Single Family or Multifamily...?

[Jake Andronico]

Curious to hear people weigh in on this. 

I've laid out some pros and cons below that we thought of off the cuff: 

Single Family: 

Pros:

- Many potential targets (more available)

- More likely to find a deal (but varies from market to market)

- Location (more SF homes in more locations compared to MF)

- Condition (easier to find new(er) inventory)

- Exit Strategies (can resell to an investor AND/OR an owner occupier)

- Simpler Financing (residential compared to commercial lending)

- Self Management Option (easier to manage one home as opposed to many tenants)

- House hacking (many forms of this in a SF home)

- Lower barrier to entry/lower buy-in costs (cheaper properties) 

- House Swap (primary residence financing with rental income after moving out)

- Tax benefits (potential to 1031 exchange or Section 121 exemption for primary residence) (always check w/ your CPA)

Cons:

- Generally lower returns (owner occupants also drive pricing) 

- Single tenant income (less diversified income) 

- Potential for more upkeep (yard work, trees, etc.)

Multifamily:

Pros: 

- Efficient management (more tenants in one location) 

- Higher cash flow (generally a greater return than SF) 

- Utilities (more utility efficiency) 

- Tax benefits (1031 exchange, cost seg, 39 year depreciation on 5+ units) (always check w/ your CPA) 

- Can force appreciation (through decreasing expenses/increasing rents) 

- Very scalable (can keep 1031ing and "upgrading" in unit count with the next property in one place) 

- Income diversification (many streams of income on one parcel in one place) 

- Larger targets can yield higher returns (as unit count grows, generally cash flow does as well)

Cons:

- More complex (typically significant nuance)

- Fewer opportunities to buy (fewer targets available) 

- Older inventory (generally on smaller MF)