What is the most under realized opportunity in real estate today?

147 Replies

SFH are a better inflation hedge than multi-family. Cap rate increase with interest rate, eroding your property value even as your rent increases, whereas demand for single family is driven primarily by owner-occupants, and so demand is quite inelastic. Blackstone is correct for buying single family, in fact they buy a lot of single family/twin home communities, which in a way is like multi-family from management perspective, but can be sold off using single family valuation. With real interest rate negative, and sitting at a historical global low, there is no worse time to buy multi-family from a strategic buy and hold perspective, returns will be lethargic compared to the past decade. It baffles me how little the average real estate investor understand the macro picture.

Here is a primer: 
https://www.cbre.com/research-and-reports/interest-rate-report-chapters/why-do-real-interest-rates-matter-for-real-estate

Originally posted by @Michael Plante :
Originally posted by @Jack Orthman:
Originally posted by @Michael Plante:
Originally posted by @Jack Orthman:

Investing in multi-unit properties even as small as 4 units. It seems like millions and millions of investors have their heads buried in the sand and they have single family homes burned deep into their small brains. I seriously want to punch brokers who tell me you can make as much with single family homes as multi-unit properties and I will challenge any real estate broker or investor, any day. and that is no b.s. nor joke. Bring it on! I love a good argument.

 Very interesting

any guess why Blackstone chose to buy 6 Billion dollars worth of SFH to rent out VS buying multifamily?

Sorry! I disagree 100% and would like for you to tell me why Blackstone purchase $6 million worth of single family homes.

I won't use the word 'perhaps'. I will bet that Blackstone would have been better off purchasing multi-unit properties.

The book 'Be Obsessed or Be Average' written by Grant Cardone is actually a fairly-well written book considering he dedicated one chapter explaining how he is a recovered addict, turned his life around and became a multi-millionaire. Personally, I think the Grant Cardone is a super bright person and he still has some serious flaws, but one thing he preaches very heavily is the difference in profits earned purchasing multi-unit properties vs. single family.

The one main thing that Grant Cardone does not teach is how to do the simple math that the BP calculator does and the math similar to the images I posted.

I will say this over and over and I would like for you to prove that Blackstone made the right decision and I would like for you to prove that I am wrong in regards to anything I write. I'm betting tire of saying the same thing over and over and I love the challenge. I've been writing on many forums for many years and I always say that I will prove the accuracy for what I write and I will apologize when I make a mistake.

Please! Can some expert show me the proof where you can earn even close to the same money with single family homes as you can with multi-unit properties. I showed you my number and now show me some proof that I am wrong.

I wrote on a contractor forum for many years and some members kept writing posts saying that my plumbing company did not make the money I claimed in my posts. So, two members from the forum came to my business and as soon as I showed them one bank statement and my customer list database where we could pull up all the sales for one month they didn't want to see any more and they wrote several positive posts about the claims in my posts.

When I write that I made $34 million plus $2.4 million = $3.6 million between 2001 and 2021 with a little more than $2.2 million in cash then I guarantee you that I can back up that claim with a list of my assets and a few tax records. But...the serious issue here is not in regards to whether or not I am full of b.s.. The real issue is about proving through the math whether or not multi-unit properties can really generate $36.4 million in profits vs. investing that same amount of money in single family properties between 2001 and 2021 where I am ready to prove that if you went the single family route it is very likely that even though housing prices are rising like crazy I don't think most houses prices have recovered to above their price before 2001, meaning investors who invested in single family homes with $2.1 million would have lost money, or if prices did rise above 2001's prices they did not rise much while multi-unit properties were doubling in price every year for several years.

Just a few of the properties I own and their appreciation since 2001

Purchased 28 homes in Las Vegas between 2008 and 2010 at auctions for 30 cents on the dollar. I gifted 6 to my children still have two and sold 20 homes and netted $3.5 million. So, if you add the 6 I gifted plus the two I still own then my total profit for the 28 homes is probably about $4.5 million.

