Real Estate Investor · rancho cucamonga, CA · Member since 2011 · 48 posts · 0 votes
I have noticed lately that single family homes have been falling in certain ares or Orange and Los Angeles Counties in California. Multifamilies have been dropping as well. I am wondering if buying SFH for investing are better these days than MFH?
SFH are cheaper now, hoping normal property appreciation, broader audience to sell to if needed, and I understand that if vacant, then no income.
MFH prices are dropping as well, bigger downpayments, may not appreciate as fast, cashflow seems to be more important, still getting partial mortgage payment if a tenant is gone.
I guess, I am wondering which would be a better investment today.
Real Estate Investor · rancho cucamonga, CA · Member since 2011 · 48 posts · 0 votes
14y
I want to add some examples:
There is a house in the orange county area that is 350k 3/2 that can rent for at least 1500/mo while a duplex can be found in a similar area for about 350k where both rents can total 1800-2000/mo. Assuming all operating costs and maintenance costs are same or similar which would be the better buy.
Investor · San Ramon, CA · Member since 2011 · 1k+ posts · 569 votes
14y
What are your goals? Who are you buying through?
For example, through homepath, an investor can buy a SFH house for 10% down but a Duplex requires 20% (tri and quad are 25%)...
In that case, the SFH would give a better cash on cash return because it only requires half the down payment and returns more than 50% of the duplex's cash.
If both require the same down payment, you generally want to maximize your cash flow so the Duplex would be better. Of course you now have to deal with more tenants... but that also helps diversify risk a bit.
Last thing to consider is SFH tend to appreciate faster than MFH. Are house prices going to take off in your area? Are you looking to cash out in 5 or 10 years or hold forever? Your exit strategy can change how you approach it.
For me, I'm seeking passive long term income. I'd go Duplex.
Real Estate Investor · rancho cucamonga, CA · Member since 2011 · 48 posts · 0 votes
14y
Thanks for the post! Ultimate goal is to own everything free and clear and eventually build up enough cash flow to to cause a mass effect. Meaning, when i have enough net income from my properties, I will be able to use it as a downpayment and continue to snowball payments until the new property is paid off. The numbers for this will depend on how much and what type of properties, but I say properties in the 500k range would work.
I was wondering which method helped investors build equity faster? If by SFH, i can see if the property appreciates faster that would be good and I am assuming that's how a lot of people made their money in the past. These days, appreciation may grow at a snail's pace for the next 7-10yrs. As for the MFH, i see that as a grind, fixed income type of investment ( i already have two multiunits). I guess I wanted to know if anyone is noticing any faster returns/wealth build up with any of the 2 methods.