Should I Start Out with Multi-Family First??

11 Replies

I bought a primary residence Single-Family in 2010, Rented it in 2015 [sole landlord], and Just sold it in 2018 FSBO. That's the extent of my 'hands on' experience. Having said that, In pursuit of experience and growth, would it be wise to forego the traditional Single-Family Flip or Buy & Hold rental and instead go straight for the Duplex, Tri-plex, Quad, etc? Here's my thinking.

The cash flow, ROI, and potential margins from Multi-Family seems to consistently outweigh that of single family- from what I've calculated- without a great increase in investment total or difference in sale value. Mindful of the fact that I'd like a way to generate income to reinvest and grow and I don't know anything about buying and selling REO, notes, tax-liens, and all the other seemingly 'quick-turn profit niches out there , is Multi-Family smart to start with?

As always,

Thank You!

@Adam Scheetz there is no quick profits in Real Estate. 

even to be a good flipper of anything you need to learn what you are doing. 

To answer your questions. if i would be starting put now and i don't own my own home i would have bought a 4Plex that is value add deals. live in it for a year or two while the tenants pay may mortgage, at the same time will be adding value to create equity. 

By the end of 2 years you should have equity and cash-flow to roll over in to the next deal.  Its all comes down to buying your first one well.

@Hadar Orkibi Thanks for the response. Unfortunately, My wife and 3 kids would probably not survive living in 1/4 of a Quad lol. The reason I prompt this question is because, I'm looking at a quad right now in the Jacksonville, FL area that appears to shake out to about a 10% ROI and around $134 per door. And i'm entertaining the idea, but as you said it's vital to get the first one right. So I maybe incorrect in my thinking but the stability from 4 separate units- to me- seems to be a smart play.

ha you didn’t mention the kids... that JAX deal could be a good one with these numbers.

That's if you getting the numbers right. Feel free to share them or post link to the BP calculator. Maybe look for MFR that have 3 bedroom unit in it.

I've reflected on my journey and starting with a very small Multifamily property is sound.  You'll learn a lot.  From there you can scale at a faster pace once you've gotten the experience.   Learn to underwrite/analyze it conservatively and you'll be ok.  Just don't underwrite this one property, but a good number of properties to fully understand the process and get a better feel for what a good deal is acceptable for your market and you.

Yes go with a m/f for big and hold if you can swing it. When a s/f is vacant- all expenses come out of pocket but with a m/f- if one unit is vacant-then the other units tent covers expenses while you look for a tenant. Much less financial stress for you and your family.

"My wife and 3 kids would probably not survive living in 1/4 of a Quad lol. "

While I understand this, you and your wife need to want it bad enough. It would teach the kids a thing or two. As for your wife, you have to be on the same page. It might take some convincing.

I have 2 kids and after 4 years of bending her ear,  my wife gave me the go for owner occupied 4plex. We are looking/putting offers in now. 

We have been traveling for a year now, living in small apartments.It's not that bad. We sold out 3000 square foot, waste of space house. 

There are some nice duplexes out there too, which is our backup plan in case we can't find a 3 or 4 unit.

Originally posted by @Adam Scheetz :

Michael Dang thanks for the feedback. Do you recommend any resources- short of working for an underwriter- that I could use or read to aid in that process?

It'a a fancy word for analyzing the numbers. Spreadsheets, dealcheck.io, biggerpockets.... 

Originally posted by Account Closed:
Originally posted by @Adam Scheetz:

Michael Dang thanks for the feedback. Do you recommend any resources- short of working for an underwriter- that I could use or read to aid in that process?

It'a a fancy word for analyzing the numbers. Spreadsheets, dealcheck.io, biggerpockets.... 

Fancy word, Yes, spreadsheets, BP, and etc.  You may want to look at more advanced deal analyzers to learn more.  Review Michael Blank's SDA.  It's worth the investment.

Sometimes it takes sacrifices to get ahead. Remember that with Financial freedom, you are just deferring the fun. Decisions are sometimes uncomfortable ... Just my 2 cents.