I like sfh's more then apartments. Am i crazy?
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Rental Property Investor · Sioux Falls, SD · Member since 2015 · 9k+ posts · 18k+ votes
7yIt is not as simple as saying one is better than the other. There are different advantages and disadvantages and different fits for different types of investors. It also depends on the market.
I also think the size of multifamily is a major factor. When you own duplex / twin homes, that is essentially the same as SFH. There is really no economy of scale when you buy the small multi. There is no question that scale has advantages, but you can also get scale in single family.
I would rather have one single family property renting for $1400 than a duplex with each side renting for $700. Yes the duplex has only one roof, but it has 2 stoves, 2 refrigerators, 2 air conditioners, 2 furnaces and most importantly two tenants! Why do I want twice as many tenants, twice as much vacancy, twice the people to collect rent from, etc! Tenants and vacancy are the hardest part of this business.
Of course larger apartment complex give you true scale. If you have 50 residents you can have on site management, maintenance and leasing. You can contract volume for appliance replacement or rehab and get a discount.
As others mentioned, for a smaller landlord, SFH can be an advantage. You are not completing with large apartment owners. In my market companies put up buildings that sit half vacant for two years as they fill units. How can I compete against a brand new building with pool, walk in closets and move in promotions. I should say how can I compete for good tenants. My houses offer something multifamily does not offer. Privacy! You have a yard and you are not sharing walls. That is my niche and it works for me.
44 Replies
- Developer · NY/NJ/PA · Member since 2018 · 758 posts · 935 votes7y
All depends on your area & preferences. I hate SFHs personally.
If you can truly cashfow $500 on sfh’s go for it.
However, Many people don’t truly cashflow that much. They say they do until capex hits them. 5-10% for capex isn’t enough on cheap sfhs.
- 7yAnthony GaydenPro MemberRental Property Investor · Omaha, NE · Member since 2014 · 2k+ posts · 3k+ votes
@Joshua D.
I agree for smaller landlords. I personally have found similar in my area. I stopped looking for small multi family and focus on single family now.
- Investor · Vacaville, CA · Member since 2016 · 433 posts · 249 votes7y
I also like SFH. Have about 20 SFH. I also have a couple of four-plexes but don't really see any great cost savings with them. Each unit has a water heater, an HVAC, a garage door, etc.... Yes, there are somethings where you get economy of scales but not a lot at my little 4-plex level. I imagine if you go big there are some economies of scale but I honestly can't name what those items are. I have heard people say "there is just one roof." Ya, but the roof is way bigger on MFH and than SFH. Taxes are percentage based so no savings there. Maybe some savings on insurance!? I also like single family for easier exit if you want to sell one or two... but it's harder to sell a SFH with a tenant in it except to another investor. Thus the easy exit of SFH is a bit of a myth in some cases - depends on level of SFH I suppose. With MFH your rents continue until the day escrow closes.
- Rental Property Investor · East Wenatchee, WA · Member since 2014 · 10k+ posts · 16k+ votes7y
If median home prices were over $300k and only rent for $2k like here, I'd say yes, you're crazy.
it's area-specific as was said multiple times on the same thread topic started by someone else yesterday.
- Developer · NY/NJ/PA · Member since 2018 · 758 posts · 935 votes7y
Originally posted by @John P.:
I also like SFH. Have about 20 SFH. I also have a couple of four-plexes but don't really see any great cost savings with them. Each unit has a water heater, an HVAC, a garage door, etc.... Yes, there are somethings where you get economy of scales but not a lot at my little 4-plex level. I imagine if you go big there are some economies of scale but I honestly can't name what those items are. I have heard people say "there is just one roof." Ya, but the roof is way bigger on MFH and than SFH. Taxes are percentage based so no savings there. Maybe some savings on insurance!? I also like single family for easier exit if you want to sell one or two... but it's harder to sell a SFH with a tenant in it except to another investor. Thus the easy exit of SFH is a bit of a myth in some cases - depends on level of SFH I suppose. With MFH your rents continue until the day escrow closes.
4 roofs vs 1 roof is still a significant savings (comparing a fourplex to 4 sfhs). Also in general, SFH's are larger than 4plex, so in general, all ur expense numbers are still higher.
Taxes depend on the area. Yes they are percentage based, but in general a MFH has lower per unit taxes than a SFH.
