area have less turnover. That means less vacancy loss. The rents also tend to be lower in a single apartment as compared to a single house, yet in many cases the price per unit is similar. Keep in mind as well that the tenants pay all utilities and handle yard care/snow removal in single family rentals. That is a significant cost savings. At least here in my area, reasonably priced single family rentals are easier to find.
Some area SFH will cash flow more than MF and vice versa.
The biggest advantage I see that MF has over SFH is that is spreads costs over a lot of units vs just one. Your loss bc of vacancy is less(25% for a 4-plex vs 100% for a SFH). Repair costs are spread over all the units instead of just one. ect. ect. This really comes into play when you start to scale up.
But SFH have better turn over rates. All utilities are covered by the tenants. Lawn care and general maint. is covered by the tenant. ect. ect.
As you can see cash flow is not the only thing you should be looking at. You need to take look at the number at see what works for you personally. Because at the end of the day does it really matter what your expenses are if you are still meeting your requirements? (assuming your expenses are reasonable of course)
@Joe Villeneuve
I see! Not to many multifamily houses that sit around the 200k mark that's ready for buy and hold. Maybe to rehab and rent but I've been finding very nice single family homes with potensial.
Thanks!
What you can cah flow also depends on the market you are in Some single family homes can rent for up to $5,000.00/mo where as you would be very hard put to find an apartment that rents for that much if it does not cost you millions of dollars. Anyway as said it all depends and from what you state I do not think that is your price point. However, I have found fixer upper multi family buildings that can be picked up for a song and a dance with less that $40K in repair and rehab work that will rent per unit as much as a SFH in the area so again it depends.
SFH usually will have more useable outside space and offer more privacy for which many people are willing to pay more for.
@Michael Stanley Nino There is no right answer because this is dependent on the market and the price you purchase the asset.
Nonetheless, purchasing smaller properties can turn into a bigger property management problem especially as the PM is more expensive. One can't just look at the returns on paper only. Consider operational headaches like PM, tenant management plus due diligence costs associated with purchasing a single family home from out-of-state.
It is possible for it to go either way. Cash flow would depend on price, rent, expenses and debt structure. I have found that SFR residents tent to stay longer. Some of mine have been there over 10 years. I don't know anyone who has stayed in an apartment for 10 years. A SFR is easier to sell than a multi-family due to more buyers for the product.