SFH vs MFH - strategy and debate

[Owen Thornton]

Hello! I found many people like to debate or go dab out real estate in different ways.

SFH seem to be the ones that allow for a fluid transaction, seem to be easier to sell, etc.

MFH seem to help multiply units quickly.

What is your take on these, in use for cash flow and appreciation?

Do you prefer going for cheaper SFH or more expensive, same with the MFH?

What do you like to see? Do you like to leverage money more on either of them… or just the same.

Also side question: would you rather sacrifice cash flow and have more appreciation or go for cash flow and have less appreciation…

[Will Barnard]

Regardless if it is MF or SFR, I always look for value add opportunities, without that, I am likely not interested.

I will also point out that each investor has his/her own goals, desires, skill sets and as such, there is no right or wrong answer here.

SFR Pros - Financing is often easier. Barrier to entry easier. Able to move in as primary residence. Ease of selling on MLS. Tenants often stay longer as a SFR is more family friendly than a multi unit. Market appreciation is often better (assuming you buy in the right areas). Larger buyers pool a exit. Easier to 1031 exchange into something else. Cons - If you have a vacancy, you are 100% vacant! Low economies of scale. Higher property management costs (typically). Higher costs to place tenants.

MF Pros - Economies of scale. If you have a quad and you lose 1 tenant, you are at 25% vacancy rather than 100% with SFR. PM costs lower. Ability to add other income streams like coin laundry, covered parking, storage, etc. MF Negatives - Smaller buyers pool, more difficult to sell, depending on your market, lower market appreciation compared to SFR. Higher turn over ratio of tenants.

Would I give up cash flow for more appreciation? Depends on my existing goals but yes. I look at mid west properties for cash flow vs CA properties with negative or break even cash flow and over a 10 year period, the CA property beats it each time. That said, each strategy has its own hurdles and each investor must decide which hurdles they are willing to jump over to get to the finish line. Again, there is NO right or wrong answer with this question.