I have a not-completely-hypothetical example for advice.
Would you rather purchase a single family at $50k which will need $20k of repair to rent at 900/month, or a converted house that is currently in ok shape, with 2 1-bedroom apartments that rent at ~$430 for $70k? What variables do you consider with your answer?
Thanks for your input!
Depends on what you think you bring to the table. Are you comfortable with a 20k project? The other thing to consider, which I don't think gets talked about enough, weird people rent weird houses. I might aim for the one that is more normal whatever that might be. The other thing to consider is your marketplace. Maybe apartments are better than single family homes. Maybe none of this matters and you're most concerned about cash flow on paper because it will be the property manager's problem. Lots of different ways to look at this.
Pros for the SFH:
- It might be easier to find one renter than 2 separate ones.
- The 900 might be a better quality tenant than the lower price
- As @Nicole Frawley said, it would likely be easier to BRRRR than the other (and easier probably to sell down the line if you wanted to)
- If the SFH takes longer to find a tenant for, you have no income, unlike the 2 unit, you might have staggering vacancies and still have something coming in. Also, with the SFH it might be sorta like the putting all your eggs in one basket concept. If the rent isn't paid and you have to evict or something, you may not have anything coming in. However, you could have something like that happen with the 2 units though probably unlikely that they will both do that. But, with the 2, if you did have issues with both, it would be more to deal with...
- Insurance costs might be different (not sure?)
- The difference in cost from that timeline of fixing up the SFH (how long will it take and what will that cost you, plus just the general cost/hassle of having to do it...)
Really, it does come down to your strategy and comfort level and goals but hopefully that gave you a few other things to consider versus just price and income.
I would probably choose whichever is in the best neighborhood/area to thus attract the best tenants.
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