Purchase 28 units in 2001 for $1,950,000. Value today is 28 X $320,000 per unit = $8,960,000 plus the properties are paid off and my cashflow is currently about $45,000 per month after expenses, but when I had a mortgage two years ago I my cashflow was still more than $100,000 per year. So if we take an average of $70,000 per year for cashflow in 20 years I netter $8,960,000 - $1,950,000 = $7,010.000 plus 20 years of cashflow = 20 x $70,000 = $1,400,000 + $7,010,000 = $8,410,000 or I earned 431% on the total amount I paid for the property plus a lot of other tax benefits.

Show me a house that you can purchase today and where you actually can manually control the amount of money where you can increase the single family home 4 times the price you pay in 20 years. You cannot purchase a single family home and do any sort of math projections where you have the control to make that home worth 4 times what you paid in 20 years, but it is very easy to find multi-units, TODAY, where the math will prove that the buyer will earn 4 times the price he pays for the property.

I sort of started  in the real estate business in 1963 when I was 13-years old because I was working for a Jewish family that owned half the city in Springfield and Holyoke Massachusetts. This family took me under their wing, armpits, or whatever and they owned several very large apartment buildings, 25 movie theaters, commercial high-rise buildings and single-family homes.

The richest people in the U.S. own multi-unit properties and commercial buildings.

Send me more information about why Blackstone buys single family homes and send the math. I don't believe they are turning a profit and there are a lot of very large companies operated by some serious screwballs. Tell me what happened to that company that had some screwball business model where they were buying thousands of single family homes without looking at them, or something like that. Last I heard they went bust and had they had the same business model to buy multi-units without looking at them I would give them 100$ of my sort to say they could have purchase any multi-unit with blindfolds because just a few years ago, multi-unit properties were doubling in value every year. What a shame and waste that they didn't have the brains to look at multi-units. They would probable be trillionaires, today and they could have used the exact same amount of investment capital.


Blackstone is buying neighborhoods of new built homes so there is no real cap ex for them right now. They need the depreciation of the properties, which is huge to them. They know that the investment will cash flow & they are betting that over time the properties will go up in value. They don't believe there is enough upside value in the stock market to risk $6,000,000,000. They believe inflation is headed our way or even already here and having cash on the sidelines erodes it's value. It's a "security play" with tax benefits. Multi unit apartments are very competitive right now and there just aren't enough of them to buy.

 

Agree with Jack. The whole idea to start with Single Family is a joke. 2-4 units cashflow WAY higher and are easier to scale. They also aren't much more expensive. A lot of these new single family investors don't realize how much cap/ex and the occasional tenant non-payment cost them and are really buying $0 net cashflow deals even though on paper it might look good in real life there are a lot of expenses. I always recommend all my clients to go 2-4 unit route and ideally 4 unit buildings. I personally house hack a 4 unit and it has been great! 

Since CA set up the adu dealio which essentially turns most sfrs into a duplex or tri pontentially. Then times that by the 6.8 million detached homes, we are looking at many trillions USD of unrealized real estate dev. Mathematically I doubt there is anything that comes remotely close to 2nd place as "unrealized". 

Good luck!

@Amy Raye Rogers

Just getting started and what you can afford now. Not waiting. Don’t wait for the best multi family if you come across a great single-family. Just the fact that you need to get started sooner than later is the best opportunity.

Not only are rates very low right now, but appreciation is going up and also inflation is skyrocketing. Locking into a loan now just for appreciation alone, is a great Reston to get started.

Housing is a necessity not a luxury. Ultimately you want a well rounded portfolio with a little bit of everything. Everybody on here is going to say multi family is the best, or single family is the best or whatever whatever whatever…… it’s all great. It’s all good.

Get started with the money you have now.



i’ve been doing real estate investing for over 20 years and I’ve never come across a single person that said I regret buying that property 20 years ago!!

If you can’t find some thing where you live or don’t have anybody to help you analyze the numbers, there are 1 million posts on bigger pockets how to do that.

Best of luck!!

