What’s your maximum number for single family homes?

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What’s your maximum number for single family homes?

Aaron Arnold
Rental Property Investor · St Joseph, MO · Member since 2018 · 38 posts · 20 votes

I realize this is a totally subjective question but I’m going to ask it anyways. What’s the magic number for single family homes? How many is too many? How many for maximum efficiency? What’s the most you could self manage?

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Account Closed
Specialist · Paradise Valley, AZ · Member since 2018 · 3k+ posts · 2k+ votes
7y
Originally posted by @Aaron Arnold:

I realize this is a totally subjective question but I’m going to ask it anyways. What’s the magic number for single family homes? How many is too many? How many for maximum efficiency? What’s the most you could self manage?

 Nah, you don't want to self-manage. Do it the way I do. 

I find and buy a property "off market" using Subject To then I sell to a Tenant Buyer.

When I sell to a Tenant Buyer, since I am offering Terms that they otherwise can't get, I sell the property "As Is" for a "built in equity" of an additional $10,000 to $25,000 depending on the house. (I bump up the sales price what the value WILL be) then I get that (it is called "the back end" when they refinance or sell. The buyers are usually successful businessmen that can't get bank financing because they aren't W2. They have good income, money in the bank and want to buy a home.

I get a "down payment" up front of $20,000 to usually $25,000 then I get the monthly cash flow and then I get a "back end" equity payoff.

When I "Buy & Hold" and only rent it out, I have to take care of a tenant, fix the roof, replace the AC etc. Worry about them trashing the house, worry about vacancies. When I eventually have to replace the roof or AC it wipes out the profit from that house. The most I get up front is one month's rent. I continually have to find new sources of money for the next one, usually a bank. Bank's Stop Lending at 10 properties.

However, when I sell it to a tenant buyer, there are no real estate agent fees, I get $25,000 immediate cash, I don't have to worry about roofs, ACs, and tenants and I get the same cash flow. When the roof or AC goes, the Tenant Buyer owns the house, so he takes care of those. If the market tanks, my built in equity still exists. Each time I get a Tenant Buyer's down payment, that gives me Money to Buy the Next one and the Next one and the Next.

Pretty cool, eh?

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  • Account Closed
    Specialist · Paradise Valley, AZ · Member since 2018 · 3k+ posts · 2k+ votes
    7y
    Originally posted by @Aaron Arnold:

    I realize this is a totally subjective question but I’m going to ask it anyways. What’s the magic number for single family homes? How many is too many? How many for maximum efficiency? What’s the most you could self manage?

     Nah, you don't want to self-manage. Do it the way I do. 

    I find and buy a property "off market" using Subject To then I sell to a Tenant Buyer.

    When I sell to a Tenant Buyer, since I am offering Terms that they otherwise can't get, I sell the property "As Is" for a "built in equity" of an additional $10,000 to $25,000 depending on the house. (I bump up the sales price what the value WILL be) then I get that (it is called "the back end" when they refinance or sell. The buyers are usually successful businessmen that can't get bank financing because they aren't W2. They have good income, money in the bank and want to buy a home.

    I get a "down payment" up front of $20,000 to usually $25,000 then I get the monthly cash flow and then I get a "back end" equity payoff.

    When I "Buy & Hold" and only rent it out, I have to take care of a tenant, fix the roof, replace the AC etc. Worry about them trashing the house, worry about vacancies. When I eventually have to replace the roof or AC it wipes out the profit from that house. The most I get up front is one month's rent. I continually have to find new sources of money for the next one, usually a bank. Bank's Stop Lending at 10 properties.

    However, when I sell it to a tenant buyer, there are no real estate agent fees, I get $25,000 immediate cash, I don't have to worry about roofs, ACs, and tenants and I get the same cash flow. When the roof or AC goes, the Tenant Buyer owns the house, so he takes care of those. If the market tanks, my built in equity still exists. Each time I get a Tenant Buyer's down payment, that gives me Money to Buy the Next one and the Next one and the Next.

    Pretty cool, eh?

    35Reply
  • Aaron Arnold
    OP
    Rental Property Investor · St Joseph, MO · Member since 2018 · 38 posts · 20 votes
    7y

    @Mike M. Thanks for sharing. Always cool to see what others are doing.

