What makes more sense?

4 Replies

hello. I'm going to 1031 exchange my SF rental for a multifamily building. My options are either a 3 or 4 unit complex. The 3 unit is a lot less than the 4 units. Would it make sense for me to get a 3 unit and have more cashflow or go with a more expensive building an have a positive cashflow but less than the 3 unit? Any advise on this would really help. Thank you.

Could you provide more details about the numbers you are looking at. what is the difference in expenses cash flow etc...

well if I get a 3 unit it has to be at or under $250,000, with my down payment my mortgage would be around $1100. The rent will range from $700-$800 per unit. The price range for the 4 units is $350,000+ So my mortgage on that would be around $1600. I currently live with my parents so I would want to use this opportunity and move into one of the units. My biggest expenses would be the landscaping and management but I can take care of all that since I will be living there.

Quads are generally an easier resell than tri-plexes. They also have better break even occupancy.

The numbers of units and price is only a few factors. The location of the property and unit mix with demand dictates future rental increases for the area. The age of the building and landlord paid utility along with any rental controls affect repair costs and future rent increases. If you are buying a 3 to 4 unit in a historical area for instance repairs to the outside can be very expensive to meet the society's demands. Also if you have wood siding but all the surrounding buildings have to use brick for new code once your wears out for exterior replacement that can get expensive.

Tons and tons of things to watch out for buying these buildings. Hope it helps some.

right. I never thought to think of all that. Thanks for the advise.

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