Big hedge funds are moving into the SFR market to take on a new asset class. The increase in rents the last 10yrs and the ease of access to liquidity has made this a viable option now. I think the real reason is the decline of the dollar and yields from bonds.

10yr bonds are yielding 1.23% and 30yr bond 1.895% today. The yields are not high enough to keep up with inflation but more importantly it's not enough to keep up with returns needed to fund US pensions.  Bonds are suppose to be the safest investment from a risk perspective. If the yields are not enough and are declining what is safe and will yield more??? Real Estate. Multi-family was traditionally the vehicle but now the demand has increased to include SFRs. 

Real Estate is becoming the new US Bond. Something that is safer than equities but will yield more than bonds. The current US bond market is $46trillion (per wikipedia).  All this money will start to funnel into other assets.  I think the flight to safety is residential real estate. 

@Jack Orthman I agree with you. I don’t think Blackrock is buying homes to make money. I think they are trying to possess as many homes as possible so they can make home ownership an obsolete concept and debt back to the general population, keeping them forever in debt.

It’s monopoly and part of a larger plan. Single family homes, farm land etc.

Personally, if I had more resources, I’d be buying as much as I could.

@Jack Orthman

I invest in small multifamily.  If I run the numbers going back when I started investing I would have made more if I would have bought single family.  I think the small apartments cashflow better but single family homes have appreciated so much it has more then made up for the lack of cashflow.  

Originally posted by @Jack Orthman :

Investing in multi-unit properties even as small as 4 units. It seems like millions and millions of investors have their heads buried in the sand and they have single family homes burned deep into their small brains.

Anyone know if there is an 'ignore' function on BP Forums? 

Originally posted by @Eric Bilderback :

@Jack Orthman

I invest in small multifamily.  If I run the numbers going back when I started investing I would have made more if I would have bought single family.  I think the small apartments cashflow better but single family homes have appreciated so much it has more then made up for the lack of cashflow.  

Sorry, but I totally disagree with you and would like to see the year you paid for the properties, how much you paid, past and current rental income, the value of the property today and I will bet you lost money big-time and had you invested in multi-units two things did not occur that would have occurred had you purchase multi-units.

1) While your single family properties appreciated and maybe even doubled in value the multi-unit properties doubled in value every year and for several years in a row. I can show you the history very easily from a history chart.

That means; the value of a multi-unit property next door to my office sold in 2011 for $1.275,000. I don't know exactly how to read this information, but I know everyone who purchase this property and how much they paid.

Four years later, in 2015, a dentist purchase the property for $3.6 million. That is a 300% increase in 4 years and your single family homes will never do that.

Only 3 years later, in 2018, this syndicated screwball company purchase the property somehow through a foreclosure because the dentist was a screwball and he let a property management company and the live-in manager steal all the rent money and half the tenants were not on the books and the live-in manager was banking the cash in his account. 

The syndicator paid almost $6 million for the property. That is a 100% increase AGAIN in a three-year period.

Now, we get to 2021. The apartment building consists of 25 2-Bedroom apartments and it has a swimming pool. The value of this property is currently 25 x $320,000 per unit = $8 million. 

AGAIN!!! this property increased in value between 2018 and 2021 by $8,000,000 / $ 6,000,000 = 33% increase in 3 years.

The owner of the property wanted to sell me the building in 2010 for $875,000. So if we tale the $875,000 the value of the building was in 2010 and the $8,000,000 value the building is worth in 2021, then the percent increase over an 11 year periods is an 814% increase, or 8 TIMES the value of the sale price in 11 years.

So, send me the numbers for your single family house, or suppose you paid $250,000 for the house 11 years ago. 

Get this really clear in your brain when doing the math. In addition to the appreciation for multi-unit properties, this 25-unit building, or a 4-unit, or whatever generates a positive cash flow of about $8,000 per month, or $96,000 per year and over a period of 10 years the owner earns another cool $1 million.

