Hey all!
I’m a relatively new investor & I was talking to some buddies and they basically told me to avoid single family like the plague because if one person leaves you’re at 100% vacancy.
What do you guys think?
I’ve also hear grant cardone say this & also say don’t shop for real estate based on your budget.
I have about 30k i’m comfortable investing eith right now.
My area is relatively cheap so I can buy a single family for 45k. 20% down and rent it for $700-$800.
Any suggestions would be great.
I’m a relatively new investor & I was talking to some buddies and they basically told me to avoid single family like the plague because if one person leaves you’re at 100% vacancy.
What do you guys think?
I’ve also hear grant cardone say this & also say don’t shop for real estate based on your budget.
I have about 30k i’m comfortable investing eith right now.
My area is relatively cheap so I can buy a single family for 45k. 20% down and rent it for $700-$800.
Any suggestions would be great.
Keep in mind the target audience for Grant Cardone. Accredited investors with at least $100,000 to invest. I agree with his advice if you fall into that category. I also agree with him in that owning one door is a bad idea.
Grant does not know or understand single family investing. He also doesn’t know or understand flipping, wholesaling, note investing, or even other commercial real estate investing. Keeping that in mind and the fact he is trying to sell his own product, he gives misleading advice to sway people away from the other investments.
I like single family. I think the barriers to entry are lower and it allows people who don’t own their own profitable businesses or have high paying jobs the opportunity to invest in real estate. I think owning a single door is a bad idea though and the only way investing in single family can work well is if you own enough units.
I would go multifamily . A single family the CASHFLOW numbers just aren’t there and if it’s in a rougher neighborhood you really don’t want a single family home . As soon as it goes vacant it gets robbed or squatters / bums move in . when there is a vacancy on a single you pay 100% out of pocket . It the furnace craps out you just lost 2 years profits . It just doesn’t add up for the little gain . I guess if you want to make 1500 bucks profIt in a year then go for it
I have been investing for over 19 years and 99% of what I buy is single family. I love them and buy as many as I want, whenever I want because in most cases, I am simply taking over payments on existing financing.
Once I own the property, I can do with it as I please. Rent it, lease it with the option to purchase, sell it for cash or sell it with financing to an end buyer. The choices are endless. Single-family homes just mean more options for me as far as I am concerned.
Generally Multifamily is the way to go but starting with a SFH is a great idea for a lot of people. Some markets only have SFH and I know many investors who are VERY successful in those markets (near downtown areas typically). They factor the vacancy just like multi unit investors do, theirs is just higher. With the income those properties provide along with the accelerated appreciation they generate (due to greater market factors on SFH) those investors have no need to dabble in multi's.
I think if you had to choose one, multi's act more like businesses so they better cater to investors but I don't think its fair to write off SFH as investment vehicles :)
@Jim K. Thsnks, all of it sounds very sensible. Coild you, please, clarify abiut the “certain point”? Many private equity funds were buying SFH after the bubble burst in 2007. Their bet was on appreciation, though
I actually don’t know who that is. Seen the name here a lot.
Along with some other guy Ramsey, who just tells people to save instead of invest.
Never bother to Google them. Seems like they’re just people who get paid by their cult followers to share common sense (not so common) and their opinion along with it (good or bad)? Really don’t get it.
With the right systems, a good handyman could self-manage and do the upkeep on maybe 20 properly hardened SFR before maintaining them seriously started cutting into his time. But by the time you've paid off ten of them, you've got more than enough in equity to start working on transitioning to less problematic real estate asset classes, much more passive investing instead of buying yourself a job...a well-paying job, it's true, but still a job.
@Jim K.
That’s so true about the job thing . A lot of people startIng out have this Idea that investing In buy and hold rentals wIll be totally passive and smooth . They don’t realize they bought themselves a second job till the calls start coming in lol I like working on the properties but not dealing with the people but it’s all good . I think I would only buy sfh in decent areas I’ve toured way too many in c class and d class that were heavily vandalized to want to go that route myself . Appreciation seems to be the key on sfh and that will mostly be in decent neighborhoods
@JR Rivas I would not be afraid of SFR. There are pros and cons of every asset class. I would weight the pros and cons and determine what best helps you reach your goals and manage risk.
Pros:
-30 year fixed rate mortgage available if <4 units - lowers your risk and helps you predict/manage cash flow when rates are on the rise.
-Lower cost - means lower risk on your first deal when you are getting started and still learning
-Potential lower vacancy rate depending on property because there is higher likelihood of long term tenants that want privacy, etc that only SFR offers.
-Potentially lower monthly expenses - no "shared" or common areas - tenants can maintain the yard, pay their own utilities, etc
-Exit strategies - you can sell to anyone, not just another investor. This can lower risk if you need to sell OR help with forced appreciation if you are doing any rehab.
