Deal comparision: 10 unit apartment vs 10 cottages

10 Replies

Trying to figure out which is best.  I know the income / expenses on each will be different, but just for comparison sake make them around the same.  Which would be better?  Both are relatively around the same price range and brings in about the same gross income.  Would you rather buy a 10 unit apartment for 500k or 10 separate cottages on one lot.  These would all be 2bd / 1 bath units.  The apartment units are identical, while the cottages vary in color, interior décor, etc....  Thanks. 

I would assume that the cottages would rent more quickly. By cottage.. I am assuming detached.

I don't see that the decor etc. variance would really matter unless they were just grotesque looking... but even that could be changed.

So I would say cottages.

yes, cottages would be small detached units with no garages. Kind of like cabins.  Thanks for the input 

6 of one, 1/2 doz. of the other.  There are pluses and minuses to either way you go.  

Cottages:  + Might be easier to rent.  + Less problems with neighbors too close. + Easier to separate and sell when you want out.  + or - Might appreciate or depreciate more because of local factors.  - Possible more maintenance (10 roofs instead of one, 10 drive ways, 10 lawns.)  - Because of no real close neighbors, they can be more likely to get destroyed.

Apartment Building:  + or - Appreciation or depreciation will be determined only by rental income, not quite as much on local factors.  + Possible less maintenance.  (1 roof etc.)  + If one tenant is destroying their apt. a neighbor is likely to report it.  - Can be harder to rent if you get one bad tenant.  - Tenants so close can cause problems with each other.  (Noise, smell etc.)

All that being said, with everything being equal; I would buy the apartment building.  But if you can, why not go for both.

How does your financing look on the cottages? Is this 10 loans or one? I would add that to everything @Tim Cooper  mentions (especially the roofs).

Cottages can be sold to investors and new homeowners.  You can sell them off one by one or as a package. So wider range of possibilities.  

Whereas, an apartment is only attractive to another investor and obviously cannot be divided.  So days on market for an apartment building could be twice that for each cottage.

What @Annette Hibbler  assumed is the deal breaker IMO - if you can actually sell the off as individual properties, then that provides huge value.  If you can't - and you mentioned they are all on one lot so I assume you can't - then mehh...you may be better with the true multi-family unit.

I'm with @Tim Cooper on the apartments. 1 roof as apposed to 10 makes it a lot easier to maintain. Plus you can force appreciation on an apartment building, any upgrades would add more value.

Originally posted by @Sam Jones:

What @Annette Hibbler  assumed is the deal breaker IMO - if you can actually sell the off as individual properties, then that provides huge value.  If you can't - and you mentioned they are all on one lot so I assume you can't - then mehh...you may be better with the true multi-family unit.

 Both will require commercial financing.  The cottages are on one lot and can't be sub divided or sold off separetely.   From what everyone is saying, the apartment is better. 

@Tou V.  If that is indeed the case, then yeah, go for the apartment building.

For me, it would depend on the location. If one is in a slightly better location, I would probably go with it. 

I guess it also depends on how the bank views the cottages. They may look at it the same as a 10 unit complex in which case it is a wash. If it is harder to get financing on the cottages, then the complex wins.

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