Hello! I wish to buy to rent with min rehab. I selected a few markets, but now I wonder what is more lucrative to purchase? Where do I find the stats/analytics to compare if it would be more profitable to buy storage units/qualdruplex/residential, for example. Thank you Team!
Real Estate Broker · Milwaukee, WI · Member since 2015 · 299 posts · 90 votes
1y
Marcus I disagree I've owned them for a long time and they are more cost effective than single families. True owning a SFR you can have the tenant do snow and lawn. But historically in my experience it was never done on time and i would get notices from the city about it. Hallway utilities are around $25 a month and tax deductible meaning net cost around $17.50. I don't' see a need for a property manager (I use rent redi) because you have 4 renters under the same roof. Most 4's have separate furnaces Finally NONE of my rents are $800 a month. mine average around $1200-$1400. Since the average price of a SFR is around $400k you can get a decent 4 for less than 600K. In the past with owning duplexes in Milwaukee, One rent paid for the mortgage and the other paid the property taxes and insurance. I didn't get into investing to break even or lose money...
Hello! I wish to buy to rent with min rehab. I selected a few markets, but now I wonder what is more lucrative to purchase? Where do I find the stats/analytics to compare if it would be more profitable to buy storage units/qualdruplex/residential, for example. Thank you Team!
What is better sushi, pizza or steak? Maybe you can re-phrase the question?
First you need to understand all the costs of ownership for both properties. This includes future maintenance that will be required. I check on real estate taxes, local taxes, insurance cost, etc.
You also want to do your due diligence to verify property conditions, easements, neighborhood, and other details about the properties. Is the property on septic or sewer? Some details can be checked on the assessor's website other details may require calling other agencies, a good local RE agent and talking to neighbors.
Ask yourself how long you expect to hold the property. Is the area appreciating in value, stable or perhaps falling. If you plan to rent what are the area vacancy rates, how much other housing is currently available in the area.
After consider these things it is easier to make a sound decision based on your investment goals.
Hello Marcus and thanks for making me aware that my message is unclear. What I meant to ask was where can I retrieve data/analytics on what is the demand for property types in my area? For example; young professional may trigger higher demand for smaller units. How do I know if tenants in certain area, are X demographics, have X income, and prefer X type of property. Some other areas may attract influx of residents from other states who find triplex on very small lots attractive. where do I find that data? Thanks for your patience guys.
For data you can use the census data to look at trends. Most cities also have a local business organization where you can look at data for companies and job growth in the area. Politicians love to use this data. In Reno, NV we have an economic development authority that actively recruits companies from CA (Tesla) and tracks job and demographic data. Also check local news papers TV for large companies moving to the area. Some people use the U-Haul data. Talk to local property managers, investment agents, and others involved in in the real estate in the area. Check commercial real estate sties that have local apartment rental and inventory data. There is not one site where you can look up all the data. There will be assumptions that need to be made on the best investment in a particular market.
Real Estate Agent · Crownsville, MD · Member since 2018 · 102 posts · 36 votes
1y
@Gisele Sood this is where you really need to start looking for your team in the area you want to invest. You can do a lot of this research yourself, or you can leverage the expertise of others that already know it. Talk to real estate agents, property managers, contractors, lenders, title agents, etc. to find out what is going one.
Also, you do need to think about what your goal is. If you are looking for cash flow, storage might be great in one area, but one county over they get 0 cash flow. I don't want you to get stuck analyzing everything, so narrow down some ideas of what you want to do, then go find where that works best.
Hello Marcus and thanks for making me aware that my message is unclear. What I meant to ask was where can I retrieve data/analytics on what is the demand for property types in my area? For example; young professional may trigger higher demand for smaller units. How do I know if tenants in certain area, are X demographics, have X income, and prefer X type of property. Some other areas may attract influx of residents from other states who find triplex on very small lots attractive. where do I find that data? Thanks for your patience guys.
Ah, okay! I was wrestling with a similar question when I bought my first rental property. My main concern was if I there would be any tenants looking for a place in that particular neighborhood. I also thought of renters as people who are basically poor and can't buy a home. 15 years later I think that's funny.
You can look up demographics, but I don't think it will give you the clarity you are looking for. Also, there are more things to consider than max ROI.
