SFR or MF in Beloit and Janesville - Which has better cashflow?

13 Replies

Hi All,

I'm an out of state investor looking into the Beloit / Janesville areas. I'm seeing on the MLS single family homes for around 60k that will rent for $1,200 which is a great return. However, I was surprised to see MF such as 2-4 units listing around mid to high 100k.

In your experience are the multi family or single families seeing a better CoC return? Especially interested in the BRRRR strategy and cashflow would need to be high to make it worth it after refinancing.

Thank you!

@Jeff Stansberry , you obviously have to analyze every deal, but generally multi-families provide better returns for 2 reasons: 

  1. They don't cost multiple what SFRs do (i.e. a 4-family doesn't cost 4X what a SFR does) .
  2. With multi-family you start to see economies of scale.

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I'm sure you can find deals there in both SFH and MF. Economies in both of these communities are still recovering after losses of major industry years ago. Be wary of neighborhoods - just like in every community - as well. Overall, both are generally good areas with hard-working folks. I personally have not invested there, but wouldn't be against it. I also agree that I see better returns on MF for the same reasons Jaysen mentioned.

Jeff,

The multi-family market in Janesville and Beloit are both extremely hot right now. However, all forms of rentals in the area are extremely high performing at the moment. I manage over 125 in the area and can attest to returns being very high at the moment. Neither one is a bad deal, but MF investing is harder to get into at the moment. 

@Calvin Ozanick Since you are in property management. How much less would rent be for a 3 bedroom MF unit vs a 3 bedroom SFR?

@Jaysen Medhurst I agree with multi-family you will economies of scale but higher turnover in units = more expenses as well... But agree you need to analyze each deal on it's own. 

@Jeff Stansberry it all really depends. Based on two specific units we manage currently here are the numbers:

Janesville 3 Unit MF: 78k purchase price/ rents for $685, $675, $500 and the owner pays the utilities. 

Janesville Single Family: In the right area, the homes in Janesville can rent for upwards of 1200-1500. However, those homes are going to cost you closer to 100-120k. 

FYI - The $60K houses in Beloit/Janesville do not rent out for $1,200 per month. I'm guessing you may have talked to an agent who is prevalent on here promoting those types of deals. I have about 75 rentals myself in this area and the typical 3 Bed 1 Bath house for $60K will rent out for around $900/mo.

@Chris Heeren Thanks for the reply and you are correct regarding that agent promoting those types of deals. In your portfolio of rentals do you have any MF? If so, how do they perform overall vs the SFR? Thanks

@Calvin Ozanick  

What would you say the difference in rent is per month for a 3 bedroom 2 bath SFR vs the same in a MF unit?

@Jeff Stansberry

If cashflow per door was the same in this area for both asset classes, which would you target?

Since you're looking for good BRRRR opportunities, outside of cashflow the next question I would ask or research are the values of said properties. After an initial scan of the inventory you could narrow your search down to properties with 30+% potential equity. Then do a deep dive on those properties to explore those specific areas and the rents those assets command.

@Jeff Stansberry I don't have personal investing experience in Belot/Janesville or with this agent mentioned, but my business partner does. He has invested in at least 6 properties (possibly more at this point) in those areas, most of which are through Scott Sklare (the infamous agent being mentioned). He's does indeed receive $1,200 in rents every month from his properties through Scott. 

Again, I don't have personal experience with these properties in my own portfolio. This is just what has been relayed to me by my partner. I'll tag him here so you can ask his opinion personally. @Dave Corfman

Originally posted by @Jeff Stansberry :

@Chris Heeren Thanks for the reply and you are correct regarding that agent promoting those types of deals. In your portfolio of rentals do you have any MF? If so, how do they perform overall vs the SFR? Thanks

I'm finding long term my single family are producing better numbers than multi family. Keep in mind I'm paying about $40k for the $60k properties fully rehabbed. My mortgages are between $35k-$45k and rent out for $900. My multi Families are also around $40k-$50k and rent out for $600/unit. Overall turnover on the 2 bedroom units eat up the extra profits. It's easier to find a good deal on SFH than Duplexes at the moment.

@Chris Heeren Thanks for that information! As I look into the market more that is what I am finding as well. The key is getting the properties and rehabbing them for as low as you are doing. Hopefully I can get something going soon...

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