I’M STUCK!! Single Family or Multi Family??

40 Replies

I don’t know where to start! For the past few months i have been educating myself on buy and hold properties. There is so much controversy on whether buying single family rentals is better than multi family, vice versa.

I’ve heard horror stories from both and also just as many success stories. Currently i have no rentals, but i have some fix and flips under my belt. I just want to try my best to start off on the right foot. Most people are telling me to start with single family just to get my feet wet, but these are also people with little to no experience as well, so that’s why i am here.

Should i start with single family since it’ll be my first rental? Or is it the same work with just a bigger dollar amount for multi family? If i do get multi family, i will be looking into a Property Manager after so many doors are in my portfolio. I’m looking forward to your opinion, thanks!

@Kirk Frickey there is no controversy or comparison. Multifamily is hands down the best option if you want to scale and are looking for serious cash flow. Single family is a long term appreciation play, labor intensive and offers little cash flow. There are exceptions to the rule of course but your not going to build serious wealth anytime soon with single family. You can generate serious wealth and cash flow fast with multifamily if you know what your doing.

"if you know what you're doing" is the key. And that's why I recommend someone start with a SFR. It gives an opportunity to learn landlording skills. It's easy to get into and out of and is a "baby step" before diving head first into multi family.

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@Greg Dickerson In my situation of just starting off with rentals, would you recommend starting with smaller units (duplex, triplex) or would it be just as easy to get into a building with more doors? I will not be managing myself, but I’m also willing to get out of my comfort zone in order to get the passive income associated with bigger multi family units.

@John Teachout That is what I’ve been told before. I’m not looking for any get rich quick situation, but i would not mind the extra income from multi family. I have a single family property right now that I’m flipping, and i was considering keeping it instead just to test the water.

i vote for the multi unit.  I would be analyzing all deals between 2-4 units. and let the numbers dictate wether you decide on a duplex triplex or4 unit

Originally posted by @Kirk Frickey:

@John Teachout That is what I’ve been told before. I’m not looking for any get rich quick situation, but i would not mind the extra income from multi family. I have a single family property right now that I’m flipping, and i was considering keeping it instead just to test the water.

Multifamily is definitely not get rich quick. It requires education, research and a thorough understanding of the markets your interested in and all the metrics that go into the underwriting process. If you want to start smaller you should be looking at 20 unit buildings and up if you feel like you understand the space. If not keep flipping and build your cash while you educate yourself and look at and analyze the larger properties so when you find one you will be able to pull it off. Once you get the first one done it's easy to scale from there to whatever level you feel comfortable with.

@Kirk Frickey my suggestion is just START! You seem to be going through a perfect example of analysis paralysis. Your first deal will more than like NOT be a grand slam. It is more important that you simply complete the first deal. Go small and complete a SFR. Get your jitters out. Then scale as fast as you are comfortable (or uncomfortable) doing. Take action brother. You got this.

Multi family is my vote. I don't touch single family homes as the numbers do not work for me. I  Just bought a nine unit building for 500k, rents are 109k  I put 125k down financed 375k after all expanses it gives off 42k in cash flow

I totally understand your indecision Kirk. I am struggling with the same decision. I am very new to the REI world (bout a month) and am determined not to let analysis paralysis take hold but I too have heard good and bad about both multi family and single family. One concern I have is although I plan to buy and hold, if I need an exit strategy isn't it going to be harder to sell multi?

I'm a big fan of doing more with less. I would need a multi unit with 115 doors at $200 a door to do what 8 of my single family's cash flow.That's another 107 more nut jobs to deal with.  No thanks!

@Kirk Frickey. If u want cash flow, consider MF. If u want long term wealth, consider SFH's in 4-5 star neighborhoods w/ BRRRR method.

Define your goals first if u haven’t already.

-Justin

@Kirk Frickey if you feel comfortable with 4 units start with that, even better off you can house hack it...!!

Have you thought about coaching?  joining local meet ups?

i would go Small MFR instead of SFR, the goal is passive income, why not by 4 doors in one deal then buying and looking for 4 houses ????

@Kirk Frickey

Single family home = 1 chance to get income

Multifamily Home = multiple chances to get income.

There isn’t a comparison - if you’re doing B&H then you have to go multifamily.

@Kirk Frickey. Everyone is so gung-ho on multifamily. You’re telling me if someone comes along and says here you can buy single family for 70 percent of their value you’d say no?

Take what the market gives you.

Originally posted by @Javier D.:

@Clifford Paul

Hi Cliff,

I dont understand this math. How do 8 sfh give you 23k a month net?

I had the same thought. $2875/door?? 

Talk to a good property manager in your area.  She may have some off-market portfolios of SFHs that would be a good start.  If you have the capital for purchase and repairs, multis can be very fruitful.  However, I manage a quad that recently had 2 air units in need of quite a bit of repair within one month.  Between repairs, landscape, and trash removal, the owner ended up contributing this month instead of taking a disbursement.  Problems can obviously arise in SFHs, but, say an HVAC starts leaking condensation, one property will be effected instead of 2.

Hands down @Kirk Frickey there's no competition. Multifamily trumps single family all day everyday. The economies of scale is untouchable. If you decide to go to multifamily think 5 units and up. Anything more than 5 units will be considered commercial. This works heavily in your favor because the property has the income value approach, rather than the comparable sales approach. Not to mention all of the tax benefits that work in your favor as a commercial real estate investor.

@Javier D. All in on the flip I'm interested in keeping, I'll be at 85k. ARV is estimated with comps at 135k. Rent in that area for this sized house (1250sqft) is $1100-1200 a month, give or take.

@Kirk Frickey

I’m new to the real estate investment game also. I live across the lake from you and would love to meet up and exchange knowledge and talk about different ideas with you