Switching from SF to Multi Family any suggestions?

4 Replies

Hey Chris, 

unfortunately, single-family experience doesn't transition 100% efficiently over to MF. However, I'm sure that it will be easier for you with all the experience under your belt. There are a few different ways to go.

You could:

  • Learn to underwrite deals yourself, start out small (2-4 unit), and go larger. 
  • Transfer equity from SFR to larger assets. (Not always necessary to do a 1031)
  • Find a general partner and learn about the deals they invest in as one of their LP's

Regardless of the route you choose, keep on educating yourself and it will save you lot's of headache in the long-run.

Good luck!

Hey Chris, In my opinion a nice duplex is not much different from buying 2 SF homes. You can find Duplex's in SF neighborhoods. Your rental demographic may change a little bit depending on number of bedrooms but if get two 3/1 units in the duplex your target renter would be very similar to someone looking at a 3/1 SF rental. 

When you start to go up in # of units and get properties with 1bed units then the type of tenant you're getting will change. With more doors under 1 roof, typically the better your cashflow will be. That being said you'll also have some landlord expenses that you're not able to pass off to tenants the same way you can with SF homes (like water, sewer, snow removal, landscaping, trash, etc) so make sure to have those line items in your deal analysis. If you go view a few multi-families ask the agent to send you the financials. If it was an investor that owned the house prior they should be able to provide you with some of the annual expenses and run rates. Always assume they "forgot" to include something, especially if the numbers look low compared to other properties that gave you the financials. 

Small MF is the way I invest and I love the cashflow per unit. Just for a comparison, in my market I can buy a 5 unit building for the same price as 2 SF homes. It gives me less properties to manage and less roofs to worry about , plus they scale quickly. I think the biggest difference you're going to find will be in the type of tenants you'll get when compared to your SF rentals.