Single or Multi-Family for First Rental Purchase?

Question

I've been searching for my first investment for some time now. I am going back and forth between buying a single family home versus a multi family unit. For a first time buyer, what do you think is the best option? There aren't many multi family units in my city (Palestine, Texas), so if I go that route, it will have to be a distance purchase. Also, SFRs are being snatched up within days. What do you guys think?  Thanks in advance!

Kevin Dureiko · Answer

@Dustin Crawford In general, going for a tri or 4 pled is economically adventitious. As someone who is in nearly every facet of the business. 1 door is the same work as 4. That being said getting as many doors under one roof just makes more sense economically and its more stable.

There’s plenty of people that would disagree and say to start small or amass a portfolio of SFR. That may work for them. Historically for myself and clients, the more doors under one roof the better.

Dena Puliatti · Answer

My advice to a first-time investor would be to buy a single family home.  Multis are great for cash flow, but you'll also deal with multiple HVACs and other major systems. Those repairs can be costly and take a lot of time to recoup.   If you buy a single family home in good condition, do a few cosmetic changes, and rent it out, it may be less stressful as a first purchase.  Once you're in the groove, a multi would be a great next step.

Dustin Crawford · Answer

I agree with you 100%. The problem that I'm going to run into is financing a multi-family. I have enough cash to put down for a 20% down payment on a SFR, but not a multi. I would have to house hack the multi to make it work. The problem is, I would have to move to a bigger city to be able to do this, as multi-units are a rare find in the city that I live in.

Dustin Crawford · Answer

My ultimate goal is cash flow and building long-term, sustainable wealth for my family.

Peter Mckernan · Answer

@Dustin Crawford

It's up to you and your end goals, or at least your 3-5 year goals on where you want to be. What have you been studying, and what do you know more about? If you know and are really confident in SFRs verse Multifamily go that route for the first one hit some bumps to iron out the challenges you'll have in being a landlord then move into multifamily. You can take down a 2-4 unit and get your confidence as a landlord that way then move into more units. Really depends on your thought process and desires.

Jeff Hornberger · Answer

@Dustin Crawford I might be bias because I purchased a duplex 12 years ago for my first purchase but I can say that it was the single best thing I could do financially. I used an fha 3.5% Down loan, lived in one side and then a couple years later refi’d that into a conventional loan then bought another duplex with fha (bigger for our growing family and closer to where I wanted to be). After these two duplexes were purchased I was able to move out of the larger one and cash flow my single family residences mortgage payment. I don’t think this would have been possible had I bought a single family home. The cash flow on those just isn’t what a duplex can be, atleast in my area.

I think if you run the numbers it will be easier to cash flow Multifamily and in the long run it will be easier to qualify for more properties as you’ll likely have more income and established leases to show income.

If there aren’t very many duplexes in the area you want to be then that tells me a direct mail campaign to those duplexes wouldn’t be all that expensive so maybe giving that a try for a couple months first to see if you can generate anything off market for you to buy and if not you ultimately sacrifice for a couple years then buy closer to where you want to be. 🤷‍♂️

Kevin Dureiko · Answer

Depending on what your end goal is should drive your initial purchase. Do you want to flip first to get your feet wet or maybe use that income to get into a bigger multi family? Really depends on what you’re trying to accomplish.

Ari Hadar · Answer

If you find good small multi family that have cashflow that sounds nice. You can house hack even. One hour  from your house isn't much. People invest out of the country and oos because they don't find cashflow.

Single or Multi-Family for First Rental Purchase?

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