Multi family residence or SFR

11 Replies

Hi all,

I have a question. I currently own a couple of properties in Jacksonville thru a TKP and I have been daydreaming about what to do next. If and investor has say 500k(I have about 2M but would not be willing to go more then 500k) in cash reserves. Should that investor be looking at diving into a bigger deal such as 2 million apartment? Or continue with slowly building portfolio of ~200k SFR? How do you buy a $2M apartment? Is it the same as SFR? Do banks see it as you buying several properties? I don't even know where to start. Just looking for some opinions from more successful people then me.... stand on the shoulders of giants and all that.

Thanks

Silicon Valley Semi Retarded Investor.

Originally posted by @Craig Oram :

Hi all,

I have a question. I currently own a couple of properties in Jacksonville thru a TKP and I have been daydreaming about what to do next. If and investor has say 500k(I have about 2M but would not be willing to go more then 500k) in cash reserves. Should that investor be looking at diving into a bigger deal such as 2 million apartment? Or continue with slowly building portfolio of ~200k SFR? How do you buy a $2M apartment? Is it the same as SFR? Do banks see it as you buying several properties? I don't even know where to start. Just looking for some opinions from more successful people then me.... stand on the shoulders of giants and all that.

Thanks

Silicon Valley Semi Retarded Investor.

 Hi Craig,

The more straight forward advice would be: Go With What You Know.

That being said, I believe that some people tend to take that advice to literally and don't take the time to "Get to Know" and educate themselves about other options that are potentially better for their particular situation.

First thing that needs to be done (which you probably already did) is answer the question of how active you are looking to be in your real estate investments. The answer to this question will allow you to determine what strategy is probably best for you and will allow you to reach your goals faster.

If you are looking to be active and maximize your investment dollars by also investing your time then there are several strategies that you could dive into with those $500K. First thought would be to do the BRRRR strategy or build a Fix and Flip business and invest the proceeds in building a SFR portfolio.

You can definitely go ahead and purchase an apartment complex of $2MM, use third party property management and be somewhat active doing the asset management and making sure the business plan is accomplished.

And then if you want to go totally passive and get "mail money" you have REITS, Syndications, and some other strategies that will each be a good option for you or not, depending on your return expectations, risk tolerance, etc.

I used to own 4 SFRs and made the transition to large commercial multifamily. I initially started investing as a passive investors with experienced operators through syndication model and eventually built a business around that that allows me to keep my "not operator level active but not Limited Partner level passive" status, which was my goal.

To learn about how commercial lending works I would recommend you listen to Old Capital Podcast.

I'd be more than happy to chat further and go into further details about commercial real estate investing if you are interested. Just shoot me a PM.

Good luck Craig!

@Craig Oram First you would really need to define your goals with some timelines as well as how hands-on/hands-off you want to be. There are plenty of strategies in Real Estate which can meet investment goals you decide on as well as your involvement level. If you want to own MF, you can do so passively as well as actively. With the amount of funds you have available, you really have plenty of options.  My suggestion would be to continue to further your education and build more knowledge before deciding one thing or the other.Listen to Podcasts, Read blogs, forums, books and/or book time with more experienced people on the platform to discuss/clarify questions you might have. 

(919) 434-3132

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I think based on many points, that I will not go into here; math being one of them, that Single Family Rentals have better total returns. But they are not great for investing with large amounts of money say more then 3 or 4 million. You can buy bulk houses in packages of 20 to 100 at a time but then again that is about the limit most of the time. With apartments you can buy 300 to 400 unit complexes in nice areas all day long if you got the money for it. Returns lower but money safe. For the small guy like me SFR all day long. If I need to park a few million then I would look for large apartments. Keep growing your knowledge and keep growing bigger pockets. Skywalker out.

@Luke Myers Can you get into more detail about why you say SFR is more profitable than MF? I always hear MF is the way to go - better economies of scale. Although I've heard SFR are better because the tenants tend to stay longer (families). I am debating which way to go, and welcome input on SFR vrs MF.

@Craig Oram I'm in the apartment complex space and my advice would be to never shop on a budget when you're looking for real estate. If you don't have the money, go find someone who does by raising the capital needed. In that respect, these investors are going to want to see first if it's a good deal (you better be on your A game about every metric/detail), your experience, how you will manage the deal and finally the exit. I've built a financial model that I use to analyze all my properties and have helped other investors, so please feel free to reach out if you need any assistance putting the financial analysis/offering package together. Best of luck!

@Craig Oram First of all, I give you a lot of credit for putting yourself out there and asking a question. Secondly, read this advice and any other as just an opinion. Everyone is speaking from their own perspective. I can go mile and a half about the benefits of multifamily, but then the next girl comes around and shows the same thing for single family. Therefore, my third point, educate yourself some more on the pros and cons of both: SFH vs MFH investing. When it comes to MFH, do you want to continue buying smaller MFH via TK providers or would you rather become an equity partner in a larger (aka commercial) apartment building syndications.

I can give you a list of podcast for each of these entity types to listen to. However, at the end of the day, you need to decide what will work best for you personally and where do you see yourself 5-10 years down the road. Happy to chat offline if you'd like. Feel free to PM me. 

Btw, since you're a member of BP community, I'd say you definitely do not qualify as even 'semi retarded investor', more like an 'education-hungry investor' :) ! 

Best!

I always like to think that slow and steady wins the race. If the opportunity seems great and you’ve done your due diligence and you feel confident in your decision then move forward. But I believe moving slowly is always a good idea

Thanks you all for your replies. Gives me a lot to think about. On the one hand TKP provides me a means to get into real estate that does not require much from me. On the other hand it does conflict with a even more powerful force within me... I’m cheap. Every time I’m about to move forward with another TKP property, I cringe a little because I know I’m paying someone a premium to have them do many of the tasks that are easy for me to do. Even still with a full time job in semiconductor it does provide me with an easy avenue to diversify. I just wish I could do the one “mother-load”, get it with some value built in, and be done. 

Thanks again all!

(Slightly less) Semi-retarded investor in Silicon Valley. 

@Craig Oram

for $550k,, you could buy an portfolio deal from a turnkey provider or roofstock that comes with PM 

a multi family loan will be considered a commercial loan so will not impact your ten loans.

a multi family syndication is also possible with a min $50k participation

so a lot of RE possibiities

you live in the Bay Area, so your other option is to invest locally. Don’t worry, that $500k won’t go far, but: you’d be acquiring prime real estate with significant future appreciation, you can self manage and learn how to landlord and manage renovations, etc. You will definitely have much more control over your investment, and you can learn the specific ins and outs of different neighborhoods and towns near by, so you can maximize your returns. Several years from now you’ll probably look back and realize that the appreciation gain was well worth the efforts. 

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