    1Reply
  • Thomas S.
    Member since 2016 · 13k+ posts · 12k+ votes
    7y

    Subjective is correct. For me 1 SFH is 1 too many. They are not cost effective as rentals due to the one tenant one roof scenario. The rarley cash flow adiquitly, are too high risk due to 100% vacancy senerio, tend to attract more professional tennats and are a risky appreciation play. Since prices are driven by home buyers they are more expensive per door.

    Maintiance costs are also higher per tenant. Too much work and responsibility for a small landlord and restrict ability to scale up. 

    7Reply
  • Aaron Arnold
    OP
    Rental Property Investor · St Joseph, MO · Member since 2018 · 38 posts · 20 votes
    7y

    @Thomas S. Thanks for the response. I had a feeling I’d catch a lot of single family “hate” on this post. Hopefully some single family enthusiasts will jump on to share their thoughts as well.

    0Reply
  • Kenneth GarrettPro Member
    Investor · Florida Panhandle/Illinois · Member since 2016 · 4k+ posts · 3k+ votes
    7y

    @Aaron Arnold

    I think you can do well in sfh.  Cash flow is higher, more stable tenants, higher rents and tenants take care of property better for the most part.  I hear the argument compared to multifamily; one roof, one furnace, if one tenant moves out vacancy rate is 100%.  

    If you have 20 sfh then one tenant moves out isn't it the same as a 20 unit building with a vacancy = 5%. I own both multifamily and single family. My cash flow is much higher on the sfh then the multi. The exit strategy of a sfh is much easier then multi. I can sell much quicker, but it is dependent on the market versus (comps) versus NOI on multi.

    Warren Buffet and his group Invitation Homes owns 82,000 rental houses.  It works for him.  Check out there website Invitationhomes.com.  They were very selective in markets and bought at the bottom of the market.

    You can make money in many different areas of real estate.  Pick your own strategy that works for you.

    Good Luck.

    28Reply
  • Aaron Arnold
    OP
    Rental Property Investor · St Joseph, MO · Member since 2018 · 38 posts · 20 votes
    7y

    @Kenneth Garrett awesome response. Thanks for sharing. I was unaware that Buffett owned so many - very cool. I guess I now have a “magic number” that ranges from 1 is too many to 80,000!!!

    4Reply
  • Kenneth GarrettPro Member
    Investor · Florida Panhandle/Illinois · Member since 2016 · 4k+ posts · 3k+ votes
    7y

    @Aaron Arnold

    If only we had Warrens money and his business acumen.  I still believe you need to pick your own strategy and if it works for you that is all that matters.  There are many opinions here on BP but at the end of the day it is your business.

    2Reply
  • Aaron Arnold
    OP
    Rental Property Investor · St Joseph, MO · Member since 2018 · 38 posts · 20 votes
    7y

    @Kenneth Garrett I like single family and I’m in the process of building my portfolio now. I view single family as my foundation. I think it’s safe and reliable (at least in my Midwest market). I intend to pivot to multifamily at some point but for now I’m really enjoying the single family game. I use some technology that helps manage and I’m always working on new systems to improve my processes. I also think there’s a point where you can just have too many houses but I’m not sure where that’s at yet.

    2Reply
  • Kenneth GarrettPro Member
    Investor · Florida Panhandle/Illinois · Member since 2016 · 4k+ posts · 3k+ votes
    7y

    @Aaron Arnold

    Completely agree.  What hurt the sfh investors during the down turn was over leveraging.    Lending was easy.  Let’s learn from history.  Don’t over leverage and a reduced rent in certain circumstances is better than none.  

    Today the rental market is strong and expects to continue unless the market makes a very distinct change.  The onset of the millennials within the housing market has created a shift.  They either prefer to rent after watching there parents struggle to hang on to there house or watch them lose it or prices to buy are just to expensive.

    Buy right and in good markets.

    1Reply
  • Account Closed
    Investor · Leander, TX · Member since 2016 · 299 posts · 402 votes
    7y

    My goal is 10 SFH, as I'm just looking to supplement a $3,000 a month pension (inflation will slowly drain its buying power, so turning to real estate to combat that effect) that I'll start drawing from in 2023 at the age of 53.

    I currently own 4 rental properties and looking for #5. (Planning on buying 1 a year until 2023)

    Right now...

    Collect $4,580 a month in rent.

    Expenses are $2,298.01 in total mortgage/tax/insurance and $409.15 in total PM fees

    Net $1,872.08

    Of course other expenses come and go (gutters need cleaned out, lease fee on a new tenant, annual pest control, etc.) so that net is never a fixed income, but very variable.

