New York City, NY · Member since 2016 · 20 posts · 6 votes
Hi all! I have a set amount to spend on investment property(ies) and am weighing the pros and cons of getting one that's larger and thus, more expensive vs. a few small ones in the same area. Any advice? I figure the larger would attract a family, while the smaller studio/1 BR types would be for couples/singles. As a newbie, I'd guess the smaller spaces would be easier to rent, but having one more expensive place might be easier in terms of management. Any thoughts? Thanks!
Hi all! I have a set amount to spend on investment property(ies) and am weighing the pros and cons of getting one that's larger and thus, more expensive vs. a few small ones in the same area. Any advice? I figure the larger would attract a family, while the smaller studio/1 BR types would be for couples/singles. As a newbie, I'd guess the smaller spaces would be easier to rent, but having one more expensive place might be easier in terms of management. Any thoughts? Thanks!
I look at it like this. You can get 10 residential mortgages. So assuming you have 1 mortgage for the house you live in you should use the remaining 9 on the most expensive 1-4 unit houses you can afford. You are essentially at least going to quadruple your money over the course of the loans so you should put as much out there as possible. That's literally the best debt in the world.
After you exhaust those 10 mortgages it's then time to look at the big stuff. Commercial financing has no limits. If the property has a good DSCR & you have the down payment money they will loan you as much as you can handle. Note, the terms are no where near as favorable as those 1st 10 residential loans.
@Justin Hammond thanks for that rec.! As a newbie I must admit (with slight embarrassment!) that I don't completely understand why sellers prefer all cash so strongly. If a buyer uses a bank mortgage won't the seller still get the cash? Is it just that an all cash buyer can expedite their sales process?
Cash deals don't fall through because of low appraisals or buyers not qualifying for financing. They also close in about half the time.
Rental Property Investor · San Anselmo · Member since 2015 · 659 posts · 600 votes
8y
This depends upon your focus and goals. Just remember.......
Cash flow = Income
Appreciation = Wealth
I personally diversify. I have the majority of my portfolio in "Cash Flowing" areas (Midwest, Texas, GA) and a few appreciation plays in California. I chose Maine earlier this year as a blend between cash flow and appreciation. Best of luck and if you have any questions reach out.
Investor · Franklin, NJ · Member since 2017 · 27 posts · 26 votes
8y
While this question is rather vague in nature, I will try to answer it as best I can, from my experiences owning different types of RE.
Owning properties in different areas allows you to "hedge" your investments - should the market turn sour in one area, it may not in the others you own property in. If you own one property, you are at the mercy of the normal rental rates in that area.
If I were in your shoes, I would prefer to own one property, with multiple units i.e a commercial building, since you only have to travel to one place to collect rent, perform maintenance & check up on that property.
I am fortunate enough to own other properties as well, and while it may be difficult to manage at times, it is also rewarding because sometimes my properties begin to appreciate because the area I bought in starts to gentrify.
It all comes down to cash flow, and personal preference of how comfortable you are having to visit properties that may be located in different areas.