- 7yJay HinrichsBusiness MemberReal Estate Consultant · Summerlin, NV · Member since 2014 · 45k+ posts · 66k+ votes
Originally posted by @Steve Vaughan:
If median home prices were over $300k and only rent for $2k like here, I'd say yes, you're crazy.
it's area-specific as was said multiple times on the same thread topic started by someone else yesterday.
there are many parts of rural PA old coal towns etc were you can buy a pretty decent sfr for 10 to 15k put same into it and rent for 800 ..
wont every be worth much more than you paid for it as the only one that would buy it is another investor looking for the same cash flow but I have funded dozens like this in PA.. so I know they exist.
- Specialist · Toronto, Ontario · Member since 2012 · 2k+ posts · 891 votes7y
You have a case when it is up to 4-5 unit But when it is a multi where value is based on NOI then its a different ball game..
Vacant and Occupied SFR has the same value most of the time.
Vacant and Occupied 6 plex and up usually have a significant price gap
100% agree with your analysis on economy of scale. Replacing 4 roofs vs 1
- Handyman · Pittsburgh, PA · Member since 2018 · 5k+ posts · 13k+ votes7y
Well, Jay, it's kind of eerie that you were able to steal the words off my fingers about this area a continent away, but nothing new. I've lived in and visited a bunch of places, but western PA has some unique physical and historical features that lead to the SFR characteristics you describe.
The chief one is that there is a disproportionate number of 1890-1929 SFR builds of exceptional, lasting quality out here. There's plenty of crap that's falling down, don't get me wrong, but once you get into the brick-veneer builds, the standards of building quality generally take a disproportionate jump. Because this area is waterlogged, you need a really solid foundation for lasting construction. You get that with the brick-veneer builds. Once you have the solid foundation and the brick above it, you'll find a lot of these places were originally slate-roofed as well, because there was plenty of local slate and slate-producing concerns. They had box gutters, but the gutters were made of seamed copper. They had solid main steel beams holding them up by the end of the building boom. The timber used was air-dried virgin fir and spruce of real versus nominal thickness, more solid and with greater long-term structural integrity than the kiln-dried managed-forest sticks we build with today.
Even the designs homebuilders had to pick from, heavily influenced by the incipient modernism of the Prairie School and the Arts and Crafts movement at the time, were very heavily focused on lasting value. It was a golden time for this area, and the people here seized the moment when building their SFRs.
One big historical reason was the coal. In most of the towns north of Pgh, the coal boom was originally anthracite, and people understood that sooner or later it would be gone, mined out. They built accordingly, pre-1880ish. But once the understanding that the massive bituminous fields to the south could be fired into coke came along, people really believed that Pgh as a steeltown could not possibly go anywhere. No one knew that alternating current would make high-temperature coal-fired furnaces wholly obsolete by 1940.
So here we are today out here, surrounded by quite a few SFR properties built by people who believed they were building for generations to come in a very stable area. These properties are islands in the midst of quite a bit of flimsy crap built earlier (mostly gone now) and later (often in worse condition than the 1890-1930 brick-veneer).
- Rental Property Investor · Sioux Falls, SD · Member since 2015 · 9k+ posts · 18k+ votes7y
It is not as simple as saying one is better than the other. There are different advantages and disadvantages and different fits for different types of investors. It also depends on the market.
I also think the size of multifamily is a major factor. When you own duplex / twin homes, that is essentially the same as SFH. There is really no economy of scale when you buy the small multi. There is no question that scale has advantages, but you can also get scale in single family.
I would rather have one single family property renting for $1400 than a duplex with each side renting for $700. Yes the duplex has only one roof, but it has 2 stoves, 2 refrigerators, 2 air conditioners, 2 furnaces and most importantly two tenants! Why do I want twice as many tenants, twice as much vacancy, twice the people to collect rent from, etc! Tenants and vacancy are the hardest part of this business.
Of course larger apartment complex give you true scale. If you have 50 residents you can have on site management, maintenance and leasing. You can contract volume for appliance replacement or rehab and get a discount.
As others mentioned, for a smaller landlord, SFH can be an advantage. You are not completing with large apartment owners. In my market companies put up buildings that sit half vacant for two years as they fill units. How can I compete against a brand new building with pool, walk in closets and move in promotions. I should say how can I compete for good tenants. My houses offer something multifamily does not offer. Privacy! You have a yard and you are not sharing walls. That is my niche and it works for me.
- Real Estate Agent · Southington, CT · Member since 2008 · 5k+ posts · 3k+ votes7y
@Joshua D. How is your tenant pool for these single family rentals? How is the market for selling them on the backend, will families raise their kids in these neighborhoods? If the answer is yes to both of these then I don't see an issue at all with this strategy.
