Go big or go home? Multiple SF/MultiF vs Apartment building

7 Replies

Hey there, I’m a new investor currently collecting info on various properties in the local area and wanted to get y’alls thoughts... If one is just starting out investing with the following goals: -$5k/month cash flow within 5 years -multi-fams / single family / apartment buildings I have a combination of accumulated personal savings and over $200k available in the form of a HELOC (debt free home) What are your thoughts on buying a few multi-fams/single fams vs buying the biggest apartment building I could afford? Thanks in advance!

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Thanks Gina! Yes, definitely wish I had gotten in sooner!

This might go against the grain here.... but I'd get SFH/MF mix and pick out the good ones. The problem for me with apt complexes are they are very different in terms of funding the deal and who'd want to buy it. Plus you don't have all your eggs in one basket.

Again, maybe not applicable to you, but let's pretend: Year 2 of being landlord, you have nice mix of SFH/MF but there's one or two units that's just not working for you. Problems with the structure or problems with the tenant pool doesn't matter.... but hey market is still up so you sell them off. Let's pretend they're in good shape, so you have investors (since you have rent roll) AND owner occupied looking at the same property. 

5k cash flow might be difficult whatever route you go though, you figure you're generally getting about 1% rent per unit w/ 20% down or so you're looking around few hundred mo cash flow per do. 

Napkin math tells us: 
200k = 1mil loan ammount

300/door (average) you'd need about 16 doors at that, probably going to go over your 1 mil loan. 

Again, assumption being you target higher class properties with higher rents.

I should also add you COULD get lucky and be aggressive in buying out prior investors portfolio/partial. There's lot out there this time of year... and not everyone has the capital you do...

Thanks Matt, very helpful. Just to clarify, do you mean buy prior investor notes? Or the properties...

@William Crutcher

I only have experience with small multifamily (4 units) and single family so I may be a little biased. I like small multifamily because it gives you the best of both worlds when you are getting started.

Let me give you an example. You buy a 16 unit apartment complex. You use commercial financing, you have a higher interest rate, 20 year amortization, and a 5 year balloon.

On the other hand if you buy 4-4plex buildings (perhaps all located right next to each other) you can use residential financing, a little bit lower interest rate, 30 year amortization, and no balloon. The downside of course being closing costs on 4 separate loans.

My 2 cents. If i were you @William Crutcher . i would go big but partner with someone who has done it few times and been successful. In that case you are leveraging his expertise reducing the risk and also you ll be able to afford bigger deals with more capital and its a win win situation.

@Anthony Garden
Thanks for the insight. I can see the benefit of buying more smaller units.

@Chairthra Kumar
I definitely know experienced individuals in the city and will get with them to flush more of this out. Thank you!

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