2 Bed 1 Bath model. Whats the good and the bad?

Question

I have seen a lot of investors talking about buying a smaller SFR with only 2 bed and 1 bath. (Not the ones that have 3rd bedroom potential) Im talking about a less than 1300 sq ft home.

It caught my attention as it is significantly cheaper and would rent similar to a 3/1 SFR. What's your thoughts on this?

On a quick and rough analysis, I think it is great on a cashflow basis. However, Im afraid of the potentially difficult exit (if i want to sell eventually).

It would also be hard to do "value add" or find market comparatives (?) maybe..

Anybody with experience on this? Or any insights would be really appreciated! 👌

Robert McAllister · Answer

I love the idea of a 2/1 and I'm actually looking at one myself. The rents are significantly different though. 2/1 home will pull $1000 here and a 3/2 would pull 1500-1600... so, gotta run the numbers to do what makes sense in your market.

Corey Hawkinson · Answer

@Jacob G. Each investor is different. In no way am I saying that my way is the “correct” way. I wanted to start out by saying that.

Personally, the largest units that I would want to invest in would be 3/2. I love the 2/1 places because the younger generation seems to appreciate smaller homes. I believe those homes are set up to hold their value as the millennial generation ages. (That’s my opinion, no one can 100% predict the future)

They also typically require less maintenance. If the numbers work, go after 2/1 properties.

Manaia Alalamua · Answer

@Jacob G.

I think it depends on the demographics you are serving. Where I live (Hawaii), it makes more sense to go with the 3/1 versus a 2/1 SFR if you want higher rents. Price points and investment types (SFR, Condo, etc) are important to consider. However, I find 3/1 more popular with the families here on island. So, it just depends on where you at and who you are serving. My thoughts! Good Luck.

2 Bed 1 Bath model. Whats the good and the bad?

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