Cons:
-Less economies of scale - i.e. one roof per tenant vs. an apartment where the roof is shared, no full time maintenance or PM that you could get with very large deals, etc.
-sensitivity to vacancy - as you stated when a tenant leaves, your have 100% vacancy
- sensitivity to comps - valuation based on other houses, not cap rate. Potential for more market fluctuation (could be pro or con)
The best way to start is with an owner occupied multi family. Obviously you have to live there, but it's one of the least expensive ways to get in and it spreads your risk over more doors.
Single family is great too, but something you might want to incorporate after you have gotten started.
Any asset class can be great if you are buying below market value with an opportunity to cash flow. Any asset class can be terrible if you pay too much or have to hold while your expenses are greater than your income.
@JR Rivas You can negate virtually all risks and expenses related to maintenance, vacancy, and eviction (and of course utilities) by doing a rent to own. A properly set up RTO with a properly vetted tenant/buyer is the closest thing to truly passive cash flow I've ever found. Almost without exception with my RTOs I don't hear a word from the tenant/buyer after they move in until they're ready to buy.
@JR Rivas
I started with 3 singles.. knowing that 1 rented unit would cover my expenses..
My approach from day one was not to get stuck with a property where you can potentially have 💯 vacancy. I liked my chances with 1 of 3 to be above water..
Getting used to paying taxes and city violations.. get your feet wet
I was gonna post my 2 cents but @Jim K. nailed it. SFH investing is the easiest way to get in to real estate investing. By the time you get one or two under your belt, small MFH would be the next logical step. Just make sure you have enough cash reserves for when it goes vacant or you need to replace the furnace. Best of luck!
Once again, I think it has to do with your goals and your market. It's not smart to force something just because you want a Multi. At this point I can say in my market MFH are way to expensive to get a good ROI. The problem is their is just not enough of them and everyone wants them. I go with SFH's all day. Better tenants less of a mess and most of the time they only sit vacant for a week or so if that. It probably would be worth noting that I buy in B Area's.
I think a huge part of it comes down to the cliché of location, location, location.
If your area has an active rental marked for single families, by all means go for it. Where I invest, economies of scale make multi families work well (a new roof on a 4-family or a single zone steam boiler replacement for a 4-family costs close to a single family. Also, in my state I can't offload snow removal -- I'm liable for it.
At the price point your talking about, the BRRR method can work very well and quite quickly.
You have to keep your own counsel and not be swayed by what "buddies" have to say, well-meaning or otherwise.
Both have pros and cons. Make a list of the pros and cons of both and then, compare. Based on that, decide which way to go.
To get you started, some of the pros of SFR's: the tenant is paying all utilities and responsible for routine maintenance, like cutting grass and shoveling snow; broader market for your exit - SFR's can be sold to other investors or owner occupants; additional exit strategies, for example, lease option. Your "buddies" have already given you the only con that comes to mind.
The pro of multi-family is multiple rent revenues. One of the cons is you have to pay for the routine maintenance from a service company or by having one of your tenants do it unless you do it yourself...every week.
I rarely just rent my SFR's. I either sell them on a land contract or do a lease option because I get more money upfront, the money I get is non-refundable (unlike a security deposit), the occupant takes better care of the place, and if I get the property back, I get to repeat the process and make more money off the property than I would as a rental. You really can't do that with multi-family unless you condo the units out.
I just got a SFH last week. Will be living in one room and renting out the other two to coworkers.
I’m happy so far and I think it s a great starter property.
I used to love cardone, but he’s so full of it
I’m a relatively new investor & I was talking to some buddies and they basically told me to avoid single family like the plague because if one person leaves you’re at 100% vacancy.
What do you guys think?
I’ve also hear grant cardone say this & also say don’t shop for real estate based on your budget.
I have about 30k i’m comfortable investing eith right now.
My area is relatively cheap so I can buy a single family for 45k. 20% down and rent it for $700-$800.
Any suggestions would be great.
Hey JR,
Will a Fannie Mae lender do a rental property loan on that low purchase price with only 20% down? I've only seen 25% down on stuff like that.
I would definitely double up on units and buy a cheap duplex at around 70k in a reliable, working class area if that makes sense in your market. That type of asset tends to work out really well in Indiana where I'm at.
First and foremost , Karen Rittenhouse'advice is spot-on . Go to your local real estate investor association and speak to people there . Secondly, I can tell you from first-hand experience that investing in single-family rentals is a wonderful wealth builder and cash flow provider the key is to making sure that you have enough money to cover any vacancy lods in between tenants. Additionally, the gain far out weighs the risk if you have screened your tenants well. Best of luck.