Now lets look at a stinky average single family house. Suppose, you paid $300,000 for the house the same 11 years ago. To match the appreciation (not including the great cashflow) your house would have to be worth 814% more than you paid, or be worth $300,000 x 814% = $2,442,000 and you know you did not get that return on any single family home like that in the past 11 years and I don't even need to see your records.

The same type profit applies to 4+ units and anyone who claims that single family homes can produce near, equal to, or better results than multi-family properties has to have less than a 5th grade education if you can't spend only a few minutes to do the math, BY YOURSELF, because no broker and nobody else seems to be able do do this SIMPLE ANALYSIS when searching for the best place to invest your money.

Sorry for the way I express myself, but it is frustrating to constantly hear people say they did just as well with single family homes.

I am not bragging when I tell you how much money I made without even trying, while running a plumbing construction company with 60 employees, while driving to Las Vegas and Idaho to manage properties every few weeks. while personally managing multi-million dollar construction projects for plumbing and underground utilities like we did for a brand new 25-room hotel called Shade Hotel in Redondo Beach California where the only the underground utilities took almost two years to complete and I still managed to make $36.4 million dollars in my real estate business with only $2.4 million from 2001 to 2021 without even trying because I do the simple 5th grade math to determine whether a single family home purchase or whether a multi-unit will give me the most bang for my buck. Sure, I purchase 28 single family homes between 2008 and 2010 and I gifted 6 homes to my children, still have two, paid capital gains taxes on the homes I sold for $3.5 million and if I sell the two I have left and count the profits for the 6 I gifted to my children my profits would be about $4.5 million. But...I did the math before I purchased the properties and I purchased them for 30 cents on the dollar at live auctions. 

Originally posted by @Terrell Garren :
Originally posted by @Jack Orthman:

Investing in multi-unit properties even as small as 4 units. It seems like millions and millions of investors have their heads buried in the sand and they have single family homes burned deep into their small brains.

Anyone know if there is an 'ignore' function on BP Forums? 

Why is that? Is there something I said that you can prove is wrong, or just tired of hearing the truth, or is it because you advocate for inferior investment strategies?

Originally posted by @Henry Lazerow :

Agree with Jack. The whole idea to start with Single Family is a joke. 2-4 units cashflow WAY higher and are easier to scale. They also aren't much more expensive. A lot of these new single family investors don't realize how much cap/ex and the occasional tenant non-payment cost them and are really buying $0 net cashflow deals even though on paper it might look good in real life there are a lot of expenses. I always recommend all my clients to go 2-4 unit route and ideally 4 unit buildings. I personally house hack a 4 unit and it has been great! 

Thank you very much for posting that even 2 to 4 unit properties make more sense. 

@Jack Orthman

You win I’m not going to dig that up.  I have never seen anything appreciate 300%.  not saying it didn’t I’ve just never seen it. But I can tell you I bought a 15 unit same time as I did my house house has tripled in value.  Apartment I don’t think has even doubled.  It he does not cashflow well enough to make the difference.


but sounds like you got it all figured out.  So go on with your bad self!

Originally posted by @Jack Orthman :
Originally posted by @Terrell Garren:
Originally posted by @Jack Orthman:

Investing in multi-unit properties even as small as 4 units. It seems like millions and millions of investors have their heads buried in the sand and they have single family homes burned deep into their small brains.

Anyone know if there is an 'ignore' function on BP Forums? 

Why is that? Is there something I said that you can prove is wrong, or just tired of hearing the truth, or is it because you advocate for inferior investment strategies?


Because you are a jerk. 

Originally posted by @Matthew Irish-Jones :

@Amy Raye Rogers

The best returns are usually on the value add opportunities if they go well.

If you buy in all cash and renovate you have a brand new property with a top notch product. Your rehab should include all new mechanicals.

When this is done correctly you end up with the best product on the market for a rental and you control your two biggest variable expenses in CapEx and maintenance.

 What are mechanicals you would recommend being new please?

