What’s your maximum number for single family homes?
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?
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?
A nice fourplex is just that, nice. We have just finished a BRRR and are most happy and rented out as of tomorrow. Whole job completed in one month. Couldn't be happier. BTW it is a 10 CAP.
@Cory S. Would you mind sharing who’s your pm in Alabama?
It really depends on the area you're in. For the nice areas in Seattle, there usually aren't that much MFH. I choose SFH because of availability, the tenants also tend to be much higher quality. CAP rate these days is pretty dismal, but appreciation has been great.
All my SFHs are pretty close to each other, I don't see a scale limit, but I want to limit to 10 or less because I want to spend my time on other things in life as well.
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?
I'm not sure if there is a magic number but I own 85+ outright and bought another one last Friday. I have a maintenance man who makes a few service calls each week and we self manage. It's like having a part-time job that pays high six figures annually. My plan is to shoot for a 100.
Nothing against multi-family, I have 25 or so doors, but I find a better class of tenants lease the SFR's. Also common maintenance can be an issue in Multis as well as neighbor to neighbor complaints/issues. Not so much in SFR's.
I was originally leaning toward multi for my first property but was talked out of it by an older investor who's been in the game a long time.
His point was SFH at a specific rent will attract a different socioeconomic group vs cheaper MF. Yes, one roof, one door but less turnover costs (vacancy, advertising, turn over rehab, tenant screening), someone taking better care of your property, appreciation vs multi, and more ease of selling when the time comes.
It really changed my mind because I dont have a ton of spare time to manage all of those other headaches (I know I'll still have some).
In the long run, I wouldn't mind a 1-4 plex in my mix though just for diversifying.
@Cory S. We have very similar goals and timelines. My wife and I have started our “10-home plan” to help augment military retirement that should kick in between 2023-2025.
@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.
I buy all of my properties Subject To or Wrap. It always violates the Due on Sale clause. So what? ;-) I don't use new bank financing at all. Never have. Doubt I ever will.
Banks just want to get paid and be paid on time. I've been doing these since the mid 1990's when I was a loan officer, (So, I learned what you can and what you can't do) and I had only one Due on Sale called in 2006. I took them to court and won.
It says the bank "MAY" call the loan due, it doesn't say it will or that it has to.
I sell these as Turnkey to investors and NONE of those have been called either.
It works very, very well when you do it ethically, legally, with a Title Report and in Escrow. Some of my early properties are at 8% because that was the going rate (like I said, I've been at this a long time) and I can cash flow a property until rates hit 9% or 10% and that isn't going to be anytime soon.
Right now the properties I Turnkey are around 4% and cash flow between $600 and $900 a month. Due on Sale or no Due on Sale, this is the way to retire in two years if a fellow puts his mind to it. For me, I love the challenge of finding great deals "off market". It's kind of like the prospector and mule, "ther's gold in them ther' hills".
@Gary L Wallman wow! Thanks for sharing. 100 is an awesome goal and you’re well on the way. Any technology or systems that you’re using to make things easier for yourself??
I can speak to this from more than a personal stand point. I managed quite a few properties for other people. I found there are different groups of people that can handle different levels of management and systems themselves before it is too much. There is usually a 1-5 owner, 10-20 owner, 20-35 owner, 50-100 owner and then 100+. Usually the 100+ have their own systems that are pretty efficient for the most part.
@Ian Walsh I’m hoping some of the 100+ type managers will share some of those systems.
I won't disclose exactly how many SFH's I have, but is it okay to say "more than I have fingers and toes?"
As others have said, it depends on you, your strategy, etc.
I find SFH's to be easy to acquire and less tenant drama to manage. No one complains about "that guy from Apartment A who parties until 1 AM" or "the girl from unit 45 has a boyfriend who keeps parking in my spot." Also, no dumpsters to have to police. I've seen multis with old couches and piles of trash all over their dumpster area.
Tenants in SFHs mow their own lawns (usually) and have their own space to roam. They're responsible for their own bug treatments, which many municipalities make the LL responsible for multi-units because no one can tell who brought them in.
Tampons clogging the main drain line in an apartment complex? Who flushed them? Who knows? Who pays? The LL.
