Hi all,
I recently read the following article about how the US government is planning to market a ton of foreclosed homes as rentals and noticed the following comment in the article:
"Single-family home rentals can yield cash flows that are 300 basis points, or 3 percentage points, higher than apartments"
What are everyone's thoughts on this? Is this true in your experience in real estate? I've been under the impression that multi family units normally cash flow better than SFH units.
Here is the article: http://www.bloomberg.com/news/2012-01-31/foreclosures-draw-private-equity-as-u-s-selling-200-000-homes-mortgages.html
Any other thoughts on the article would be great as well
Investor · Round Rock, TX · Member since 2010 · 8k+ posts · 4k+ votes
14y
Capitalization rates for SFRs are almost always lower than apartments doing an apples-to-apples comparison. In fact using discounted purchases it is still hard to get positive real cash flow with standard loan constants for SFRs. This is even true with gov-mint-backed FNMA debt with crazy low yields.
The context of the comment was from someone buying over $100M in assets. It is easy to compare apples to oranges and get commentary like this. If you bought hundreds of millions in apartments the CURRENT yields would almost always be lower than buying same amount of said SFRs. There are always exceptions though.