Small MFR or Larger MFR as a new investor- Confused!

[Ravi Bhagavan]

I am an out of state investor looking to invest in turnkey properties in Cleveland and/or Columbus. I have looked at other places like Birmingham, Little Rock and Memphis, but for now settled on these two (mostly!). Between these two, I am leaning more towards Cleveland. I have a leasing agent I like and I will use a property manager (yet to interview/hire). I am going to do a DSCR to keep my person DTI low preferably, and I don't see much difference in the DSCR rates vs conventional rates when I have checked with a few lenders.

Overall my goal is to build up a portfolio that can generate 60-75K in cash flow in 4-5 years, with a 3% annual property appreciation. 

Here is where my thinking starts to get muddled-

Strategy A- But 4-unit multi families in Cleveland. As is well known on this forum, there are parts of Cleveland on the East Side that provide a high cash flow with Section 8. But the high CF numbers on paper will not likely not be a reality as there will be more fixes/rehabs/tenant turnover with these properties. I am open to this, but the more I think about it, I don't know if getting into Sec 8 on my first property is a good thing.

Strategy B- Buy 4-unit multi families but buy them in westside neighborhoods such as Edgewater and maybe ones on the edge like Tremont (which seems to have the best value+ price combination). These are though in general hard to cash flow overall.

Strategy C- Buy a 12-16 unit apartment complex around $1MM. More of these are available in Columbus (compared to Cleveland) in areas like Franklinton. 

Across all of these strategies, I am not risking more than 30% of my capital. 

I can go small multi families to bigger ones, or I can go for the bigger ones. My intuition and data so far indicates that scale matters- the more the number of units, the more you get economies of scale. The part where I get scared is that I don't really have a team, and the feeble attempts I have made at building one have not really resulted in anything. For example, while I understand the concept of cost seg, I have no experience with it. When I say the team, I specifically am referring to a lender and a competent property manager who can manage a large property and a CPA because all of this is for nothing if I cannot figure out the right tax strategy.

I'd love to get some feedback from some of the other folks on this thread, please share your thinking.

[Kerlous Tadres]

Quote from @Ravi Bhagavan:

I am an out of state investor looking to invest in turnkey properties in Cleveland and/or Columbus. I have looked at other places like Birmingham, Little Rock and Memphis, but for now settled on these two (mostly!). Between these two, I am leaning more towards Cleveland. I have a leasing agent I like and I will use a property manager (yet to interview/hire). I am going to do a DSCR to keep my person DTI low preferably, and I don't see much difference in the DSCR rates vs conventional rates when I have checked with a few lenders.

Overall my goal is to build up a portfolio that can generate 60-75K in cash flow in 4-5 years, with a 3% annual property appreciation. 

Here is where my thinking starts to get muddled-

Strategy A- But 4-unit multi families in Cleveland. As is well known on this forum, there are parts of Cleveland on the East Side that provide a high cash flow with Section 8. But the high CF numbers on paper will not likely not be a reality as there will be more fixes/rehabs/tenant turnover with these properties. I am open to this, but the more I think about it, I don't know if getting into Sec 8 on my first property is a good thing.

Strategy B- Buy 4-unit multi families but buy them in westside neighborhoods such as Edgewater and maybe ones on the edge like Tremont (which seems to have the best value+ price combination). These are though in general hard to cash flow overall.

Strategy C- Buy a 12-16 unit apartment complex around $1MM. More of these are available in Columbus (compared to Cleveland) in areas like Franklinton. 

Across all of these strategies, I am not risking more than 30% of my capital. 

I can go small multi families to bigger ones, or I can go for the bigger ones. My intuition and data so far indicates that scale matters- the more the number of units, the more you get economies of scale. The part where I get scared is that I don't really have a team, and the feeble attempts I have made at building one have not really resulted in anything. For example, while I understand the concept of cost seg, I have no experience with it. When I say the team, I specifically am referring to a lender and a competent property manager who can manage a large property and a CPA because all of this is for nothing if I cannot figure out the right tax strategy.

I'd love to get some feedback from some of the other folks on this thread, please share your thinking.

I would recommend looking into using strategy B in Columbus! Going big in an area that you don't know very well can be a little risky. I would start one deal(anywhere from 2-4 units) at a time and go from there. As long as you build a solid team with a great CORE 4 with a great realtor, contractor, property manager, and attorney, then you'll go far.