SFH have their own set of challenges, but I think by buying smart you can over come most of them.
Easier to enter, easier to exit. Don't need someone with $5-$10 million to buy out your entire portfolio of SFH's. Just sell them off one at a time. Maybe it takes longer, but you also tend to get a higher per unit price in my town at least.
Vacancy? Yeah, as others have said if you own 10 SFHs and one goes vacant, how is that any different than if you own a 10-unit multi and one goes vacant?
Roofs? Those do cost more per unit... BUT, you also don't have to replace a 10,000 sq ft room all at once...you can stagger your replacement schedule, and if you stay with the same roofer you can negotiate a bulk discount. Cost is $X for first three roofs, cost is $X - 15% for the next three as long as we do them within 2 years, etc. Leverage your quantity of business regardless of what you own.
Diversification. You can own 5 SFHs here and 10 there and 15 over yonder. If one area declines, the other areas may rise. An apartment is ONE block of units. If the area goes down, the whole unit suffers.
Are there advantages to owning Multis? No doubt! Scalability is a big one. Values based off caps rates vs. comp sales. "Forced appreciation." Easier to keep an eye on when everything is in one place. Many others.
The neat thing about REI is there are at least 5 dozen ways to make money. Go find the ones that suit your temperament and abilities best and conquer!
@Gary L Wallman wow! Thanks for sharing. 100 is an awesome goal and you’re well on the way. Any technology or systems that you’re using to make things easier for yourself??
Aaron,
We use an accounting system similar to Quickbooks. We started using Buildium this year but it may be more complex and feature filled then we really need. It's also a bit pricey at 2k per year.
@Ian Walsh I’m hoping some of the 100+ type managers will share some of those systems.
Single family rentals are fine, but they do have more expenses. Not only maintenance, but also turnover costs. You can make some of that up by getting better tenants and longer stays. I have lots of single family rentals, but I acquired them opportunistically during the downturn. That opportunity no longer exists. For scalability and for economies of scale - apartment buildings are better.
My maximum number of SFRs is "just one more."
:-D
We currently have 12. We don't really need any more, but I'm sure we'll buy another when a good deal comes up.
We are at a very good point in our investing. We don't need to grow, but can afford to add to our portfolio if we want to. We are content with our income, and that's a very comfortable place to be.
@Aaron Arnold I self manage 25 Cash flows are fine as they are with anything as long as you buy right. Hoping to be to 30 by the end of the year and just keep adding with the goal of five more year. I like the way single-family homes spread your risk over a lot of different properties. If one is vacant I am still making money. And the turnover is low I started five years ago and some still have the same tenants.
Not sure why this has turned to a SFH vs. MFH, both are great, and both come with unique ups/downs.
I think it all depends on the quality of your houses. If everything is new and maintained, there aren't very many maintenance calls. If you keep up with your properties and make sure they're in A+ condition, they don't require a lot (maybe 2 calls/yr?), and if you have great tenants who understand how houses work, the property management side isn't hard at all.
1 was my max. I stay away from SFHs. Small MFs (3-10 units) is my sweet spot.
That being said they are similar in operations. I don't think there is a max. It all depends on your schedule. If you have a 9-5, maybe 10-20?
If you are self-employeed or have a flexible schedule, I think unlimited. You can self-manage as many as you want as long as you build systems and bring things in-house. Once you hit 50-100, an office with an assistant and a in-house repairman is needed. You can manage 100s this way.
Yes. Once again, Linda, on this sort of discussion, there's a lot of dancing around the generalities instead of getting into the weeds. And then the discussion flips to something different because nobody has anything of value to contribute.
We buy single-family in two age groups in our area , the stuff built during the major building boom from 1890-1929 and the stuff built during the secondary boom from 1945-1960. We vastly prefer brick-veneer properties when we can get them, slate roofs always a plus, the least major upgrading and modification on the original build possible. The properties are typically in the nicer pockets of D'class areas or the shadier pockets of solid C'class areas, allowing us to acquire at D'class prices and turn out borderline-or-better renovations. That's the natural sweet spot for SFR in our area for the small DIY investor, where the biggest gains can be made for modest investments. I'd bet a lot of money the model works exactly the same way throughout the entire Rust Belt. You have to know the neighborhoods of your target area like the back of your hand, you have to understand general building practices within those neighborhoods for the last 100 years. Those are your edges to exploit to the fullest.