- 7yJay HinrichsBusiness MemberReal Estate Consultant · Summerlin, NV · Member since 2014 · 45k+ posts · 66k+ votes
Originally posted by @Jim K.:
Well, Jay, it's kind of eerie that you were able to steal the words off my fingers about this area a continent away, but nothing new. I've lived in and visited a bunch of places, but western PA has some unique physical and historical features that lead to the SFR characteristics you describe.
The chief one is that there is a disproportionate number of 1890-1929 SFR builds of exceptional, lasting quality out here. There's plenty of crap that's falling down, don't get me wrong, but once you get into the brick-veneer builds, the standards of building quality generally take a disproportionate jump. Because this area is waterlogged, you need a really solid foundation for lasting construction. You get that with the brick-veneer builds. Once you have the solid foundation and the brick above it, you'll find a lot of these places were originally slate-roofed as well, because there was plenty of local slate and slate-producing concerns. They had box gutters, but the gutters were made of seamed copper. They had solid main steel beams holding them up by the end of the building boom. The timber used was air-dried virgin fir and spruce of real versus nominal thickness, more solid and with greater long-term structural integrity than the kiln-dried managed-forest sticks we build with today.
Even the designs homebuilders had to pick from, heavily influenced by the incipient modernism of the Prairie School and the Arts and Crafts movement at the time, were very heavily focused on lasting value. It was a golden time for this area, and the people here seized the moment when building their SFRs.
One big historical reason was the coal. In most of the towns north of Pgh, the coal boom was originally anthracite, and people understood that sooner or later it would be gone, mined out. They built accordingly, pre-1880ish. But once the understanding that the massive bituminous fields to the south could be fired into coke came along, people really believed that Pgh as a steeltown could not possibly go anywhere. No one knew that alternating current would make high-temperature coal-fired furnaces wholly obsolete by 1940.
So here we are today out here, surrounded by quite a few SFR properties built by people who believed they were building for generations to come in a very stable area. These properties are islands in the midst of quite a bit of flimsy crap built earlier (mostly gone now) and later (often in worse condition than the 1890-1930 brick-veneer).
Another way to say it is that these homes were built by craftsman.. who had a ton of pride in their work etc.
you will find this in pre war and post 1908 earthquake in SF.. you look into the rafters and its all framed in REDWOOD and true two by fours
that would does not rot.. Now redwood is so expense you would never use it for dimensional lumber. At least here in the north west and for the last 3 to 4 decades the best Doug fir logs go to Japan.. then next best went to China then the next best went o Korea.. then we have the remainder which we call domestic log.. ( this is private timber) state and federal timber your not allowed to export.. So what you also see is Grand fir or white fir or what we call piss fir this is really low quality but is sold at the same price as Doug fir.. On top of that there the old growth while still standing your not allowed to cut .. so everything that gets cut today is 2nd 3rd or 4th growth and logs instead of cut at 48 inchs at the butt are cut at 12 to 18.. so they are just not as mature and the quality is just not the same..
So you take those pre war homes built in nicer areas.. the components or guts are just better quality.
- Real Estate Broker · Naples, FL · Member since 2013 · 9k+ posts · 6k+ votes7y
I don't have a preference though I hold only 14 units at this time. I would buy MF if I could find a deal here (5 or more units close enough to manage myself). There will be more turnover in apts vs SFR.
- Contractor · San Diego, CA · Member since 2018 · 432 posts · 221 votes7y
@Jay Hinrichs thanks for the education on lumber exports. I’ve noticed termites to be quite the picky eaters as I remodel. They will pick one 2x4 in some places and leave the rest alone. Do you know anything about termites choice of meal? It would be nice to know if some of these species of modern building lumber are less desirable to termites. It’s amazing to see these old houses standing with framing that might last longer than new homes potentially.
- Contractor · San Diego, CA · Member since 2018 · 432 posts · 221 votes7y
@Jim K. What’s the quality of the foundations on these old gems? Do you run into a significant amount of problems with the foundations on these super built homes?
- 7yJay HinrichsBusiness MemberReal Estate Consultant · Summerlin, NV · Member since 2014 · 45k+ posts · 66k+ votes
Originally posted by @Account Closed:
@Jay Hinrichs thanks for the education on lumber exports. I’ve noticed termites to be quite the picky eaters as I remodel. They will pick one 2x4 in some places and leave the rest alone. Do you know anything about termites choice of meal? It would be nice to know if some of these species of modern building lumber are less desirable to termites. It’s amazing to see these old houses standing with framing that might last longer than new homes potentially.
