Moving up to Multi family from SFR

Buying & Selling Real Estate
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Moving up to Multi family from SFR

David I.
Banker · Louisville KY · Member since 2019 · 26 posts · 10 votes

So have 5 SFR's under my belt and handle most of it myself - they are all in good areas of town and knock on wood I have had some pretty good tenants. Things go wrong but they have been understanding and I have people that help with plumbing or other issues.

I want to move up to 4 plexes but hear horror stories of course. I know the tenants in a 4 plex are paying less than in a sfr so you are getting different types of tenants. Also I know many may be out of work or making less due to covid 19 so I have to assume 4 plex tenants who didn’t make as much before may be making less now or have possibly been laid off.

But even before that I just know from deductive reasoning the tenant in a sfr I’m collecting $1,495 a month from is going to be different from the 4 plex tenant I collect $600 a month from.

I know sfr are easier to sell if need be and have greater appreciation. However know the cash flow is potentially much greater on multi.

I want to expand and keep going. 4 plex then 6-8 plex, eventually heck a 100 plex.

Help me get past the doubts? Thanks.

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Nicholas Lohr
Investor · San Francisco, CA · Member since 2015 · 302 posts · 206 votes
6y

@Lori Agajanian  I highly recommend you fully exhaust all other options before embarking on a new build. All other options being that you can find an existing property to buy and fix up.

I bought a 4-plex a few years back that only used half the lot and thought to myself, "yeah why not I'll just throw in a few more units back there."  

2.5 years later I finally completed it.

In literally a third of that time I bought, rehabbed, and refinanced a much bigger property and made the same money. (and it was WAY easier)

For example, when you're in month 6...7....8.... and still going back and forth with the building department about design, plans, etc... you'll see what I mean.

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  • Joseph CacciapagliaBusiness Member
    Lender · San Antonio, TX · Member since 2020 · 1k+ posts · 1k+ votes
    6y

    In my market, fourplexes in good condition and good areas still get multiple offers, so I don't know I believe SF is necessarily easier to sell. We also see great appreciation in many of our fourplex subdivisions here, so that may not be a correct assumption either. I've always heard both of those statements, but it's certainly not the case in every market. I think it just depends on where each type of property is located. Sure you have a lot more SF buyers, but we also have about 50 times as much inventory of SF.

    Also, are $1,495 and $600 actual rent figures where you are? The nicer fourplex units in my market are rent for $1,250, where a similar sized single family may go for just $1350-1450 in the same area. I don't think I'd buy a fourplex with $600/unit rents. At a certain point, it's just not worth the time. For the most part, my clients are buying properties with rents of $850/unit or more. There are some exceptions, but somewhere around there is where they start to make a lot of sense. Of course, my first duplex rented for $450 per side, but that was 15 years ago, and those same units are going for $795 today. 

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  • David I.
    OP
    Banker · Louisville KY · Member since 2019 · 26 posts · 10 votes
    6y

    Thanks for the reply and info. $1495 is my latest sfr I rehabbed and it’s in a great area.  I’d say my avg sfr is $1200.  The $600 is probably on the lower end for a multi in my area, in a good area probably would get $800-$900 at best. These are smaller units.  Bigger complexes would be on your $1000+ range.  
    And those 4-6 plexes do sell literally within hours of hitting the mls. 

    I guess it really depends on a good property manager.  With the increased cash flow that would help with the calls and headaches 

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  • Lori Agajanian
    Las Vegas, NV · Member since 2017 · 32 posts · 4 votes
    6y

    I want to try the duplex or 4 plex idea,  but they are all in bad areas in Las Vegas.  I’m considering building my own duplexes or tiny home community in Las Vegas.  

    Does anyone know builders who could give me a quote for the project?

    Also need to find the land and location.

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  • Nicholas Lohr
    Investor · San Francisco, CA · Member since 2015 · 302 posts · 206 votes
    6y

    @Lori Agajanian  I highly recommend you fully exhaust all other options before embarking on a new build. All other options being that you can find an existing property to buy and fix up.

    I bought a 4-plex a few years back that only used half the lot and thought to myself, "yeah why not I'll just throw in a few more units back there."  