It generally take a renovation and two years of occupancy before all the operating problems and deferred maintenance and cut-corners-in-the-past on this kind of buy shakes out. But once you bring a good brick SFR back from the brink and are watching the maintenance carefully on it, you can keep one of those things chugging along nicely for minimal maintenance costs practically forever.
So I'm completely with Linda on quality as No. 1 determining the upper limit of our single-family properties, and adding in good, regular maintenance as the No. 2 qualification.
I think our maximum number self-managing and self-maintaining single-family properties is going to be 25 in properties like these before it becomes too much for one guy, me, assisted by on-again, off-again day laborers to reliably handle. We could theoretically go much higher if we weren't handling the maintenance, but the nature of maintenance in properties like these is that I ALWAYS have to be available, and when the hammer comes down I have to be able to devote many hours to a problem at once, often at a moment's notice. It's really difficult to find solid handymen who would be willing to follow that schedule along with you.
So the only reasonable solution for is to always keep at least one renovation going, and to fully employ your existing handymen (and yourself) on that as well. Is the renovation a flip or turning a new acquisition in your bread-and-butter area into a rental unit? The state of the economy decides.
After 25 SFR properties I'm going to be looking to liquidate the portfolio and move the money to something else, which is another important consideration to SFR investing. This is not passive investing as we do it, this is a job. A better-paid position than I ever thought I'd hold, and most certainly doing a lot less work than I was routinely called upon to do as a teacher, but still a job, with significant availability demands. Don't kid yourself.
@Jim K. Great answer and insight. I agree entirely that managing a higher volume of properties turns into a job to some extent. The challenge for me is going to be figuring out how to maximize efficiency so my new “job” only takes a few hours a week.
IMO for self-managing the key is to find a great local handyman. Don’t nickel and dime him. Keep him happy, you’re saving a ton of money by not paying a PM.
I live 100 miles away from my 21 units. My handyman is the one who goes for emergencies. Not me. Also have a backup.
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.
I love that number - infinity.
I've made money with houses but I like multifamily even more.
I've acquired over 1,000 apartment units.
And would love to acquire more.
How can one acquire so many units and acquire even more?
Answer: professional property management and asset managers who over-see the PMs - backed by property management systems I've developed for over 20 years now.
I am at 21 sfh and 5 multi unit buildings. Of my 35 units total, I self manage 30 of them. My goal is to be at 50 units at the end of this year with at least 25 sfh. At the moment I am struggling on the management part. I am debating on going to a PM for all or a personal assistant. I think when you ask what's the most you could self manage it really depends on your situation. Do you already have a full time job? Will this be all you do? How many hours a week do you have to dedicate to your rentals? I understand the importance of systems and really need to start implementing. Over the past year I have doubled my portfolio and it has been really hard to catch up with organization. This started out as a side hustle and has quickly taken over my life. Totally in a good way though.
I believe it all depends on your goals in real estate investing. Along as you have the right team and systems in place I don't think you can ever have enough single-family homes.
@Aaron Arnold this really comes down to your income and responsibility goals. Lets say your goal is to make $200K per year passive income. Then figure out how many houses it will take to reach that goal. If each SFH has monthly cash flow of $400, then you would need 42 houses to have $200K per year income.
The other decision is your responsibility level. If you self manage and do all your own repairs, it will increase your income, but also take up more time. The more you hire done, the more passive the effort. Personally as a landlord, my goal as I get older is to make it MORE passive. Of course the flip side is that it cuts into profits, so maybe instead of 42 houses, you need 50 to make it to $200K passive income.
Personally, I see no reason to buy more than what you need to make your goals, but you find many investors get addicted to growing their business. They take on way more properties than they need and make way more money than they have time to spend.
I would rather have time than money, but the two are related because money buys time. Meaning, I can pay people to do things so it frees up my time to do what I want to do.