WE don't deal with a lot of termites out here on the west coast at least in real big way .. I know they are here of course.
but its not like deep south and other areas.
Not sure if any species is termite resistant or not.. that would be a good question though for Mr. Google.
the other dimensional lumber that is a profit generator for the Mills.. is the ones label Hemfir that's Hemlock that they try to pass off as fir.. and they can buy those logs for almost half of what true D fir costs.. white fir or piss fir is about 30% or more less valuable as logs.. so the mills make out pretty good when they pass that stuff off as D Fir.
- Handyman · Pittsburgh, PA · Member since 2018 · 5k+ posts · 13k+ votes7y
Originally posted by @Account Closed:
@Jim K. What’s the quality of the foundations on these old gems? Do you run into a significant amount of problems with the foundations on these super built homes?
Hi, Jonathan. The brick-veneered, slate-roofed foursquares I'm talking about typically have very heavy foundations to handle the brick veneer and the weight of the slate up top. They might leak, but usually that's just grading and erosion issues that can be remedied easily. These places, compared to anything I've seen built post-1950 around here, are just solid top to bottom. In the early range of the envelope (1890s), these places usually have stone foundations. By the 1920s, they'd gone to poured concrete.
Now once you step OUTSIDE of this 1890-1929 brick-veneer envelope in the urban Pittsburgh area, on the other hand, we've got foundation problems galore. It rains an insane amount here, and it's only getting worse. As you get out of the city and head west or north, there are some minor subsistence problems from all the coal mining in certain areas (watershed erosion is quickly making this worse). You'll find plenty of wood shiplap-sided houses from the era, especially the one-story bungalows, with dirt basements. I stay away from those. I've seen some crazy block basements with bowing walls that are hard to believe, sliding down hillsides. These very frequently get sold to OOS investors relying on the local realtor's inspector. Sometimes they get flipped and marketed by boutique firms.
- Contractor · San Diego, CA · Member since 2018 · 432 posts · 221 votes7y
@Jay Hinrichs ok , cool I’ll be checking w google on those termite preferences. I’ve def run into my share of the suckers in CA. Def more out east. Too bad Hemlocks aren’t a better lumber because it seems like they stay really hard and the cores don’t seam to rot too bad but the splitting I hear is undesirable. I didn’t know that’s how they were packaging them (hemfir). Seems like Lowe’s is peddling a lot of the white stuff and I have a really hard time finding the yellow stuff there (Douglas fir). I have a 10 acre lot of timber that has a bunch of hemlock, so good to know there’s someone selling the stuff. Thanks
- 7yJay HinrichsBusiness MemberReal Estate Consultant · Summerlin, NV · Member since 2014 · 45k+ posts · 66k+ votes
Originally posted by @Account Closed:
@Jay Hinrichs ok , cool I’ll be checking w google on those termite preferences. I’ve def run into my share of the suckers in CA. Def more out east. Too bad Hemlocks aren’t a better lumber because it seems like they stay really hard and the cores don’t seam to rot too bad but the splitting I hear is undesirable. I didn’t know that’s how they were packaging them (hemfir). Seems like Lowe’s is peddling a lot of the white stuff and I have a really hard time finding the yellow stuff there (Douglas fir). I have a 10 acre lot of timber that has a bunch of hemlock, so good to know there’s someone selling the stuff. Thanks
Hemlock and spruce grow close to the oceans.
- Contractor · San Diego, CA · Member since 2018 · 432 posts · 221 votes7y
@Jim K. very interesting, this is a rich history lesson as I’m flipping a 1940 sfr in a historical district east Tenn now. I see the block on a 1940 wouldn’t compare to the quality of solid poured, yet I imagine even the solid poured have their problems of the weight being huge and might tend to sink overall a little more. Sounds like the builders of that era in W Penn knew how to make em stand, but I wonder how much steel they put in those solid poured. Sounds like a very interesting market for sfr #s and really interesting rehabs. Thanks
- Investor · Winhall, VT · Member since 2016 · 106 posts · 44 votes7y
All depends on your preference. I like having to repaint one common area or replace one roof on a multi vs doing all of those on each single family.
- Rental Property Investor · Indianapolis, IN · Member since 2015 · 21 posts · 3 votes7y
@Joshua D.
Single family has some great benefits that multi doesn’t - check out Keith Weinholds website podcasts - he really has a great data driven comparison.
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