DONT BE STUCK IN SINGLE FAMILY HOMES FOREVER
Jason MalabuteBusiness Member
Accountant · Los Angeles, CA · Member since 2016 · 2k+ posts · 914 votes
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DONT BE STUCK IN SINGLE FAMILY HOMES FOREVER
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Investor · Greenville, SC · Member since 2016 · 5k+ posts · 13k+ votes
6yBoth are profitable strategies...just depends on your goals. I started with singles and small multi's but that was not going to work long-term. It would have taken me an eternity to source 30 SFRs; so, I bought a 30 unit community instead. Also, sourcing and managing 30+ individual properties is the polar opposite of my goal for more control and freedom.
Managing one 30 unit property is exponentially easier than 30 individual properties but it still comes with it's management challenges. Going larger and having on-site management and maintenance and commercial vendors is the most effective solution.
Regarding the vacancy and major expense argument, that one does not hold water. Having 100 SFRs vs 100 units in an apartment community both provide insulation from vacancy and major expenses in one or a handful of doors. It's the benefit of scale in either strategy.
34 Replies
@Joe S.
If you don’t want a passive ownership via a syndication, then you can partner (Joint Venture) with one or more passive investors who provide a majority of the capital. You be the operator while having less of your capital invested
- Rental Property Investor · St. Paul, MN · Member since 2016 · 3k+ posts · 3k+ votes6y
What is the most important part is that you get STARTED! If buying 1-4 unit buildings is going to get you into the corridor, then that is the best approach for you. SF's can provide excellent cash flow, good appreciation and be a stable asset, that teaches you valuable lessons. The most important part of what you said is that you don't stay in too long. Always be uncomfortable and continue to grow.
My approach was buying 1-4 family rentals, while also flipping houses and using those profits to buy more rentals. Then I started buying small apartments and finally buying 100+ unit apartment buildings. This worked for me and where I was at in my life and education level.
One of my mentoring clients is purchasing their first investment property and it is a 100+ unit apartment complex. They got the education and quickly created the mindset to buy a large asset. This approached worked for them and I couldn't be happier for them, but if I told everyone that they had to buy a 100+ unit for their first deal, most wouldn't get started.
- Real Estate Broker · Chicago, IL · Member since 2014 · 2k+ posts · 1k+ votes6y
Originally posted by @Jason Malabute:
Most big time investors tell you to skip SFH and jump straight to multi -units. If you have the stomach to invest at least $100k in your first real estate deal without any knowledge and extensive knowledge then go ahead. You're better than me. Even if I had a trusted mentor, it's difficult for me to trust him. with hundreds of thousands of dollars without me knowing what's going on.
On the other hand , I suggest new investors to first start with SFH. SFH will teach you the basics of real estate. It will teach you the acquisition, due diligence , rehab, marketing, and refinance process. It will teach you how to manage your team and how to respond to tenant requests .
However, the secret is not to be comfortable being content staying in SFH.
I have had so many experiences with SFHs. I've had everything from flooding to burglary. SFH only has one income stream. So when something happens like a water heater leaking or burglary you will pay out of pocket if the rent is not enough to cover the expense.
However, in apartments if a major expense happens in one unit you have 20 other units to cover the expense and put cash flow in your pocket.
Some investors value equity over cash flow. They argue "I love SFH because the equity grows faster than equity of apartments. I think this so silly. I have one question for those thinking like this. Can I buy food with equity before I sell the property? Yes or no?... OK then .
Good topic. I'm not sure I agree with the topic line "Don't Be Stuck in Single Family Homes Forever" We personally don't like single-family homes to hold because of the physiological reason of an asset not producing income when it is vacant. With that said though we know of far too many people who have been wonderfully successful with SFHs and after building a portfolio having one home vacant isn't dramatic. The best strategy I've ever seen is for friends of myself and my partner who are or were in the military. Over a 20+ year career, they purchased properties to live in/around the military base where they were posted, whether domestic or foreign. Very simple homes. When they were moved to new posts they held on to the home and rented it out, usually to another military family. When retiring from the military they had a nice portfolio. Fantastic strategy, well thought out.
- Member since 2018 · 83 posts · 68 votes6y
@Crystal Smith - see my article about military tenants here.
- Flipper/Rehabber · Memphis, TN · Member since 2020 · 758 posts · 285 votes6y
Originally posted by @Jason Malabute:
Most big time investors tell you to skip SFH and jump straight to multi -units. If you have the stomach to invest at least $100k in your first real estate deal without any knowledge and extensive knowledge then go ahead. You're better than me. Even if I had a trusted mentor, it's difficult for me to trust him. with hundreds of thousands of dollars without me knowing what's going on.
On the other hand , I suggest new investors to first start with SFH. SFH will teach you the basics of real estate. It will teach you the acquisition, due diligence , rehab, marketing, and refinance process. It will teach you how to manage your team and how to respond to tenant requests .
However, the secret is not to be comfortable being content staying in SFH.
I have had so many experiences with SFHs. I've had everything from flooding to burglary. SFH only has one income stream. So when something happens like a water heater leaking or burglary you will pay out of pocket if the rent is not enough to cover the expense.
However, in apartments if a major expense happens in one unit you have 20 other units to cover the expense and put cash flow in your pocket.
Some investors value equity over cash flow. They argue "I love SFH because the equity grows faster than equity of apartments. I think this so silly. I have one question for those thinking like this. Can I buy food with equity before I sell the property? Yes or no?... OK then .
Agreed on this one.
- Investor · Singapore · Member since 2013 · 1k+ posts · 3k+ votes6y
Originally posted by @Jason Malabute:
Some investors value equity over cash flow. They argue "I love SFH because the equity grows faster than equity of apartments. I think this so silly. I have one question for those thinking like this. Can I buy food with equity before I sell the property? Yes or no?... OK then .Well, technically yes. You can refi out the equity and spend the money to buy food. The other advantage of SFH over apartments is liquidity. Its usually much easier to sell a SFH than an apartment. Also if you have a portfolio of say SFH you can sell them individually to raise cash if you need. Your apartment is all or nothing. You cant just sell 5 units out of your complex cause you need the cash.
- Contractor · Williamsburg, VA · Member since 2020 · 24 posts · 4 votes6y
@Jai Reddy
Real estate syndication is “crowdfunding for real estate” before crowdfunding for real estate ever existed. In its most simple form, both syndication and crowdfunding involve pooling capital with other individuals for a common purpose or a common goal.
- Real Estate Broker · Chicago, IL · Member since 2014 · 2k+ posts · 1k+ votes6y
Originally posted by @Kyle A. Isaacs:
@Crystal Smith - see my article about military tenants here.
Thanks for the link to your article.
- Member since 2020 · 72 posts · 17 votes6y
In terms of putting a down payment on a SFH vs multi, do both have pretty similar criteria with how much you need to put down or is it frowned upon im multis to do the traditional 20% ballpark down figure?
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