$40K per unit fourplexes VS. $40K SFR "Pigs" - Are they the same?

Question

Here is a question for the more experienced experts out there...

If all factors (neighborhood, quality of home, repairs, etc) are the same, would you view a fourplex that costs $160K (or $40K per unit) the same as a SFR that costs $40K?

In this scenario, assume that both properties are next to each other.  The SFR is only $40K for a reason.  Would you look at the MFH next door any differently?

Ronald Perich · Answer

@James DeRoestAgree with the statement that a multifamily does have limited people willing to buy, but a fourplex can qualify for residential loans. Much different from a lending perspective.

Benefit of the fourplex is typically less CapEx since you only have one roof, one driveway, etc. You actually should be getting the fourplex for less than four SFH. But James is right about problem clients. They are like a cancer. And your good clients won't  tell you there is a problem more than once - they'll just find a new place.

Benefit of four SFH is the vacancy rates can be lower, you might be able to add a bedroom somewhere (big time paypack). A lot more options. You typically are not responsible for outside maintenance.

And you might be lessening your risk from a location perspective. If the neighborhood goes to crap around one SFH, you still have three in different areas. If they are all on the same block, that doesn't count, of course.

It's all about what you like to invest in.

James DeRoest · Answer

It's really up to you and what you like. There is no difference.

There is a downside to multi units which no one on BP mentions which - if you get a bad tenant in one unit, he'll start to cost you tenants in other units. Other tenants will not put up with a bad one. And the ones that do put up with the bad one, that's not good either.

Personally speaking, I'm not a fan of multi unit properties as they can only ever be bought by investors. When it comes to your exit strategy, the number of possible buyers is vastly reduced.