SFH vs. Apartments which one to pick?

Question

Hello fellas,

I am considering two investment strategies, both with pros and cons and wanted to hear some of your fantastic point of views.

• Considering I'll have aprox. 250K to invest

Option one

Purchase apartments with 25% DP, good for maybe 3 of them based on prices I am seeing. I could probably get aprox $1,000/door in cashflow (only considering PITI+HOA for simplification)

My concern with apartments is always the potential for special assessments that could wipe out months, if not years of income.

Option two

Purchase SFH with 10% DP, good for maybe 6. ( I could place some under my name and some under my wife's name to stay with limits). cashflow is aprox $500.mo, half of option one. I am looking at newer houses that would require less maintenance.

In total I may get aprox the same cashflow but:

- Option one requires less properties to manage

- Option one has the potential of special assessments where option two wont.

- I am under the impression that apartments require more management than houses (some odd thinking without any basis, just gut feeling)

- Option two would be at about 2hrs driving

What would you do?

Bjorn Ahlblad · Answer

@Allende Hernandez Two hours away is fine with a decent PM. Apartments with an HOA are too much risk IMO. Why not a couple of 4 plexes in a good area? Conventional loan, cash flow, easy to qualify etc.

Adam Martin · Answer

Are you planning on self managing or hiring a pm because that comes into play.  I personally like sfh because I self manage and put all yard maintenance and snow removal on the tenants.  It is very hands off once you have good tenants.  I do question your financing plans though because I’m not aware of how you will get financing for investment property at 10% down but if you have a way I’m sure we would all be interested.  I feel like apartments are more work and personally I am trying to keep this as passive as possible while still self managing.  With apartments you are also managing more people which while that spreads risk that also increases effort and the number of appliances and turnovers you are responsible for.