SFR investing.... Who HATES it?? .....Who LOVES it??

Question

So I will be the first one to admit I love commercial real estate for a number of reasons. I wanted to get a feel for those who invest with SFR out of necessity and those who just enjoy that space as a landlord.

My experience has been people do it because that is the cash they are working with. It is a rare bird that owns SFR for a lifetime and retires with it. Most I find when the cash is substantial want to trade up to less hands on type of properties.

Bigger Pockets is mainly a residential forum although we do have a commercial section it is not as vibrant however many people contact me privately.

Over the years I have heard so many horror stories with SFR. I have mine as well. I realized it was not for me years ago. Developing and building houses is different in that you are selling off and not holding etc.

Just on this site today alone pit bills, shady evictions, high damage to units. Brandon Turner posted something somewhere about his tenant with a shotgun. Is this the only option to make money dealing with all of that?? I think not.

I see excitement from people buying their first SFR but unless it is an A or B asset and location that enthusiasm quickly wanes.

If you love SFR I wish you all the best and I am glad you are into changing communities and all of that kind of thing.

Sharad M. · Answer

Hey @Joel Owens

Really enjoy reading your post.

I invest heavily in SFHs. I started out in SFHs due to necessity of limited funds available and also because it seemed easier to get started with SFH over a big multi unit. The first 3 properties I bought were 2 unit, 3 unit and 4 unit. I refer to them as SFHs because to me multi units would mean bigger apartment buildings.

I think majority of the people start with SFHs because of the two main reasons: limited funds and easier to wrap your head around SFH investing vs multi unit.

If I were to win a $100 million lottery today, I would only look into big multi units because it would give me better rate of return on my time. I would have to buy less properties to spend $100 million vs investing that money in SFHs even though my return on money would be higher investing in SFHs.

Anthony Gayden · Answer

I can't say that I like single family homes as buy and hold rentals. For the people who go that route and have long term success, I am sure that they own far more than one or two properties. When you are talking about owning 10+ single family homes, you can have some of the same benefits as multi-family. A single vacancy is not going to effect you so much.

The problem that I see is that a lot of beginners do not have a lot of properties. They may have one, and if if it is vacant, they are literally now paying that mortgage out of pocket. Also because many single family homes have lower cash flow, it is difficult to budget for property management almost forcing a person into the role of landlord.

Also the way that most beginners acquire single family rentals means that often the properties were used as a primary residence first and later converted into a rental. What that means is that many single family rentals were bought at prices too high, and do not have enough cash flow. I see this a lot with my coworkers, some of whom have one or two properties outside of their primary residence. One literally is paying $150 a month out of pocket to cover his mortgage with a renter paying rent.

The one benefit I can see is that they would certainly be easier to sell in the future. I have also heard that there is more stability in the renters, but I am not sure if that is always the case and believe that it depends on what class of property you are buying.

Dawn Anastasi · Answer

I prefer SFH.  Even if I had a million dollars I would still invest in SFH.

Antonio Lopez · Answer

I love it becaus of the feeling of putting a lot of moving parts together. I also love talking to new people. Door knocking has become fun.

For some reason or another it's hard to follow up on leads more than go after them. Follow up is the part I don't like.

Karen F. · Answer

I love SFHs! I own 3 now as part of an almost debt-free portfolio of 11 units. I've owned and sold several more -- which is how I eliminated my debt (and quit my job!) And I'm contemplating picking up 2 more this fall, vs. another multi. I think of them as "slow flips." I buy low and do a retail quality renovation, then hold each for about 2-3 years while commanding a very premium rent, and sell for a large profit. Depreciation keeps my rental income taxes low, and long-term capital gains or a 1031 keeps my sale taxes low. Since I'm selling to an owner-occupier, they are willing to pay full market price. Sometimes the buyer is my renter, and then I save RE commissions, too. I generally rent to young  professional couples and/or newlyweds in my homes. Those couples are usually fresh out of grad school, and within a few years they are ready to buy.

Because they treat the home like their own, I have had very few damages. Of course, I screen thoroughly, seldom allow pets, own in a very nice area within a few miles of my home, drive by the homes often, etc. It's been a formula that has worked for me!

SFR investing.... Who HATES it?? .....Who LOVES it??

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