    2.5 years later I finally completed it.

    In literally a third of that time I bought, rehabbed, and refinanced a much bigger property and made the same money. (and it was WAY easier)

    For example, when you're in month 6...7....8.... and still going back and forth with the building department about design, plans, etc... you'll see what I mean.

    3Reply
  • Michael S.
    Rental Property Investor · Dayton, OH · Member since 2011 · 54 posts · 12 votes
    6y

    Don’t overthink it.  Find a good deal and move on it.  Everything can be figured out as you go.  Single family, 4plex, 10-units, and so on — all the same and you’ll learn as you go through experience.  Good luck!

    1Reply
  • Terry Lao
    Professional · Anaheim, CA · Member since 2017 · 1k+ posts · 686 votes
    6y

    @Lori Agajanian

    I just did a search for 4plexs on Redfin, and brought up 35. It is hard to believe there are 35 4plexs on MLS without offers in all of Las Vegas. Same search for SFR resulted in 4598. On first thought, it would make sense to build your own 4plex. However, when I first thought about this idea 2-3 years ago, you must buy the land first, calculate around $120 per sq. ft to build, and have to deal with all the permits, contractor, lenders. Like Nicholas said above, the time to build would take several years.

    Most 4plexs are in bad areas, east and north Las Vegas. However, there is a small pocket that are good areas, Spring Valley/Chinatown around 400-450k 4plex, east of 95 near Summerlin 450-500k 4plex, and behind MGM casino, Tropicana/Maryland called Parkway Villas around 350-400k 4plex.

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  • Lori Agajanian
    Las Vegas, NV · Member since 2017 · 32 posts · 4 votes
    6y

    Hi Nicholas, Michael and Terry, 

    thank you for the input! I will look into those. Still I feel these are bad areas. There haven't been any new 4 plexs built here in a while. The main reason I considered building is just to build them in better, safer areas. Maybe I could buy SFR, rent out part of it. Or a SFR with a casita.

    I wonder if other towns have this issue where the duplexes and 4plexes are in bad areas?

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  • Lori Agajanian
    Las Vegas, NV · Member since 2017 · 32 posts · 4 votes
    6y

    And yes rehabbing does seem easier!  Michael, You are so right about overthinking it.  I have been overthinking this for too many months, meanwhile life is just passing me by.

    Thank you all for your help.

    0Reply
  • David I.
    OP
    Banker · Louisville KY · Member since 2019 · 26 posts · 10 votes
    6y

    Back to my original question- do you find the tenants more difficult to deal with in a 4 plex or multi family, are there more headaches since there are multiple units versus a sfr.  I guess a property manager takes care of most of this? Thanks. 

    0Reply
  • Michael S.
    Rental Property Investor · Dayton, OH · Member since 2011 · 54 posts · 12 votes
    6y

    Lori you might be hijacking David’s post here.  My response was to the original post he made.


    David, you didn’t ask those questions in your original post.  You said you already knew the tenants were different.   In my experience, the tenants are not different and overall it’s easier — from a management, maintenance and financing perspective.

    1Reply
  • Anthony GaydenPro Member
    Rental Property Investor · Omaha, NE · Member since 2014 · 2k+ posts · 3k+ votes
    6y
    Originally posted by @Lori Agajanian:

    Hi Nicholas, Michael and Terry, 


    I wonder if other towns have this issue where the duplexes and 4plexes are in bad areas?

     They aren't building small multi-family in a lot of cities any more. That is why most of it is older and in bad areas.

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  • Lori Agajanian
    Las Vegas, NV · Member since 2017 · 32 posts · 4 votes
    6y

    Thank you Anthony,  I just hear a lot about them on this biggerpockets platform as a way to get started in investing.  But I can do this with single family homes.

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  • Lori Agajanian
    Las Vegas, NV · Member since 2017 · 32 posts · 4 votes
    6y

    Does anyone know of a duplex or parcel of land with 2 casitas.  I’m looking fro myself and renting out the second . I would really like a lakeside or beach property.  $250000 - $280000

    It could be anywhere;  I want to move.

    Thanks, Lori 

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