Originally posted by @Eric Bilderback :

@Jack Orthman

You win I’m not going to dig that up.  I have never seen anything appreciate 300%.  not saying it didn’t I’ve just never seen it. But I can tell you I bought a 15 unit same time as I did my house house has tripled in value.  Apartment I don’t think has even doubled.  It he does not cashflow well enough to make the difference.


but sounds like you got it all figured out.  So go on with your bad self!

It is not about getting angry or winning. It is about telling the truth and trying to make the correct statements so investors with less experience can learn the best way to invest their money. I've been wrong many times and I will apologize. We people who write posts giving advice should realize that other investors are putting their money on the line and I don't want to be the person responsible for someone using my advice and lose money. I don't want to see someone using someone else's advice and lose money.

Sometimes, I get carried away like when I said something like people who can't do simple 5th grade math need to use there small brains...and then I look back and say, "Oh, sh..t that was a mistake" and I apologize. I get carried away and it is frustrating to keep saying the same thing when there is absolute proof that (and I am sorry to have to say again) that single family homes can produce the same profits as multi-unit properties and I am the type person that cannot allow other people I don't even know make huge mistakes purchasing single family homes when deep inside they would prefer to purchase multi-unit properties with the same amount of money and earn 5 to 10 times more profit in a far less number of years.

It should work like this on BP. When someone makes a statement they should try to post accurate information and should be prepared to have a friendly argument to prove what they say. Otherwise, how does anyone get to learn the truth, or get to learn what type investments give the best returns. It is not about bragging, ego or winning! it is about learning and getting accurate information.

@Amy Raye Rogers I think this varies a ton from one market to the next. In San Antonio, I believe the 3 best opportunities for individual investors are: 1. ground up in-fill development of single family and small multifamily properties, 2. Short term rentals (STR), and 3. Purchasing tenant occupied SFR where the tenant is not currently paying. I'm currently combining 1. & 2. for my personal investments, but I have successful clients using all 3 of these strategies today.

For investment companies or individuals with much more capital, the answer will most certainly be different. There appear to be a lot of redevelopment opportunities for struggling commercial properties. I've been surprised that there aren't more defunct commercial spaces being converted to residential right now. However, I don't spend a lot of time in the commercial space anymore, so I'll leave that to someone else to comment on.

@Amy Raye Rogers

I have bought and sold over 1,000 properties for my own inventory. I also did Bigger Pockets Podcast #82 and wrote a book on real estate. I've bought SFH as well a multi-family and other real estate; including farms, woodland, water front property, land locked property, perk failed property, title defect properties, unlocated properties, and owner unknown properties. There's money to be made in all of these properties. I bought an unlocated parcel, abandoned by the owner, after research and survey sold the property for more than 60 times what I paid or a 6,000% return. Everybody else passed over this property because they didn't know what to do, how to do it, see any way to make a profit. I bought another property that was in probate, where the attorney valued the property for state inheritance tax at zero. I was able to buy and sell at a big profit. I bought a perk failed lot for $1,500, because it was unbuildable with the failed perk test. I re-tested the perk test and sold for for $80,000 as a buildable lot. The first wooded property, that I bought, I introduced myself to the neighbor, who told me he was timbering his property and that there were timber quality trees on my property also. I called his logger who came out marked the trees he wanted to cut and paid me twice as much as I paid for the entire property. I didn't know anything about timbering and asked a ton of questions of my neighbor and the logger, and learned a lot that I was able to use on other tracts of land. That property I sold for more than 49 times what I paid or 4,900%. There are lots of ways to make money in real estate, not just one way.

Originally posted by @Jack Orthman :
Originally posted by @Eric Bilderback:

@Jack Orthman

I invest in small multifamily.  If I run the numbers going back when I started investing I would have made more if I would have bought single family.  I think the small apartments cashflow better but single family homes have appreciated so much it has more then made up for the lack of cashflow.  

Sorry, but I totally disagree with you and would like to see the year you paid for the properties, how much you paid, past and current rental income, the value of the property today and I will bet you lost money big-time and had you invested in multi-units two things did not occur that would have occurred had you purchase multi-units.

