Type of Property to start out with

8 Replies

Hello,

I was wondering what is the best beginner friendly to start off with? A single family home, or a duplex? It seems a single family home would be better tenant wise, but it’s not cashflow. It seems there are a lot more cashflow positive duplexes I can find than single family homes. I’m certainly more attracted to the multi-family units than the single ones but it might be a bit too much beginning so what your opinion.

@Matthew Paul , cashflow isn't dictated by what asset type the property is.  I've got single-family's that cashflow better than most small MF, with less risk of repairs.  They're dictated by analyzing if the property was a good deal or not.

There won't be much of a difference if you're managing a SFR or quad. It's still very small scale relatively.

Instead, take the time to really analyze a good deal.  If you're starting out and don't want to handle a lot of maintenance then be willing to pay for an asset in a good area and good condition.  

If you're worried about maintenance, go SFR. If you're worried about vacancy, go MF.

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My first property was a side-by-side duplex. It has been great, as the tenants do the lawn care and snow removal just like as if it were a SF.

@Kenny Dahill

Thanks for your response. I guess how I’m analyzing deals might be off somewhat since almost every multi family is great but single is so bad. Perhaps I’m missing some possible expenses that a multi can have.

That’s good insight not to think about an asset that’s inherently better than another and just focus on the deal and the numbers instead.

I’ve been using the calculator on here to help analyze properties I like, and one thing I’m wondering about is how well the link they provide is about average rentals in the same areas as the address you provide? Is their a better method to getting a more precise number down?

@Scott Weaner

That’s great to here. How did you get it like that? I’d imagine most tenants in multis would want you to do the lawn care. Luckily here in Georgia we only get 2 inches of snow a year, if that. That still turns our state into a complete stand still.

@Matthew Paul , without seeing the properties you analyzing I can only provide general suggestions. 

For MF, you need to carry a higher maintenance budget, whether it's a higher percentage or dollar. The more units you have, the more appliances/plumbing/HVAC that can break. Compared to a single-family, it's fewer components to break. MF generally is cheaper rent per unit, therefore you shouldn't carry the same maintenance percentage as a SFR.

Real estate is hyper local. Perhaps in your area MF is the better choice.  Or perhaps the budget range you’re looking at.  I’d practice analyzing a dozen of each asset types so you get familiar.  I also encourage people to build their own proformas in Excel. BP analyzer is great, but learning the math formulas is so critical when you want to analyze deals on the fly. Even learning how to ballpark deals can be useful.   

@Kenny Dahill Thank you for the insight. It’s given me a different perspective when looking at the different property types.

Yes that seems to be true. I’ve got a few books that list formulas and have been trying them out in excel and they work really well. Thanks for the tip!