Hey, im looking to start investing in multifamily and buy and hold. I've wholesaled for a few years and have been part of a 33 unit acquisition that didn't pan out in the end. My mentor says you can get more cash flow and liquidity with SFH vs Multifamily, since brokers seem to want a certain cap rate on sales accross a geographic area vs when working with SFH sellers, they're more flexible and motivated based on individual needs.
What are your thoughts on buying SFH vs Multifamily?
I want to get the most cash flow possible to quit my 9-5
Who is your mentor? id like to know where the logic comes from saying there is more cashflow on SFR than MF..
MF hedges against market shifts and cap ex. also doors are a multiplier X so if i have 100 units under 1 roof and 1 of my tenants moves out and trashes the place well thats only 1% of my expense.. as opposed to 1 SFR which would be 100% of my expense..
the only aspect I could potentially agree with is the liquidity.. but lets start off with IF you are investing in holding real estate then you SHOULD be holding LONG TERM. so liquidity is only a tertiary calculation. Real estate is NEVER liquid it is illiquid, BUT if I have a 100 unit apt complex vs a SFR yes i could potentially liquidate the SFR faster then 100 unit. but thats speculative . and if my 100 unit is cashflowing.. why would i WANT to liquidate
Hey, @Justin Kane you're correct that the more doors the more money. but due to having many doors, there are general expenses that increase there by decreasing cash flow. for instance.
Do you find that expenses are usually 50-60 of income?
I think this is an eternal debate... Most of us have limited capital so we making these choices aren't easy but my suggestion is do both. It depends on the market, in my home area I can't justify single family rentals but MF's work... however I've invested in single families in markets where the MF's scared me.
@Account Closed Thanks for your response. my question to that would be,how did you determine which market was right for MF vs SFH investing?
@Account Closed is correct, absolutely do both.. especially if youre just starting out even Grant Cardone started with a SFR. but for the sake of his question lets say you have 100k saved up for a real estate endeavor TOTAL, and you find a SFR that fits the 1% ratio (100k house that brings in 1k rent) that is doable if you calculate it out that would equal a 8.2% cash on cash IF it stays at a 90% occupancy rate. on the other hand if you invest that 100k into a limited partnership with a company that invests in value add apartments will now your cash on cash can be a preferred 10% with a target of 16-20% IRR which would essentially double your money in 2-5 years.. in this scenario the SFR would take sweat equity from you and risk while only returning a measly 8% CoC while the MF would be completely passive allowing you to learn and grow without hindrance with a 10% CoC
now we are over simplifying but I hope this made sense.. cuz my brain hurts ;D
@Jide Alufa typically rent to value is my first quick analysis on where a market lands. RtV is below 1 in my market but in the SFR markets I'm in they're above 1.
What are your goals exactly? I think if we know what you want to achieve we can reverse engineer your ideal "path"
@Justin Kane makes a really good point on the scalability of the larger MF game.
@Jide Alufa scale quicker with multi-family!
You’re financially protected more with more units/doors.
Of course more income.
Cons of larger multi family are barriers of entry costs to acquire, operate, and experience. However, the more you learn the more you will learn ways to solve the above.
Thanks @Account Closed i want to build at least a $7k/mo passive cash flow. so thinking MFH is the fastest and best way to do that.
@Bjorik Mutize That makes total sense. Do you own MFH units?
7k is an awesome number! I would agree, I think MF is your best bet to scale. Just remember, life's too short to own C class properties!
@Jide Alufa smaller multi-family aiming and learning to scale into larger apartment units!
😂 Hey @Jonathan Child , from all my study, people advocate getting a c class property you can value add, are you saying this isn’t a good idea? What has been your experience
I personally invest in SFRs and prefer those over multi-units. I like the idea of owning a house and having a larger pool of buyers that will value that asset differently in the future. For me, the tradeoff in cash flow has not been different from the multi-units I own. I buy properties that are under value and rehab them. This creates higher cash on cash. I also buy homes cash which allows me to get the lower price of entry.
There are also more houses for sale which gives you more opportunities to buy. The big difference I see is that houses will take much longer to scale. If you are looking to get 100+ units it most likely won't happen with houses. For me, that is not my goal. I want 30 houses paid off and collect that check.
Generally speaking I target MF for buy and hold and I target SF for flips. Hoping someday to have the working capital to flip MF as well and when I come across a cashflow gem I'll hold it long term.
But at the end of the day I'll buy anything of the deal is good enough. I first look to hold long term but if the numbers are not perfect I will flip it for a quick return and reinvest that money into something that can generate a better ROI.
Buy good deals, diversify, and consistantly increase ROI.
@Jide Alufa I Would recommend looking at an investment on a deal by deal basis. If you find a great deal in a single-family house that cash flows you’ll be in good shape, and if you find a great deal on a multi family go for that. A good investment is a good investment When starting out. However, If you really want to scale multifamily is the way to go but of course single family is easier to get involved with and it can start you off in the right direction
@Jide Alufa if you're investing for long term MF is the way to go, yes there are lots to learn @Justin Kane point investing in as a LP will get you the experience while reducing your risk as you'll be with operators who have a track record of performing. As there is nothing wrong with SF, it's easier to scale with MF. There is an old Chinese proverb that says "When is best time to plant a tree? 20 years ago, when is the best time to start? Now!" Happy Investing!
I think it's less of an issue of which is better and more of what are you comfortable with? We have SFR's and I have no desire at all to get an apartment building. They're quite different on a number of levels and some people just gravitate to one or the other. I think SFR's are easier and even if someone wants to go to multi-family, SFR would be a good place to start.
SFR's are pretty easy to buy and sell as there's a broad market. With multi-family, your market if you're selling is limited to other investors. Not bad, just different.