1) While your single family properties appreciated and maybe even doubled in value the multi-unit properties doubled in value every year and for several years in a row. I can show you the history very easily from a history chart.

That means; the value of a multi-unit property next door to my office sold in 2011 for $1.275,000. I don't know exactly how to read this information, but I know everyone who purchase this property and how much they paid.

Four years later, in 2015, a dentist purchase the property for $3.6 million. That is a 300% increase in 4 years and your single family homes will never do that.

Only 3 years later, in 2018, this syndicated screwball company purchase the property somehow through a foreclosure because the dentist was a screwball and he let a property management company and the live-in manager steal all the rent money and half the tenants were not on the books and the live-in manager was banking the cash in his account. 

The syndicator paid almost $6 million for the property. That is a 100% increase AGAIN in a three-year period.

Now, we get to 2021. The apartment building consists of 25 2-Bedroom apartments and it has a swimming pool. The value of this property is currently 25 x $320,000 per unit = $8 million. 

AGAIN!!! this property increased in value between 2018 and 2021 by $8,000,000 / $ 6,000,000 = 33% increase in 3 years.

The owner of the property wanted to sell me the building in 2010 for $875,000. So if we tale the $875,000 the value of the building was in 2010 and the $8,000,000 value the building is worth in 2021, then the percent increase over an 11 year periods is an 814% increase, or 8 TIMES the value of the sale price in 11 years.

So, send me the numbers for your single family house, or suppose you paid $250,000 for the house 11 years ago. 

Get this really clear in your brain when doing the math. In addition to the appreciation for multi-unit properties, this 25-unit building, or a 4-unit, or whatever generates a positive cash flow of about $8,000 per month, or $96,000 per year and over a period of 10 years the owner earns another cool $1 million.

Now lets look at a stinky average single family house. Suppose, you paid $300,000 for the house the same 11 years ago. To match the appreciation (not including the great cashflow) your house would have to be worth 814% more than you paid, or be worth $300,000 x 814% = $2,442,000 and you know you did not get that return on any single family home like that in the past 11 years and I don't even need to see your records.

The same type profit applies to 4+ units and anyone who claims that single family homes can produce near, equal to, or better results than multi-family properties has to have less than a 5th grade education if you can't spend only a few minutes to do the math, BY YOURSELF, because no broker and nobody else seems to be able do do this SIMPLE ANALYSIS when searching for the best place to invest your money.

Sorry for the way I express myself, but it is frustrating to constantly hear people say they did just as well with single family homes.

I am not bragging when I tell you how much money I made without even trying, while running a plumbing construction company with 60 employees, while driving to Las Vegas and Idaho to manage properties every few weeks. while personally managing multi-million dollar construction projects for plumbing and underground utilities like we did for a brand new 25-room hotel called Shade Hotel in Redondo Beach California where the only the underground utilities took almost two years to complete and I still managed to make $36.4 million dollars in my real estate business with only $2.4 million from 2001 to 2021 without even trying because I do the simple 5th grade math to determine whether a single family home purchase or whether a multi-unit will give me the most bang for my buck. Sure, I purchase 28 single family homes between 2008 and 2010 and I gifted 6 homes to my children, still have two, paid capital gains taxes on the homes I sold for $3.5 million and if I sell the two I have left and count the profits for the 6 I gifted to my children my profits would be about $4.5 million. But...I did the math before I purchased the properties and I purchased them for 30 cents on the dollar at live auctions. 

Jack I think what you mentioned regarding the building near your office is an outlier, and while I agree large multi-family projects have seen better appreciation than single family, small multi 2-4 doors have paced along about the same. Going forward what you want to pay attention to is the cost of borrowing, because it's a crucial line item below NOI and therefore drives cap rate and valuation. For example at 200K NOI and 5% cap, the property is worth 4mil, and if cap rate increase to 6%, valuation is now 666K lower. With real interest rate negative, this is perhaps as wide a premium as large projects will get for the next 3-7 years. Paying market value to purchase an apartment right now is dangerous, and I am quite confident you won't have a repeat of the past decade.

