Should we buy 2 or 1 properties?

Question

Is it better to buy say 1 $500k property or 2 $250k properties? Assuming we can rent them out right away without further investments. Goal is to rent them out or AirBnb them.. Thanks!

Aaron Gordy · Answer

@Alex Kovalenko Don't forget economies of scale in your calculations. With two properties in the same city or even submarket one can achieve lower costs on a per property basis. Most contractors will discount their price if they know that you will use them for both properties. I use that leverage and it works.

Twana Rasoul · Answer

@Alex Kovalenko depends on the total return. If the 2 lower cost have better cashflow, doesn’t mean they have better total return.

Adam Poshka · Answer

More properties diversify you. So if 1 tenant stops paying, you still have another working property. However if you buy one it could cut your Cap X in half... Only one roof, A/C to fix ect.

Jesse Whitmore · Answer

@Alex Kovalenko haha low price high rent sounds good to me. I’m getting closer to finding my perfect market in central texas. I’m getting priced out of Austin and looking to profit off of everyone else with the same problem lol. When you do find a few properties, even just for numbers sake, I would make a post with your market in the title, I’ve seen better results for responses when posts have the market in them, that’s how you find exactly who you need to find. I would also try to see if there’s BP people in your area to network with and get some insight on the market from them. Good luck!

Alex Kovalenko · Answer

Haha @Jesse Whitmore Thanks man! The only way I guess it to research and hopefully go with the right 1 or 2.. ;) We were thinking of Tampa, FL seems like a good place for investing.. Properties are much cheaper than the east coast of Florida and rents are high because of good job market.. Might change after Corona who knows though..

Jesse Whitmore · Answer

@Alex Kovalenko Yea, you could always face a bad tenant, but just the costs of owning a property in general, cap x, and costs of buying by property as well. You don’t necessarily have all the numbers so it’s hard to point everything out, but essentially with two equal properties (theoretically) than you’re just doubling the work of the first. The problem is you’re thinking theoretically, not that it’s bad, you just can’t asses it. To directly answer your question, with the numbers you came up with I would go with two buildings, because they’re making more money. But once you find the actual properties to consider and run the numbers, then you will truly find the answer. You could have 1 500k home brand new in a hot rental market or two 250k fixer uppers in a factory town where the plant got shut down. In that scenario two properties definitely isn’t the solution. Asking if owning 2 buildings is better than 1 isn’t really the right question when it comes to investing your time and money. You need real properties, real analysis, real numbers, or else you’ll land in real trouble because 2 > 1 sounded good at the time. Not to be a buzz kill, I suffer from analysis paralysis myself, but that comes from blowing money and wasting time before, never really looking deep into the realities of my commitments.

Alex Kovalenko · Answer

Thanks @Jesse Whitmore - you mean if we get a bad tenant or something? The way I am thinking is if we buy 2 properties at $250k each - we can rent them out for say $2.5k each = so $5k each. But if we buy $500k property - max we can probably do would be $3.5k-4k.. so come out about $12k-$15k ahead each year.

Jesse Whitmore · Answer

@Alex Kovalenko if the ROI match I would go with 1. I would try to make the numbers work to make more money for double the work/risk, if you went with the 2.