Would you get a sfr or 4plex as your first investment?

Multi-Family and Apartment Investing
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Would you get a sfr or 4plex as your first investment?

Jonathan Chu
Contractor · Los Angeles CA (los angeles, ca) · Member since 2020 · 11 posts · 6 votes

As my first property to get into the real estate game. I just don't know if I should get a single family residential to do the Brrrr strategy and continue acquiring property's that way, or if I should get a 4 Plex and do the multi unit route.

What strategy do you guys recommend ?

Thank you in advance

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Dallas Regimbal
Real Estate Agent · OR · Member since 2021 · 34 posts · 27 votes
4y

@Jonathan Chu It is difficult to answer that question without knowing your long term goals and how "passive" you want your investing to be. Typically, investing In multifamily units is going to allow you to scale faster and more efficiently. If you're willing to house hack you can get into the property with a low down payment of 3.5-5% depending on the type of loan you choose and then move out after the minimum requirement of typically 1 year and repeat the process. If you did this every year for 5 years you could own up to 20 units if you did that with single family homes doing the BRRRR you won't be able to get nearly as many units in that same time frame.

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  • Jerry L.
    Member since 2022 · 27 posts · 10 votes
    4y

    If it was me I would hack the 4 plex for sure

    3Reply
  • Dallas Regimbal
    Real Estate Agent · OR · Member since 2021 · 34 posts · 27 votes
    4y

    @Jonathan Chu It is difficult to answer that question without knowing your long term goals and how "passive" you want your investing to be. Typically, investing In multifamily units is going to allow you to scale faster and more efficiently. If you're willing to house hack you can get into the property with a low down payment of 3.5-5% depending on the type of loan you choose and then move out after the minimum requirement of typically 1 year and repeat the process. If you did this every year for 5 years you could own up to 20 units if you did that with single family homes doing the BRRRR you won't be able to get nearly as many units in that same time frame.

    4Reply
  • Jonathan Chu
    OP
    Contractor · Los Angeles CA (los angeles, ca) · Member since 2020 · 11 posts · 6 votes
    4y
    Quote from @Dallas Regimbal:

    @Jonathan Chu It is difficult to answer that question without knowing your long term goals and how "passive" you want your investing to be. Typically, investing In multifamily units is going to allow you to scale faster and more efficiently. If you're willing to house hack you can get into the property with a low down payment of 3.5-5% depending on the type of loan you choose and then move out after the minimum requirement of typically 1 year and repeat the process. If you did this every year for 5 years you could own up to 20 units if you did that with single family homes doing the BRRRR you won't be able to get nearly as many units in that same time fram

    Makes total sense. Thanks for your breakdown much appreciated!

    1Reply
  • Jonathan Chu
    OP
    Contractor · Los Angeles CA (los angeles, ca) · Member since 2020 · 11 posts · 6 votes
    4y
    Quote from @Jerry L.:

    If it was me I would hack the 4 plex for sure


     Got it Jerry, ! Much appreciated

    0Reply
  • Johnny LynumPro Member
    Investor · Leesburg, VA · Member since 2018 · 233 posts · 92 votes
    4y

    @Jonathan Chu both are great strategies. It depends on your real estate goals.

    I have done alot of fix and flips and I started buying apartments a couple years ago. I wish I had started buying apartments alot sooner than I did, so I could reach my passive income goals sooner.

    Look at your cashflow projections and market rent for the areas.

    Will the 4 unit require updates to units in order to obtain market rent?

    757-699-4447
    1Reply
  • Andres Murillo
    Real Estate Agent · Los Angeles, CA · Member since 2022 · 137 posts · 106 votes
    4y

    My first investment was a SFR. Now I own a couple of SFRs and a couple of duplexes. SFRs are going to reappraise faster - there's typically a ton more transaction volume of comparable properties compared to 2-4 units.

    1Reply
  • Luis Olivier
    Real Estate Agent · Member since 2022 · 37 posts · 34 votes
    4y

    I would house hack the 4 plex. Depending on the market, you could get paid to live there. You could even Airbnb one of the units and increase your income even more, you'll make money and have no housing cost. After you fulfill the primary residence requirement, do it again. My wife and I started with a SFR but looking back on it, I would've bought a 4plex.

    2Reply
  • Jonathan Chu
    Member since 2022 · 5 posts · 1 vote
    4y
    Quote from @Luis Olivier:

    I would house hack the 4 plex. Depending on the market, you could get paid to live there. You could even Airbnb one of the units and increase your income even more, you'll make money and have no housing cost. After you fulfill the primary residence requirement, do it again. My wife and I started with a SFR but looking back on it, I would've bought a 4plex.


     Thanks Luis for your feedback, and experience. Much appreciated brother 

    0Reply
  • Jonathan Chu
    Member since 2022 · 5 posts · 1 vote
    4y
    Quote from @Andres Murillo:

    My first investment was a SFR. Now I own a couple of SFRs and a couple of duplexes. SFRs are going to reappraise faster - there's typically a ton more transaction volume of comparable properties compared to 2-4 units.

    Thanks for your feedback Andres, and what you said is exactly on why I keep on going back and forth. Much appreciated !
    0Reply
  • Jonathan Chu
    Member since 2022 · 5 posts · 1 vote
    4y
    Quote from @Johnny Lynum:

    @Jonathan Chu both are great strategies. It depends on your real estate goals.