Originally posted by @David Krulac :

@Amy Raye Rogers

I have bought and sold over 1,000 properties for my own inventory. I also did Bigger Pockets Podcast #82 and wrote a book on real estate. I've bought SFH as well a multi-family and other real estate; including farms, woodland, water front property, land locked property, perk failed property, title defect properties, unlocated properties, and owner unknown properties. There's money to be made in all of these properties. I bought an unlocated parcel, abandoned by the owner, after research and survey sold the property for more than 60 times what I paid or a 6,000% return. Everybody else passed over this property because they didn't know what to do, how to do it, see any way to make a profit. I bought another property that was in probate, where the attorney valued the property for state inheritance tax at zero. I was able to buy and sell at a big profit. I bought a perk failed lot for $1,500, because it was unbuildable with the failed perk test. I re-tested the perk test and sold for for $80,000 as a buildable lot. The first wooded property, that I bought, I introduced myself to the neighbor, who told me he was timbering his property and that there were timber quality trees on my property also. I called his logger who came out marked the trees he wanted to cut and paid me twice as much as I paid for the entire property. I didn't know anything about timbering and asked a ton of questions of my neighbor and the logger, and learned a lot that I was able to use on other tracts of land. That property I sold for more than 49 times what I paid or 4,900%. There are lots of ways to make money in real estate, not just one way.

 I see people post they have bought and sold 1000 properties 
or they have flipped over 1000 properties 

Im thinking a 1000 flips have got to be at least $30,000 x 1000 or $30,000,0000. 


But I never see them talk about how much profit before taxes they actually make 

To me this is essential for people looking to start or to try and go bigger   

Does your pod cast talk about that?

If so please drop the link 

BTW I’ve only flipped a few and rented a few but am happy to talk actual numbers both good and bad

The worst made $55,000 hence my thinking the 1000 flipper people have to be netting at least $30,000 per flip before taxes  

Thank you 

Originally posted by @Allen L. :
Originally posted by @Jack Orthman:
Originally posted by @Eric Bilderback:

@Jack Orthman

I invest in small multifamily.  If I run the numbers going back when I started investing I would have made more if I would have bought single family.  I think the small apartments cashflow better but single family homes have appreciated so much it has more then made up for the lack of cashflow.  

Sorry, but I totally disagree with you and would like to see the year you paid for the properties, how much you paid, past and current rental income, the value of the property today and I will bet you lost money big-time and had you invested in multi-units two things did not occur that would have occurred had you purchase multi-units.

1) While your single family properties appreciated and maybe even doubled in value the multi-unit properties doubled in value every year and for several years in a row. I can show you the history very easily from a history chart.

That means; the value of a multi-unit property next door to my office sold in 2011 for $1.275,000. I don't know exactly how to read this information, but I know everyone who purchase this property and how much they paid.

Four years later, in 2015, a dentist purchase the property for $3.6 million. That is a 300% increase in 4 years and your single family homes will never do that.

Only 3 years later, in 2018, this syndicated screwball company purchase the property somehow through a foreclosure because the dentist was a screwball and he let a property management company and the live-in manager steal all the rent money and half the tenants were not on the books and the live-in manager was banking the cash in his account. 

The syndicator paid almost $6 million for the property. That is a 100% increase AGAIN in a three-year period.

Now, we get to 2021. The apartment building consists of 25 2-Bedroom apartments and it has a swimming pool. The value of this property is currently 25 x $320,000 per unit = $8 million. 

AGAIN!!! this property increased in value between 2018 and 2021 by $8,000,000 / $ 6,000,000 = 33% increase in 3 years.

The owner of the property wanted to sell me the building in 2010 for $875,000. So if we tale the $875,000 the value of the building was in 2010 and the $8,000,000 value the building is worth in 2021, then the percent increase over an 11 year periods is an 814% increase, or 8 TIMES the value of the sale price in 11 years.

