Next step after a few SFHs

3 Replies

Hi everyone! I've been purchasing and renting out a few SFHs in my area (4 at the moment). I'm thinking that I may get a couple of more, but I also want to know what the next step tends to be for other people out there. Do people tend to keep buying up SFHs? Invest more in multiplex  properties? Try to move up to small apartment complex? I see at least a few complex in my area that can't be more than 8 or 12 units. How profitable are such units, and at what point can a single person start getting into that kind of game (or is this something people tend to go in on as a group)? I would love to hear what you all have to say!

Moving on to small apartment complexes is an excellent next move. It's a different beast than SFH, but opens up lots of possibilities in terms of scaling up.

You will have to put 25-30% down (either by yourself or with partners), the loan will be commercial (i.e. will take into account the income the property produces) and will be different to run than a bunch of SFH. Personally I am a fan!

Jonathan,

In general, you should expect SFRs to appreciate more than small MFs (duplex, fourplex), that said, why folks migrate to small MFs from SFRs is cash flow (yield) is typically better per $ spent. A typical SFR in Austin might pull in $300 - $400 /mo but I can get into a fourplex for maybe twice the downpayment as the SFR but get $1500/mo (4x the cash flow)....so yields (cash on cash) when I look at it get me closer to 10% w/small MF but the SFRs are in the 6%-7% range as prices have crept up. For many investors, cash flow is king as it pays the bills and gets them closer to "take that job and shove it" mentality....aka, financial freedom. Appreciation is icing on the cake so to speak and you can't live on it until you sell w/SFRs. The other main reason is your time....management / scale. With small MF, you can go to one location for a 4 or 8 units vs 4-8 houses. Most folks value their time.

So, how would life be different if I were to go get a small 8-unit building compared to SFHs? In fact, just for curiosity, how is it different from maybe a 40-unit place? Obviously, the latter would likely require an actual PM, whereas an 8-unit place MAY be doable without one in my opinion.

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