    I have done alot of fix and flips and I started buying apartments a couple years ago. I wish I had started buying apartments alot sooner than I did, so I could reach my passive income goals sooner.

    Look at your cashflow projections and market rent for the areas.

    Will the 4 unit require updates to units in order to obtain market rent?

    Thanks for your feedback johnny! Much appreciated ! 
    0Reply
  • Malcomb StapelPro Member
    Investor · Topeka, KS · Member since 2020 · 669 posts · 488 votes
    4y

    @Jonathan Chu that all depends on how you run the numbers and what you are looking for (cash flow or high percentage ROI). My current best cash flowing property is a Duplex with a 19.5% CoC day one return.

    My current best CoC purchase in the last year has been just over 30% on a SFR. While that deal itself has a better number profile, the duplex is still the breadwinner.

    Obviously there are many factors at play here, but a big one is that I literally bought two 3/1 units for the price of a reasonable 3/1 SFR. One side completely covers the mortgage while the other provides the cashflow. You could see how this could get even better with the right 4-plex?

    0Reply
  • Jonathan Chu
    OP
    Contractor · Los Angeles CA (los angeles, ca) · Member since 2020 · 11 posts · 6 votes
    4y
    Quote from @Malcomb Stapel:

    @Jonathan Chu that all depends on how you run the numbers and what you are looking for (cash flow or high percentage ROI). My current best cash flowing property is a Duplex with a 19.5% CoC day one return.

    My current best CoC purchase in the last year has been just over 30% on a SFR. While that deal itself has a better number profile, the duplex is still the breadwinner.

    Obviously there are many factors at play here, but a big one is that I literally bought two 3/1 units for the price of a reasonable 3/1 SFR. One side completely covers the mortgage while the other provides the cashflow. You could see how this could get even better with the right 4-plex?

     Thanks @Malcomb Stapel it totally makes sense. Thanks for your reply!

    1Reply
  • Tim Ryan
    Investor / Mentor / Contractor · Arcadia, CA Buying Out of State · Member since 2015 · 654 posts · 622 votes
    4y

    Gotta go bid Jonathan. Actually 1-4 unit on lending will be about the same for qualifications although with a 4-unit the lender will use the rents (which should be more) toward income. Actually look up the DSCR Program and buy a 5-8 unit instead. Will be easier to buy!

    1Reply
  • Bryce Nurding
    Investor · United States · Member since 2021 · 42 posts · 16 votes
    4y
    Quote from @Jerry L.:

    If it was me I would hack the 4 plex for sure


     yes

    0Reply
  • Chris Davis
    Murrieta, CA · Member since 2017 · 19 posts · 10 votes
    4y

    @Jonathan Chu

    We bought a 4 plex and it has been great. Good cashflow. 4 doors instead of one.

    1Reply
  • Aj Parikh
    Rental Property Investor · Centreville, VA · Member since 2019 · 1k+ posts · 799 votes
    4y

    Hi Jonathan, I would definitely recommend buying a 4 plex out of state and go the multi family route. Feel free to reach out to discuss out of state investing. Would love to connect and help out.

    1Reply
  • Nadia DaggettBusiness Member
    Real Estate Broker · Tampa, FL · Member since 2019 · 92 posts · 60 votes
    4y

    Yes, I agree with Oliver. I started with a 4plex as my first house hack. We lived in one unit and then rented long term the other 3 units at $650 a month back in early 2000. However, we started using the corporate rental strategy shortly after and rented each unit for $1950 instead. It was so profitable it kicked us out. I could make more money from all 4units and find another property to live in, then for us to stay in the 4th. I would not have changed a thing! I love talking multifamily and corporate rentals. If you ever want to discuss we can grab some coffee or some talk online!:)

    [email protected]813-527-1030
    1Reply
  • Jon Q.
    Investor · Berkeley, CA · Member since 2015 · 1k+ posts · 713 votes
    4y

    DO NOT invest in fourplexes.  They're very often in rental neighborhoods where tenants do not care about the property or neighborhood.  You'll not attract a high tenant quality and they'll be a constant property management hassle.

    Just trust me. You'll thank me later.

    1Reply
  • Mike D'ArrigoPro Member
    Turn key provider · San Jose, CA · Member since 2010 · 4k+ posts · 3k+ votes
    4y

    @Jonathan Chu It really depends on how much capital you have to work with. I would rather buy a SFR in better class neighborhood than a MF in a marginal area. If you're constrained by capital, don't try to buy a MF on a shoestring budget.

    1Reply
  • John MorganPro Member
    Rental Property Investor · Grand Prairie, TX · Member since 2018 · 2k+ posts · 2k+ votes
    4y

    @Jonathan Chu

    SFR due to better quality tenants and less drama with neighbors.

    1Reply
  • Drew SygitBusiness Member
    Property Manager · Royal Oak, MI · Member since 2012 · 12k+ posts · 9k+ votes
    4y

    @Jonathan Chu what you buy will probably more depend on what you find.

    [email protected]248-209-6824
    Logical Property Management4.9451 Reviews
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    0Reply
  • Billy Daniel
    Rental Property Investor · Russellville, AR · Member since 2014 · 684 posts · 509 votes
    4y

    This is a goal specific question.  Your goals will determine the best path forward.

    I would personally go for the 4-plex. If possible, I would live in one of the units and house hack. That being said, my first property was a SFH and I still have it (and even like it)!

    0Reply
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