Less buildings and more units?

Question

I'm torn on what I want to pursue next, I own 2 duplexes right now and have been wanting to add 4 plexes to my portfolio however those are hard to find in my area but duplexes are not. My thoughts are that having less buildings is cheaper for CapEx and repairs. My goal is to have 16 units total, is it smarter to buy multiple 4 unit buildings as opposed to 8 duplexes?

Account Closed · Answer

I don't think it's necessarily true that you would have less drama or management problems with a duplex vs a building with more units.

As a tenant, I avoid duplexes.  For some reason, it's like having a roommate you didn't pick out.  It's just you and one other person/family living in a building.  You can't just blend in and avoid each other.

And it always comes down to who the tenants are anyway.  I managed a 26 unit building as a resident manager without too much drama.  It always comes down to screening.  And I only did month to month agreements so if someone was causing too much trouble and weren't heeding my warnings, I'd just give them notice.

But, it seems to me that there is actually less drama in a multi-plex than when you've just got two tenants only separated by a wall.  Maybe tenants in larger buildings expect more noise or the necessity to share parking and facilities, etc.

I'd rather live as a tenant in a multiplex than in a duplex just because I don't like getting chummy with my neighbors, and that's hard to do in a duplex situation.

Anyway, for what it's worth.  That's my take on the drama stuff.

And otherwise, it's easy peasy dealing with pest control or inspections, etc., when you've only got one building.  I think more units under one roof is just better overall, including drama.

Austin Youmans · Answer

Just run the numbers on (2) duplexes and (1) fourplex in your area and see what is better. I think it depends more on the deals you can find and less on the number of units. I wanted a fourplex but could not find a good deal on one so I went to duplexes.

Jay DeCima · Answer

Hi Samantha

I posted this to someone else last week:

Let me make a slight change in what you are looking at that can have a huge effect on your investing.  Instead of a 4-plex, start thinking just a little differently.

My biggest success over the years came from buying GROUPS (5-8 houses) of older homes on a single parcel, in older, blue collar parts of town (not slums). Because banks will not finance these types of properties, 90% of the time I got seller financing (on over 250+ rental homes I had at my high point). The seller knew he/she would be taking back the financing. I did not have to talk them into it. My down payments usually were around 10%.

I suggest you read up on a few kinds of investing you are interested in and then pick the one you think would be the best for you, and one that will not require a boatload of cash to start. Then find the best mentor or expert you can in that kind of investing. Learn from that person and stay focused on their kind of investing. Find some of these mentors on a Google. See how many pages of results pop of for them.

I have written extensively in my blogs over the last several years.  You can view the blog by going to my website link in my BP signature below.

I also stated a BP blog last week and should post each week.

BP blog at   MANAGING YOUR TENANTS BY MAIL........KEEP YOUR SANITY

Good luck.

Fixer Jay DeCima

Mike R. · Answer

we own duplexes and well as larger buildings and i don't see a significant cost difference when you compare cost/unit or cost/sqft.  what i do notice is a different type of tenant.  In duplexes we find more established individuals/families, while in buildings with more units we see more transient behavior.  I think the differences is apartments (i.e., larger # of units) generally attract people that will not be staying longer than a few years (they get married, chance jobs, move, etc) while the duplexes "feel" more like a home and attract people looking for that stability and therefore they stay longer.  I made a LOT of general statements but that has been our experience.  However, that wouldn't make me afraid to buy a building with more units--its all about the Benjamins

Dave Carpenter · Answer

@Samantha Klein I think you could make a strong case either way. You many want to consider what your personality and investments strategy is a better fit with. I currently have 4 duplexes and have often times had tenants that are at similar stages of life and get along great. I think for them they like the larger units and many have planted gardens in the back yards. I think most times smaller units can be more profitable per door, but you do lose on efficiency of many units and one location. pros and cons. I would focus on which deal is better and then decide of one style of property changes your mind over the hard cold numbers.

Good luck!

Ryan Canfield · Answer

@Samantha Klein

Hi Samantha,

I'm struggling with the same dilemma.  I'm house hacking my second 3 flat in Chicago and so far it's been a positive experience.  I would like to find another flat to house hack but in Chicago, the buildings cost more and it takes longer to save up to put money down.  We've been pretty fortunate that there has not been any tenant drama in either of the houses and all the tenants cordial to each other.  I agree with @Robert Nason about, one roof to fix, one location to go to and manage.  There is something to be said about the convenience of it.

My personal opinion would be to go for the 4 flat based upon my experience so far.  Also, if you get capped at 4 residential mortgages, you could still theoretically reach your goal of 16 units!

Nancy Curran · Answer

I thought about that too. However, having several roofs means smaller fixes, or one furnace vs. an entire boiler to repair.  It is hard to decide but I've decided not to put all my eggs in one basket.

Account Closed · Answer

Good question.  If it's not that easy, maybe you could get a list of properties that are zoned for them.

In other words, a duplex probably has a zoning of R-2.  Whereas a four-plex would have a different zoning code.  Not sure if there would be a code for a four-plex, but you could find out and maybe narrow your search down by the zoning.

Less buildings and more units?

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