Invest capital in multiple smaller properties or one larger one?

4 Replies

I have spent the past 6 months or so educating myself on REI as much as possible primarily here on BP by listening to countless podcasts, posting tons on the forums, analyzing hypothetical deals, networking with other investors, realtors, wholesalers, lenders, contractors, etc. Now I'm ready to take action and start looking for my first deal.

I was fortunate and disciplined enough to build up some decent savings to have as working capital to get started. 

My plan is to use the BRRRR strategy to ultimately build a portfolio of SFH's and MFR's. I feel this strategy will work best for me since I can continue to recycle my initial working capital over and over again which will allow me to scale quicker.

I love the whole idea of rehabbing to force appreciation so that is another reason why I feel that strategy is best for me.

The end goal is to have a large cash flowing portfolio which I'm prepared to work full-time at to ensure that I succeed.

I'm not treating REI as a hobby or a side hustle this is now a full-time career moving forwards for me.

If you were just starting like me, keeping my goals in mind, would you take the initial capital and use it as down payments spread out among multiple smaller SFH's and/or 2-4 unit MFR's or would you use it all as a down payment on one larger multi-family property?

On one hand it's enticing to spread the capital among multiple properties to diversify and kick start my portfolio but on the other hand I know eventually I'm going to want to scale into larger properties for maximum cash flow.

What would you do if you were in my shoes?

Would love to hear some insight!

@Brian Garrett Seems to me you've over-analyzed the question and have analysis paralysis. Besides, you've kind of answered your own question.

"My plan is to use the BRRRR strategy to ultimately build a portfolio of SFH's and MFR's. I feel this strategy will work best for me since I can continue to recycle my initial working capital over and over again which will allow me to scale quicker.

I love the whole idea of rehabbing to force appreciation so that is another reason why I feel that strategy is best for me.

The end goal is to have a large cash flowing portfolio which I'm prepared to work full-time at to ensure that I succeed."

Here's your answer, what you said. Do this, both SFHs and MFRs. If you buy one large MF with all your capital, you've limited your choices, to an extent. Though you can rehab a large MFR to be sure, but will you lose a part of your income stream during the process? You'd want several MFs to spread out the risk.

If you buy smaller multi families, 4 plexs, or less you can get better rates of interest, and longer terms, for more cash flow. Of course you can pay off sooner, but you get the option with a 30, not locked in to a 15 yr. loan. These smaller 4 plexs, produce a cash flow as good as a commercial, and with a lot easier learning curve.   

if ROI is all the same I'd prefer the one larger vs multiple smaller. You only get 10 easy loans so try to cherry pick the best. 1 is also a lot less work then multiple, so you can have A little more time for the learning curve.

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