Most people start by picking a particular type/style of property that they like for some reason (usually a gut decision). Instead, start by thinking about who you want to rent to. Who is your target audience? This will determine the type of experience you will have with your investment.
A storage unit is very different to manage than low income housing or a single family in the suburbs. I chose the latter, because I used to travel a lot of for work and wanted a hands-off investment. We target young families with double income and kids that want to be in a better school district, which automatically puts us into suburbs outside of Milwaukee and MPS.
We buy and renovate properties with that target audience in mind. For example, we finish the basements with indoor/outdoor carpet (instead of LVP, which makes it feel a lot more homey), because we know parents go nuts in the winter if they can't send the kids downstairs to pay - or have a space for the guys to watch the game on Sunday. While we don't get significantly higher rents, we have extremely low turnover rates. Turnover and vacancy is often the single biggest expense.
The downside is that it is more expensive to buy SFs and cash flow is not as good.
Real Estate Broker · Milwaukee, WI · Member since 2015 · 299 posts · 90 votes
1y
A Quad is still better due to the fact that you have 4 leases and 4 rents coming in and still can get a conventional loan. If one moves out you still have 3 coming in and positive cashflow. Also maintenance is less due to you only have one lawn, driveway and roof to deal with. If you have a single family it's like owning one stock vs a mutual fund to spread out the risk.
Investor · Milwaukee - Mequon, WI · Member since 2010 · 5k+ posts · 7k+ votes
1y
Greg, quads are great and some people love them, but a better comparison would be 4 single-family homes vs 1 fourplex. Or if you want to bring it down to about the same value, let's say 2 SF to 1 FP. Across a SF portfolio you have the same effect. There are 100 different strategies and I don't think one is the best, each one comes with pros and cons.
My issue with fourplxes is that based on tenant demographic rent per unit is quite low. The single roof is a plus for the FP. But you still have to provide (and maintain) a kitchen, a bathroom, HVAC (well maybe just heat), a water heater. So you have a rent-to-maintenance cost ratio that is not very good. I'd rather replace a $1200 water heater for a $2000 rent than $800 rent. The cost of the water heater is always the same.
With four plex you have to pay utilities for the hallway and common areas, also maintain and clean the common areas, because the tenants won''t. And depending on how the unit is built, the owner probably pays for water and sewer, maybe even for heat.
You also have a 4x higher PM cost, and probably more headaches due to the higher number of tenants. We want to highest amount of revenue (rents and property value - for appreciation and de-leveraging), with the least amount of tenants.
Also with SF lawn and snow are done by the tenant. With a duplex which are super common in Milwaukee you are in that in-between space where most owners try to make the tenants do it, but that can be tricky.
Real Estate Broker · Milwaukee, WI · Member since 2015 · 299 posts · 90 votes
1y
Marcus I disagree I've owned them for a long time and they are more cost effective than single families. True owning a SFR you can have the tenant do snow and lawn. But historically in my experience it was never done on time and i would get notices from the city about it. Hallway utilities are around $25 a month and tax deductible meaning net cost around $17.50. I don't' see a need for a property manager (I use rent redi) because you have 4 renters under the same roof. Most 4's have separate furnaces Finally NONE of my rents are $800 a month. mine average around $1200-$1400. Since the average price of a SFR is around $400k you can get a decent 4 for less than 600K. In the past with owning duplexes in Milwaukee, One rent paid for the mortgage and the other paid the property taxes and insurance. I didn't get into investing to break even or lose money...
Hello Marcus. I like the fact that you combine your target avatar to your investment target. Even though you feel you don't reach the full cash flow potential, you gain on making the lives of those families more comfortable. That on his own is a great achievement.
Hello Gregory! wow: thanks for enlighten me. I honestly did not even think about that. That is true, I disregarded the advantages of the quad having lower operational costs. Also, I think, general maintenance is centralized so 1 handyman could care for all units, which makes it easier to manage. Thank you.
Hello Gregory! wow: thanks for enlighten me. I honestly did not even think about that. That is true, I disregarded the advantages of the quad having lower operational costs. Also, I think, general maintenance is centralized so 1 handyman could care for all units, which makes it easier to manage. Thank you.