    Right now I don't touch any of that money, as it goes into a business account to be saved for the next one.

    My primary residence's mortgage is also due to be paid off in 2023 as well freeing up even more loot. 

    So, between $4K to $5K a month from the rentals, $3K on the pension, plus $2.5 from doing something else part time. 

    I figure maybe between $8K to $10K a month when all is said and done.

    My PM teams have really been a blessing as they vet tenants with great benchmarks to find the best, as well as property inspections, and keeping me informed.

    I just got an e-mail the other day from my PM in Alabama telling me that they went to our property for its inspection and found it in great shape and commented that this tenant takes really special care of the house and the tenant told the PM while he was there that they would love to stay there for many more years (they will be resigning for their 4th straight lease.) 

    Now that is music to a landlord's ear, a tenant who takes special care of your property and wants to stay for a long time. :)

    21Reply
  • Theresa HarrisPro Member
    Member since 2019 · 15k+ posts · 11k+ votes
    7y

    I think it also depends on the condition of the homes, how much they cost and the rental income.  

    If I keep 3 of the ones that I currently have and pay them off, I can use that income to supplement my pension when I retire.

    0Reply
  • Justin B.
    Investor · Gaithersburg, MD · Member since 2013 · 660 posts · 441 votes
    7y

    100% a personal decision :). For me, it's infinity. I've invested in both SFR's and MFR's (even a few 10+ units). My SFR's do a lot better than the MFR's I have. Of course, a ton of variables come into play here. Mainly where you invest. Where I invest, MFR's are fewer and further between so the cash flow on them isn't very attractive. For where I invest, SFR's are the play. We're actually moving away from MFR's and getting back to SFR's as it's better cash flow and value for our money. That's a really high level statement of course and there are a lot of factors to consider, but for me, SFR's is where I'm staying for the time being.

    Also, 2-4 units fall into that "SFR" category for me. I know that's technically an MFR, but to clarify, we're staying with 1-4 unit properties and staying away from the bigger MFR's. I do have 1 5-unit that does pretty well, so the # is slightly flexible, but the 10+ apartment type units is what we're staying away from where we invest.

    4Reply
  • Aaron Arnold
    OP
    Rental Property Investor · St Joseph, MO · Member since 2018 · 38 posts · 20 votes
    7y

    @Justin B. Yes!!! I love it - infinity! I have a friend that when asked how many he wants he just says “more, many more.”

    0Reply
  • Daniel Townsend
    Flipper/Rehabber · Cincinnati, OH · Member since 2019 · 75 posts · 53 votes
    7y

    @Aaron Arnold

    I think the first number of rental homes works like multi family. Have enough to cash flow your monthly needs. Once you find that magic number where you don’t have to work then you can start buying investments for comfort.

    1Reply
  • Frank Wong
    Real Estate Broker · Bay Area · Member since 2018 · 1k+ posts · 3k+ votes
    7y

    @Kenneth Garrett

    I am with Kenneth on this. If you had 10 houses its just like owning a 10unit building. The risk is spread out. I understand it is much harder to get to 10 houses vs a 10 unit building because of the cost. 

    I own both multis and SFRs.  I much prefer SFRs and that is the only thing I buy now.  Look at how many hedge funds have purchase SFRs in the last 8yrs.  Follow the money they are not wrong. 

    Now if you can only buy 1 and your leveraged to the max its much harder and tighter on the numbers to make work.  This is always the case in the beginning but once you scale into multiple units it gets easier. 

    There is no right or wrong here. Pick what you like and what makes the most sense to you and buy that.  I have an idea in my head of what I want but that number always changes and it will continue to.  Life changes and goals with it. 

    12Reply
  • Kenneth GarrettPro Member
    Investor · Florida Panhandle/Illinois · Member since 2016 · 4k+ posts · 3k+ votes
    7y

    @Frank Wong

    Good points.  There is no right or wrong.  Just make sure your numbers work for you.  Take the advice here and develop your own strategy.

    0Reply
  • Mark Fries
    Contractor · Jacksonville, FL · Member since 2017 · 1k+ posts · 2k+ votes
    7y

    @Frank Wong

    100% correct...look at what the funds are buying...single family...they are even picking up volume here in Jacksonville...just gobbling them up...

