Pros cons with apartments versus strip mall investing

[Bok O.]

Anyone have any insight on apartments versus stripmall versus medical office space investing? Which one would be better to do as a beginner? Any pros and cons for each?

[Jimmy Klein]

I can shed some light on this as I owned both and still have a strip mall. I rarely ever hear of a 500k strip mall with good tenants and as a quality asset. I own a strip mall. Purchased for mid 5 million. I have good tenants, some credit quality, others mom and pop. The location is good, near a major mall and restaurants. 

Here is what I will say. As far as maintenance goes, the strip center has very little. Just make sure the roof is well intact. Most of my leases are NNN, so tenant pays for everything. If something happens to their unit, they take care of it. Otherwise structural cost such as roof and landscaping are on me. This is almost minimal. I rarely ever step foot on the property. I just don't need to. One issue with retail strip is that the process of leasing up vacant spaces when a tenant leaves. You typically get a leasing broker and they take a pretty big cut and their may be some down time in the vacant unit due to tenant improvements as well as waiting to find the right tenant. However, once the ordeal is done, assuming you did it right you'll get a new tenant with a 5 year, or hopefully longer lease.

Multifamily is good in certain ways, but requires a lot more attention. With a 50 unit complex, you have 50 kitchens, 50 bathrooms (maybe more), several hundred light fixtures, HVAC units, water heaters, maybe even washer and dryer. So this property requires you to be there a good amount of time. The nice benefit of multifamily is that leasing up is easier. Tenants only sign one year leases. As long as the property is in the right location, releasing shouldn't be an issue. 

So in one, you have very little responsibilities, but have issues during releasing. For the other, you have a lot of responsibilities, but should be able to re-lease fairly easily. Each has their own benefit. In both, LOCATION MATTERS.