Single family or multiplex

5 Replies

Hi! I have just purchased my first property. It's a 3 bedroom 1 bath in Drexel Park, PA. This area has high taxes but I'm happy so far with the numbers. We have good, clean tenants and I clear $450 each month after all expenses (I put 25K down in case, rest is mortgage). Now I'm looking for a second property and I'm torn. It would be very easy to repeat this again in the same area. However, because of the high taxes on this single family, I've been looking at places with 2-4 units in neighboring towns. I can't seem to find anything that would create the same cashflow compared to what I would have to put down in cash. Some books and people advise against single families.. but others say the exact opposite. Would love to get some feedback from this group. Thanks!

Updated 10 months ago

I meant Drexel Hill. Typo

@Adam H.

Try my hometown of Allentown, PA out (the neighboring town of Bethlehem, PA is good too). The property taxes are pretty low and the houses in the downtown area are relatively cheap. The only caveat is that the downtown area, to some people, is considered "the ghetto". To each his own, I have lived in Brooklyn, NY almost all my life (even during the crack era 90's) so downtown Allentown is mild compared to my experiences in Brooklyn.

I had the same concerns when it came to buying single family houses: 1. What if the tenant does not pay, then I am SOL 2. At least with Multi-family I have more than one tenant paying my mortgage. 3. I may not get enough for rent on a single family 4. What if it takes a long time to find a tenant when there is a turnover?

All those concerns were quickly squelched when I was forced to get a single family due to the heavy competitive Multi-family market in Allentown. I quickly found out that: 1. Many tenants ARE looking for a SFH 2. If you place your rental ad on Facebook Marketplace or Craigslist prepare to have you phone ringing non-stop for inquiries about your place 3. As long as you have these amenities in your rental (washer, dryer, parking space, 3 or more bedrooms) you won't have a hard time finding tenants 4. As long as you do your due diligence in screening your tenant very well, you will not have that much problem getting paid on time.

Hope this helps, and happy investing

Multi unit investors will tell you to invest in multi units, SFH investors will tell you to invest in SFHs. Stock market investors will tell you to invest in the stock market.

What you invest in is a personal decision.

I am a multi unit investor. I believe SFHs are high risk and low cash flow. The market is driven by home buyers not investors. When the market turns you lose your equity. I am a cash flow investor and must be in control of my own investments not the home buying public.

You make your profit when you buy, and there are price points that will make SFHs and multi-family homes equally profitable. If you can buy four SFHs that bring in $250 per month in cash flow, or one 4-unit that brings in $1,000 per month in cash flow, in the end you will be equally successful. Yes, bigger properties will get you economies of scale. However, you generally will see lower Cap rates as the building size increases. I have SFHs as well as multi family properties (2-8 unit) in my portfolio... my SFHs have been just as profitable, making 20%+ cash on cash each year.

I'll agree with @Brian Adzadi  and @Thomas S. . Overall, I think people invest with what they are comfortable with. You can be just as successful with a portfolio of SFHs, a couple of multi-family properties, or a combination of both- but go pick out what is best for your market and crush it!

I personally prefer multi-family because of the economy of scale and the spread of risk. We started with single families and just closed on the first multi-family. We are trying to BRRRR the property and the good thing about having multi family is that we can keep getting the rental income while renovating one unit at a time. The down side is that multi family properties have got really hot in almost every market, and the cap rate has been squeezed a lot.

@Adam H. I like commerical multifamily so I get a value increase through raising rent (over time) and I don’t need the dirt to increase in value. That said, I don’t invest in San Diego (where I live) so I like that “forced appreciation” aspect. But it comes with a commerical mortgage which doesn’t make me super happy so there’s a trade-off. And that’s the key: there’s usually a trade-off when looking at real estate! My “right answer” won’t be yours because my trade-off comforts won’t be yours. 🤷🏻‍♂️

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