    1Reply
  • Storm S.
    Real Estate Agent · Santa Barbara, CA · Member since 2016 · 518 posts · 283 votes
    7y

    @Mike M. Are you buying theses houses cash and then doing owner financing on them or are you getting a loan on them and the selling them on a lease option. If you doing the latter I wonder how well this method will continue to work in a rising interest rate environment as this technically violates the due on sale clause.

    1Reply
  • Junior Soares
    Contractor · San Jose, CA · Member since 2018 · 262 posts · 407 votes
    7y
    @Aaron Arnold I dont think there is such thing as too many! It's all dependent on the amount of risk you want to take. I own both SFR and MFH and while both have their pros and cons I feel its important to invest in both and become knowledgable in both areas. I haven't worked my way up to a larger then 4 unit yet as I'm still taking advantage of being able to do conventional financing for 30 years on 4 plexes. Working on getting 1 more 4plex this year and the rest will be SFR until I'm ready to make the jump to commercial lending. Whatever your number, just make sure to play the game smartly and keep 3-6 months expenses (I prefer 6-12 months) for each individual home so that you can sleep well at night in the event that something happens.
    3Reply
  • Josh Dane
    Rental Property Investor · Chicago, IL · Member since 2013 · 100 posts · 85 votes
    7y

    @Aaron Arnold no SFH hate from me.. in my areas where most properties are rentals, SFH are actually cheaper on a per door basis as investors prefer multi family. SFH also help me a ton with retention of tenants and attracting tenants for shorter vacancies. Most tenants would prefer not to share walls and have a yard.. 🤙🏻

    2Reply
  • Cole Jensen
    Rental Property Investor · Bentonville, AR · Member since 2018 · 5 posts · 1 vote
    7y

    @Aaron Arnold in the middle of building out my portfolio and the benchmark I've always gone back to is either >5% cap rate or >$100 in profit/month/door. For the 3 deals I've got under my belt, I've hit those benchmarks through Single Family. The area over here is appreciating quickly with money funneling in left and right. True 'deals' are hard to find, so starting to network.

    In regards to the amount of homes/loans, banks do stop lending around 10, but if you have similar properties they can refinanced/consolidated. Also consider putting some homes in your name (and if applicable) some in a wife/partners name. 10 + 10 = 20! Just doubled your leverage! Best of luck out there!

    0Reply
  • Melissa Nash
    Rental Property Investor · Orange County, CA · Member since 2016 · 740 posts · 529 votes
    7y

    @Aaron Arnold I am on the "diversify" team. SFR is awesome, as people have said- easy to acquire, easy exit strategy. Buy smart and buy more. The more you buy, the more you are leveling the risk. If you find a MF and can add it- then do it. Mix it up and just keep adding. For a 30yr fixed lenders require 25% down, 20% for sf. I usually find that single-family properties do much better than most small MF after all expense bc of turnover costs. Tenants tend to stay longer in houses vs MF = less turnover costs.

    I use a hybrid brrr to buy SF, it’s a super easy concept bringing in hard money lenders and local teams sourcing and rehab for me. Haven’t done it with MF yet..... because sf has been really easy. But I plan to mix it up and add MF to diversify.

    1Reply
  • Al Pat
    Rental Property Investor · Atlanta, GA · Member since 2016 · 325 posts · 253 votes
    7y

    @Aaron Arnold I started with SFH and still maintain them. I bought Duplex last year and now looking to get larger Multi-family. With that said, I look for opportunities. My SFH has served me well. Finding multifamily has it challenges, both has its pros and cons. As others mentioned, appreciation is based on Comps for SFH, if tenant leaves then you have 100% vacancy etc. It is easy to get loan for SFH, fixed rate 15 or 30 years with 20% down payment. Multi family larger than 10 units, needs 25% down payment, no fixed rate loans for 15 or 30 years. Rents are typically half then SFH (typical SHF is 3 br/ 2 Ba, where as apartments are 2 br/ 2 ba. I like both because, I look for opportunities and cash flow. Define you strategy and stick with it.

    0Reply
  • Jordan MoorheadBusiness Member
    Real Estate Agent · Austin, TX · Member since 2015 · 5k+ posts · 3k+ votes
    7y

    @Aaron Arnold I know people that self manage 50. I only manage 2 of my 20 units and have no SFH.

    [email protected]512-888-9122
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    0Reply
  • Aaron Arnold
    OP
    Rental Property Investor · St Joseph, MO · Member since 2018 · 38 posts · 20 votes
    7y

    @Jordan Moorhead for some reason it seems a lot of self managers say 50 is their cap.

    0Reply
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