So, send me the numbers for your single family house, or suppose you paid $250,000 for the house 11 years ago. 

Get this really clear in your brain when doing the math. In addition to the appreciation for multi-unit properties, this 25-unit building, or a 4-unit, or whatever generates a positive cash flow of about $8,000 per month, or $96,000 per year and over a period of 10 years the owner earns another cool $1 million.

Now lets look at a stinky average single family house. Suppose, you paid $300,000 for the house the same 11 years ago. To match the appreciation (not including the great cashflow) your house would have to be worth 814% more than you paid, or be worth $300,000 x 814% = $2,442,000 and you know you did not get that return on any single family home like that in the past 11 years and I don't even need to see your records.

The same type profit applies to 4+ units and anyone who claims that single family homes can produce near, equal to, or better results than multi-family properties has to have less than a 5th grade education if you can't spend only a few minutes to do the math, BY YOURSELF, because no broker and nobody else seems to be able do do this SIMPLE ANALYSIS when searching for the best place to invest your money.

Sorry for the way I express myself, but it is frustrating to constantly hear people say they did just as well with single family homes.

I am not bragging when I tell you how much money I made without even trying, while running a plumbing construction company with 60 employees, while driving to Las Vegas and Idaho to manage properties every few weeks. while personally managing multi-million dollar construction projects for plumbing and underground utilities like we did for a brand new 25-room hotel called Shade Hotel in Redondo Beach California where the only the underground utilities took almost two years to complete and I still managed to make $36.4 million dollars in my real estate business with only $2.4 million from 2001 to 2021 without even trying because I do the simple 5th grade math to determine whether a single family home purchase or whether a multi-unit will give me the most bang for my buck. Sure, I purchase 28 single family homes between 2008 and 2010 and I gifted 6 homes to my children, still have two, paid capital gains taxes on the homes I sold for $3.5 million and if I sell the two I have left and count the profits for the 6 I gifted to my children my profits would be about $4.5 million. But...I did the math before I purchased the properties and I purchased them for 30 cents on the dollar at live auctions. 

Jack I think what you mentioned regarding the building near your office is an outlier, and while I agree large multi-family projects have seen better appreciation than single family, small multi 2-4 doors have paced along about the same. Going forward what you want to pay attention to is the cost of borrowing, because it's a crucial line item below NOI and therefore drives cap rate and valuation. For example at 200K NOI and 5% cap, the property is worth 4mil, and if cap rate increase to 6%, valuation is now 666K lower. With real interest rate negative, this is perhaps as wide a premium as large projects will get for the next 3-7 years. Paying market value to purchase an apartment right now is dangerous, and I am quite confident you won't have a repeat of the past decade.

I agree with your entire post with the exception that my example is an outlier. I agree that multi-unit properties will not give the investors the 800% returns like in the past 20 or 40 years, but the single family homes are also in deep trouble and I will bet that the investors buying single family homes for the prices are going to get burned big time and the investors buying the multi-unit properties may not see the 800% returns in 20 years, but since they have the opportunity to increase the rents and they have 4+ rents coming in the multi-unit investors have a much better cushion and a much better chance to forcefully increase the value of the property by increasing the rents and increasing the cap rate, or whatever numbers investors like to use.

I never pay attention to the cap rate and can't ever remember the simple math formula because I don't care so much about the cap rate when I purchase the property as I care what my return will be after I make some improvements and raise the rents and that is the nice thing about multi-unit properties. I have a 40 unit property where I took out the two 100-gallon water heaters, installed water heaters in every unit, removed the grass, save a lot of water from watering, save a lot of natural, save from paying a gardener and I think I save about $30,000 every year. I always project my numbers to 10 years and that is $300,000 every 10 years and a huge paydown on a mortgage, or enough to purchase a nice property, or make one trip to Disney World for a week. I'm picking on Disneyland and Disney World because I make a lot of money and I can't believe they raised the price to get into one theme park to $150. There is no way I will go to Disneyland with my wife and two brats and pay $600 just to get into a super crowded park.

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