Single Family v, Apartment complex
We are currently purchasing single family/ Duplex rentals in the Youngstown, Oh area. We are getting tenant occupied units for a 2% plus per month rent on purchases price. We are looking at apartment complexes to move into next. I can't help but wondering what I am missing. Almost every apartment complex I look at is bringing in about 1% on purchase price. Why buy the apartment complexes? What is the biggest reason to purchase them over single family?
#3 Innovative Strategies Contributor
- Investor
- Greenville, SC
Efficiency and exit...managing 20-50+ units across the city can get unruly and have limited exit options. But, passing up 2% for 1% is a big spread and most would stay the course with the 2%'ers.
Like Mike said -- efficiency and exit. Also, a lot of the apartment complexes in the area are quite overvalued at the moment. So, that's probably affecting the % return you're seeing. They're still trying to cash in on 2022 prices but they're late lol.
On the other hand, a lot of the time, the SFH's in Youngstown are in desperate need of major updates or repairs, which is part of the reason they're so cheap yet bringing in a good monthly return... even more so in the more "bad" neighborhoods. I've been watching a lot of out of state investors get in too deep, though, thinking they were getting slam dunk deals and then ending up selling 6 months later or their rental sitting on the market for months and decreasing in rental price week after week. There's one in particular that paid $65k for a house that shouldn't have sold for more than $50k, and it's been sitting vacant because (1) the rent was originally way too high, and (2) the "remodel" was an absolute botch job. But I digress.
I recently bought two properties on the east side which I'm remodeling at the moment. I solely invest in SFHs in Youngstown and surrounding neighborhoods, and I'm local to the area with lots of connections so I've got a finger on the pulse of anything that happens property-wise. I'm also finishing up my real estate license next month so that I'll have easier access to MLS properties rather than waiting for an agent to let me in. If there's anything you need assistance with, or perhaps want to offload a property in the future, feel free to reach out.
Quote from @Mike Dymski:
Efficiency and exit...managing 20-50+ units across the city can get unruly and have limited exit options. But, passing up 2% for 1% is a big spread and most would stay the course with the 2%'ers.
Mike: There is no major appreciation or depreciation tax benefits that would make up the other 1% missing over time?
#3 Innovative Strategies Contributor
- Investor
- Greenville, SC
Quote from @Daniel Brody:
Quote from @Mike Dymski:
Efficiency and exit...managing 20-50+ units across the city can get unruly and have limited exit options. But, passing up 2% for 1% is a big spread and most would stay the course with the 2%'ers.
Mike: There is no major appreciation or depreciation tax benefits that would make up the other 1% missing over time?
Cost segregation on the apartment community would be beneficial but hard to make up for a 100% rent/price difference. Appreciation (for SFR or APT) will be specific to the area. Regarding forced appreciation, one of the benefits of an apartment community is improving operations, cutting costs, raising rents, along with rehabbing units all in one location and driving up NOI which will increase valuation (but that can also be done on SFR with the comps dictating valuation rather than NOI).
Quote from @Alex L.:
Like Mike said -- efficiency and exit. Also, a lot of the apartment complexes in the area are quite overvalued at the moment. So, that's probably affecting the % return you're seeing. They're still trying to cash in on 2022 prices but they're late lol.
On the other hand, a lot of the time, the SFH's in Youngstown are in desperate need of major updates or repairs, which is part of the reason they're so cheap yet bringing in a good monthly return... even more so in the more "bad" neighborhoods. I've been watching a lot of out of state investors get in too deep, though, thinking they were getting slam dunk deals and then ending up selling 6 months later or their rental sitting on the market for months and decreasing in rental price week after week. There's one in particular that paid $65k for a house that shouldn't have sold for more than $50k, and it's been sitting vacant because (1) the rent was originally way too high, and (2) the "remodel" was an absolute botch job. But I digress.
I recently bought two properties on the east side which I'm remodeling at the moment. I solely invest in SFHs in Youngstown and surrounding neighborhoods, and I'm local to the area with lots of connections so I've got a finger on the pulse of anything that happens property-wise. I'm also finishing up my real estate license next month so that I'll have easier access to MLS properties rather than waiting for an agent to let me in. If there's anything you need assistance with, or perhaps want to offload a property in the future, feel free to reach out.
Alex,
Im way to cheap the pay 65k. Tenant occupied and if section 8 even better. It took me a while to find a realtor to make offers I wanted and do what I needed for touring of the property. but I did and he's a shark. Thanks for the heads up.