Property Manager · Twin Falls, ID · Member since 2017 · 42 posts · 11 votes
My husband and I are entering the world of real estate investing and are in disagreement as whether or not to invest in a single family or multi family. Looking at cash flow figures single family seems low, much lower than multiple family properties. Logically it makes sense to invest in a multiple family property. My real estate agent, who also invests in rental properties advices against multi family properties because of the tenants who are drawn to them. In his opinion, there are a lot less headaches renting single family. I'd love to hear some opinions and insight from those who have experience with both types of investment properties.
Rental Property Investor · SE Michigan · Member since 2014 · 4k+ posts · 6k+ votes
9y
Sam:
Not sure what numbers you are seeing. Generally my cash-on-cash returns are higher in single family....at least in the short term. Multi family has a HUGE advantage in a few critical ways.
1) You can deploy capital quickly. So, putting $100K, $500K, $1M into a multi family property is much easier than putting the same into single family
2) Instead of waiting for appreciation because the market rises, you can force appreciation, giving you greater control over how fast you grow
3) Financing is easier. After you grow the value of your property, do a 100% cash out refi and do it again. Try that in single family!!!
Both strategies are actually just fine. I wouldn't be where I am in multi-family without my prior single family investments. It more depends on where you are financially and how comfortable you are with big numbers.
Feel free to private message me with any follow-on questions.
Rental Property Investor · SE Michigan · Member since 2014 · 4k+ posts · 6k+ votes
9y
Sam:
Not sure what numbers you are seeing. Generally my cash-on-cash returns are higher in single family....at least in the short term. Multi family has a HUGE advantage in a few critical ways.
1) You can deploy capital quickly. So, putting $100K, $500K, $1M into a multi family property is much easier than putting the same into single family
2) Instead of waiting for appreciation because the market rises, you can force appreciation, giving you greater control over how fast you grow
3) Financing is easier. After you grow the value of your property, do a 100% cash out refi and do it again. Try that in single family!!!
Both strategies are actually just fine. I wouldn't be where I am in multi-family without my prior single family investments. It more depends on where you are financially and how comfortable you are with big numbers.
Feel free to private message me with any follow-on questions.
Real Estate Agent · Pleasant Grove UT and Hurst, TX · Member since 2014 · 128 posts · 63 votes
9y
@Greg Scott makes some awesome points. I have a lot of experience in both of these. While it may be an oversimplification, next time you play monopoly, notice that the winner didn't have a bunch of green houses out on the board. They had the red hotels/apartments.
I don't know many people that accumulate a large amount of single families and don't eventually want to simplify into fewer properties but more doors.
But singles offer some great liquidity options and higher returns in the short term in most cases. They are an excellent spring board into multi fam, which is probably the better longer term deal. But like Greg said, both strategies are fine. There is a time and place for both, and if you do them right, they'll both be very good to you!
Investor · United States · Member since 2015 · 415 posts · 487 votes
9y
As they say, "Do the math, and the math will tell you what to do." Just run the numbers side by side, as it sounds like you've done, AND account for costs like higher vacancy, repairs, etc. After accounting for all the true costs, pick which ones gives you the better return.
Greg has some very good points, though I think those strategies would start to apply more after you have a few deals under your belt. If you're just looking to learn the ropes with your first couple properties, I'd probably just look at what gives you the best total return.
Real Estate Agent · Warrior Run, PA · Member since 2016 · 341 posts · 146 votes
9y
Sam Taylor I think they both have pros an cons. For example if you bought a duplex 2 beds 1 bath each side and each side rented for $700. and say single family 3 bed 2 bath rented for $1200. Now it may seem like the duplex is the better deal but consider this. A duplex means that you would pay 2 different sewer bills (I say this because even if your tenants pay all utilities, which is always the way to go, usually you wind up paying the sewer bill in my experience) a duplex usually will be more costly to insure. Possibly higher taxes. More expenses because their is 2 kitchens etc.
Single family rental tenants usually pay all utilities, cut the lawn, shovel snow. And stay longer.
Now also consider this. Single family homes usually sell for more and quicker than multi family. As investors don't care about how pretty the kitchen is and fall in love. They look at the ROI. Also their are less investors then home buyers. So your house may sit longer.
Just something to think about. They can both be good. Depends on the market.