Single family vs multi-family

7 Replies

I’m brand new to this space so I apologize if this question is repetitive. I’m just starting on my real estate investor journey and looking to buy my first property in under 90 days. I have been looking at multi-family properties in the northeast but the prices are more than I can afford out of pocket. Do people find more early success in single family vs multi family ?

Hello Tyler, 

It depends on what your planning to do! Prices are high in the north east and from what I can see rent hasn't kept up. I think if I was just starting out in this market climate I would be doing fix and flips. Right now people are selling homes in a weeks time above asking price, this won't last forever. It will take lot more time to start cash-flowing.Why not create a nest egg and get into rentals later?

A lot of people start out in single family and realize that it just isn't as scalable as multi-family. With multi-family everything is much more centralized. You have less vacancy, more income to cover for capex, multiple units paying for your expenses, etc.

With this being said, single family allows for some creative exit strategies as the end buyer isn't necessarily an investor. There tends to be more appreciation.

I think a healthy mix between single family and multifamily is a good way to go. You can have success either way.

I've seemingly found myself explaining this a lot lately to others.  There does seem to be a general progression in real estate, and you'll see proof of this preference with lenders and investors alike.  The first step is to typically get a first single family home, then a couple others maybe, then a small multifamily (duplex - quad), then into the 5+.  Of course, there are ways to jump into higher multi-family type situations but these usually require a partner that is already in this space.  I would suggest this type of progression because the single family space allows you to understand renters, get going slowly, and if it doesn't work out, the value of your home is still a market value.  A multi-family building, if you mess that up, will loose a lot more value.

Good luck on your journey!

Assuming you mean duplex/tri/quadplex when you say multifamily VS smaller apartment complexes I would say this is 100% regional.  Even on a local scale here in SE MI it is geographic.  There are places locally that you can get du/tri/quad very inexpensively but they are in an area that is 100% du/tri/quad and no primary homeowner lives there.  Very low income areas as well.  All investors.  As such the neighborhood is not kept up.  In addition, some of them are very large.  Total 4K square feet, 2K square feet per unit so the turn costs are often very high for such low rent/low income areas.  Very few capital improvements have been done in decades, mechanicals are on their last leg and it turns more into a game of musical chairs with investors trading them, you don't want the music to stop when you own it or you might be putting in 2 of everything.  Then other areas it is primary homeowners and while you will pay a lot more upfront for these areas/homes they are the safer choice in the longeron for a new investor.  

Like most answers in Real Estate Investing it isn't as simple as A or B.  It depends on your goals and objectives, on your risk level and on the individual market as well.  Most cities in the NE offer both, but they won't offer both that are equal.  

Multi-family seems to have more ROI in terms of cash flow and the other benefits of Real Estate.

If you plan on exiting soon (ever), single family has the potential for more upside on resale because there is a larger buying pool.  Unless you are buying in 2010, the cash flow isn't going to be there as much as with multifamily.

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