One is better than Two?

Question

200k cash, would it be feasible to get 2 properties with 100k down each for rental? Or how would you go about it? SFH only.

Nathan Gesner · Answer

I prefer splitting the money and purchasing as many properties as possible, but I also recommend you retain a reserve to handle emergencies until you can build up your accounts. I try to keep 25-30% equity in all rentals and most of mine are actually closer to 50% equity.

In some markets, $200,000 will be enough to put 25% down on an apartment complex.

Will Fraser · Answer

Hi @David Jackson - two is better than one in most meaning here.  The only way one unit is better than two units is simplicity.  However, when you trade the simplicity of having only one unit for the economics of having two, you are beginning down the road of long-term stability.

If you have one unit, and the unit is vacant, guess what your vacancy rate is that month?  So when the bank's bill, or electric, gas, water, trash, etc come due it's on you my man.

If you have two units and one is vacant, then those costs are shared.  That's some beautiful stabilization in progress!

Holistically speaking, I would buy 4 houses at 25% down with my $200k.  Leverage at healthy levels is a beautiful tool.

Nathan Gesner · Answer

I'm from Wyoming so I don't know your market. Maybe $200k isn't enough in your area. I've seen apartment complexes in the midwest that are under $600,000 that produce really good net incomes. You could put $150k down, keep $50k in reserve, and have a nice cash-flowing property. It's a matter of researching markets, building a team of professionals with boots on the ground, and then finding the deals.

Consider reading "Long Distance Real Estate Investing" by David Greene in the bookstore.

Percy Matsunaga · Answer

@David Jackson

Definitely agree with Will. 4 properties are much better than 2. Hold on to your $200K and buy 1 property then keep working with whom ever you start with that 1st unit. Then keep building from there another 2-3 more properties.

Ozzy Sirimsi · Answer

I would definetely buy 2 of the 100K properties or one 300+ multi unit around Hopkins, and you will be good to go rent wise.

400K does not mean you always have easy peasy tenant and if you are vacant it is a lot of money to cover that mortgage or a lot of missed opportunity.

JC Cole · Answer

In my opinion, doesn’t make sense to buy a $400k property in Baltimore for a rental. Buying multiple properties at a lower price point would generate more cash flow, eliminate issues if there is vacancy in 1 property, example: if you were to buy 2 properties at $400k, that’s a sizeable mortgage to float if one goes vacant.

As was stated before, might as well go after a multi-unit at that point and get more doors.

David Jackson · Answer

So i'm a 30yo from Maryland. Six figure income from 9-5 job. I already have one rental and i know how good and bad rentals can go. I would want to invest in Maryland to keep properties local to me.

To avoid bad tenants, i was thinking to get 2 properties of ~400k each putting down 20% for each property. These properties would be good enough to have high income tenants which would in my opinion be a less hassle to manage/ maintain. I'm thinking like this because I already have 1 rental based on this scenario and i've had the best tenant, pays 2 months upfront as well. Your thoughts?

@Will Fraser you mentioned, "4 houses at 25% down with my $200k.". What about PMI as the down payment would be less than 20%. You've brought me to the right question now. Is it wise to leverage or give 20% on each property and save on PMI? But i do like the idea, 4 is better than 1. Would the banks be willing to keep giving me loans on properties for 25% of 200k down?

@Nathan G. I am from Maryland, can you please suggest where should i look for apartment complexes? I don't see anything good on Zillow or maybe i'm looking at a wrong place and apartment complex listings are on a different website?

Frank Wong · Answer

It really depends on your personal situation and what your goals are. Your age will play a part of this. Someone close to retirement and no time left I think paying cash makes a lot of sense. Buy it with low risk and high net. Someone who has a lot of time can take more risk. Leverage and buy multiple properties. Personally I like to buy 1 cash 1 leverage. This way you always know you got one locked up in a worst case scenario.

Steve Vaughan · Answer

Totally depends on you.  Most of the people I know outside of BP have no business owning 2 rental houses.  Feasible but not necessarily recommended.  It takes an emotionally flat person to deal with rentals.

Start small and see of landlording is a fit.  If it is, I would and do put 20-25% down on houses.  Buy right with equity capture at the buy either way.

Anna Sagatelova · Answer

This question, as nearly all threads in this forum, are very market dependent. Have you narrowed down a market yet, or are you going to find a market based on whether you decide to split up your capital into multiple investments?

One is better than Two?

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