Thoughts about purchasing multifamily with all 1 bedroom units

Member since 2021 · 82 posts · 13 votes

Good morning BP family. I hope everyone is realizing your RE investing goals. We are considering purchasing a 9 unit multifamily. All of the units are 1 bedroom. Historically we were discouraged from purchasing properties that contain one-bedroom units due to the tenant turnover. Has anyone had good experience with these type investments. We were thinking about using it to help homeless or near homeless Military Veterans.

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Jeff CopelandBusiness Member

Real Estate Broker · Tampa Bay/St Petersburg, FL · Member since 2015 · 1k+ posts · 2k+ votes

As an experienced property manager, I have no qualms about one-bedroom units. Steering clear of them is outdated advice in my opinion.

One bedroom units are very popular and easy to keep rented to single people and/or couples, because they are usually a relatively low cost housing option. They experience much less vacancy that a 3/2 home, for example.

I do, however, have qualms about leasing to homeless or near homeless individuals (veterans or otherwise). Let me be clear: I am a retired military veteran myself with 22 years of service, and I do think it's a noble and honorable idea for you to want to help homeless veterans with housing.

But I am also an experienced property manager with experience with the VA's VASH program, as well as similar programs for non-veterans. As such, I have grown jaded over the years and can tell you that in my personal experience 90% of these tenants don't work out. Often due to non-payment as soon as their benefits run out, and other times due to drug and alcohol abuse or mental health issues.

Just make sure you aren't looking at it through rose colored glasses, and understand what you are getting into. Managing tenants on these programs requires 2-3 times as much staff time and energy as managing a normal class B to C rental, and these units will very often experience much higher vacancy, collection, and eviction-related losses.

That doesn't mean you shouldn't do it. These are just the cold hard facts.

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Richard F.
Honolulu, HI · Member since 2008 · 3k+ posts · 2k+ votes
3y
Aloha,
Obviously this depends on local market, but around 80% of the rentals I have handled here have been studio and 1 bedroom. I have tenants that I placed over 15 years ago still in place, taking good care of their little slice of paradise. When one of my 2 or 3 bedroom units does come available, it is highly dependent on the time of year whether it will rent quickly or not. Families do not want to change school districts or have kids missing days mid-school year. Most of these moves happen over the summer break. Of those that do rent quickly mid school year, it is usually a new arrival to the island.
For those that might be interested in thinking outside the box, consider how your studio and one bedrooms might be more appealing if you make some "tiny" upgrades. Especially for a studio, some of the unique Murphy bed combos and other multi-purpose/hideaway elements could really set you apart from the competition. Your "studio" effectively becomes a one bedroom, and your one bedroom becomes two. Win Win. Just be sure the product quality is adequate.

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