Preferences? Single family or Multi-family rentals?

Question

Hi BP,

As a landlord/investor, what are your favorite rental properties to own? Those with more or less units? SFR's or multi's?

I'm asking to get advice, opinions, suggestions etc. I only own one duplex so far, so just looking for opinions and insight from some BP members.

Do your properties with more units seem to have a higher ROI? Do you tend to get better tenants in your single family properties? etc.  Let me know your thoughts!

thank you!

Joe

Account Closed · Answer

From a management perspective, multi-family is easier.

For instance, when it's time to do your 6 month inspections and check smoke detectors, you're in one location.

In CA, if you have 16 units or more, you have to have an on-site manager.  So, you have a manager on premises to deal with problems, and collect all your rents for you.  You can often get away with just giving your on-site manager free rent, and no salary.

I was an on-site manager, and although I did not do any cleaning or major maintenance, I did do some minor stuff like light pilot lights.  I was also there to meet repairmen.

And in CA anyway, your onsite manager doesn't have to have a realtor's license to manage the property they live on.  But, I could not have legally managed any other properties for the owner I worked for, without getting my license and being affiliate with a broker - which of course would have made my a lot more expensive :-)

So, really, in CA or otherwise, though, I think your costs and maintenance would be less in a multi-family apartment building.

You will have to be more aware of tenant conflict, though.  Part of being a good manager in a multi-family building, is being able to sense who would "fit in" in the building.  If you put a really loud person in a building full of law students who need to study, you'll have a lot of managing to do, for instance.

So, people-wise, SFH rentals would probably be easier.  But, maintenance-wise and cheaper manager-wise, a multiple-family property would be easier.

Joseph Shevy · Answer

Thanks for all the opinions and advice everyone! Was just trying to see everyone's stance on which they prefer. I definitely like the duplex so far.. because of how the numbers work for them. It seems like SFH's would be tougher to cash flow, like someone mentioned above.

Joe

Nick Patterson · Answer

you have 1 roof, wouldn't you rather have as many doors as possible.

Rob Bowling · Answer

SFH are better for appreciation, but tough to cash flow. Multi family are better for cash flow, but don't appreciate much.

I don't buy sf anymore, just multi.

Charles Worth · Answer

I think it depends partially on preference and partially on the market.

For instance, where i have bought in Chicago I can buy a 4 bedroom duplex so it is more "house" like and people are used to living in them because of the market where these are the norm.  In NJ its a smaller unit generally in terms of the size compared to what I have in Chicago but because its so close to NYC prices are high enough for SFRs that you can generally still attract a good tenant for a longer time frame or get a new tenant fairly quickly.  In many of these you only pay utilities in common areas or only water bills (its supply and demand basically).

For more rural markets though I have never really been comfortable with the tenant type in markets where SFRs are cheap and are the majority of the housing stock. I have seen some of these sit vacant for long time periods and attract much lower quality tenants.  Some people are more comfortable managing these types and some are not.

Lastly, are you talking about 5+ units as those are a whole different ballgame?

Matthew Saskin · Answer

Should also note, we only invest in properties (or groupings) that come with a rent roll above a certain amount.  That means while we bought triplexes (or larger) in NYC, the only reason we're in duplexes in NC at the moment is that we purchased 5 of them on a street as a package sale.

Matthew Saskin · Answer

We don't invest in SFH's.  Prefer the economies of scale given by MFH's (eg; single envelope for multiple units, etc.).  Also, multi-family does not necessarily imply there are utility bills to pay.

We have a triplex in NYC where we pay gas (heat), water/sewer, and common area lights, another triplex where we pay only water (gas is metered per unit with separate boilers), and 5 duplexes in NC where we pay no utilities at all (Everything is metered for the individual unit)

Joseph Shevy · Answer

Thanks Ali! I will look into that! I know there is no right answer here, just looking for personal experiences/opinions, etc. thanks for the input!

Ali Boone · Answer

Hey Joseph! There's no wrong answer as far as which to go with. They both have pros and cons. And typically the returns are higher with MFRs, but that comes with increased risk (although if all bought in the right market, it's minimal). Here's a breakdown I did comparing the two. It all comes down to preference. And never hurts to diversify!

http://www.biggerpockets.com/renewsblog/2014/12/28...

Max T. · Answer

SHF is nice because tenant pays all utilities.

I make the most money on duplexes. Triplexes would be nice too, I imagine.

I don't have any experience with larger multi units.