6 families or 3-4 families pros and cons
Member since 2019 · 38 posts · 6 votes
Im beginning to look at properties and every time i go over the numbers. Six families just make more sense then owning multiple threes.
Am i wrong?
@Michael Raposo HI Michael! As in everything...it depends! I prefer to have more doors under one roof than spread out over many (esp if you are self managing), but once you hit 5+ units its considered commercial and requires a commercial mortgage, which is more expensive, requires a greater downpayment and depending upon the location certain cities may have other requirements for 5+ units that you don't have for commercial. In NJ 3 or more units requires state registration with the Department of Community Affairs, which requires inspections from the state and other fees payable.
@Michael Raposo HI Michael! As in everything...it depends! I prefer to have more doors under one roof than spread out over many (esp if you are self managing), but once you hit 5+ units its considered commercial and requires a commercial mortgage, which is more expensive, requires a greater downpayment and depending upon the location certain cities may have other requirements for 5+ units that you don't have for commercial. In NJ 3 or more units requires state registration with the Department of Community Affairs, which requires inspections from the state and other fees payable.
I agree completely. More units under one roof is the way to go. The banks im use to dealing with require 20% down for any property bought thats nonowner occupied. I found a bank that does comercial lending and only requires the same 20%.
Bigger is better in my opinion if you're ready to execute on the ownership aspect of the larger property. Go for the 6.
It depends on what you want to focus on. If you want as many rental units as possible then multiple doors under one roof is best.
But if you want to maximize your net income single family residence is likely (depending on the area) a better pathway.
People who rent single family homes will stay longer, thus less loss of rent from turnover. Less time and money spend on refreshing the house as it is occupied longer. Generally single family houses will gain a higher rent than multis.
Multis have many more units that are turned over each lease renewal, unless there is something special like common areas-pool, fitness center, open use rooms, reception, playgrounds, picnic areas, etc. that builds a sense of community. This results in more cleaning, updating, loss of rent, loss of time to screen new renters.
A stove is a stove, etc. and they cost the same for regular size, but the smaller stoves, refrigs do have a higher price. Multis may require blacktop maintenance, commercial roofs, cleaning and maintenance of common areas such as hallways, grass, snow removal or not, depending on how big they are and how they are set up. When multis share systems such as HVAC you can get a lower cost for the system per unit, but then you also can not share the utility bill, so that bites you in the end.
With single houses, you have more travel distance to them for inspections, etc. They have larger sizes, generally so more maintenance. The rent per unit is generally higher than rent per unit for a multi.
You really have to look at the specifics of each deal to compare. For example:
I am in escrow for a multi now. The cost for the multi is about double what I pay for a single. It has double the square footage of a singe I usually buy. It has 4 units (3 two beds, 1 one bed), but also a garage with both a complete, but small kitchen and full bath, why? I have no idea! Maybe the landlord wanted it for clean up, snacks? I'll probably make it into an efficiency apartment, someday. 2 top floor apartments have their own electrical meters, 2 bottom floor apartments and garage share the one other electrical meter. Rent for a single about $1000-$1100, rent for the apartment likely $2400. BUT out of that I have to pay for trash, water and downstairs electrical. For the singles I do not pay for utilities. I also have blacktop maintenance for a larger area and a patio area that I hope they can keep picked up themselves. But for inspections there are 4 units that are adjacent, so hoping I can schedule all 4 inspections together. In this case its a wash. financially.
There are so many things to consider there is not a single answer that would have meaning.
@Lynnette E. Thanks for your reply but how much can you profit off a single family home? I own a 4 bedroom colonial and my mortgage with insurance and taxes included is $2100 and thats with 20% down. I cant imagine renting my home for more than $2500 per month but then again ive never looked into it.
@Michael Raposo I make money off the single families because I buy them as fixer uppers. Last one I bought is a 1900 house with 4 bedrooms, 2 baths, enclosed sunroom, large kitchen, and the two original front parlors. One parlor could be a bedroom (5th).
I paid $44k. It needs a new roof, $14000, large roof area and its steep requiring a special shingle, but then its a lifetime roof:). The Sunroom gets a rubber roof.
It has old 1970's paneling on the walls, 1950's fake tile in the kitchen. Kids and I will clean and paint over the paneling and drywall over the fake tile then paint. We tried today pulling the tiles off, and did one wall. Three layers of wallpaper over the tar paper over the rough wood slats. Better to drywall over. Cost, minimal, level of effort, lots of time! Real wood paneling in 2 rooms will remain.
So far the upstairs 3 bedrooms have had 3 layers of vinyl and 2 to 3 layers of carpet on them that we have removed. The stairs have 2 layers of carpet and a layer of padding. The old carpet is hard like a rock, then it turns into dust as it is pulled up. Big mess, but no cost. This flooring and stairs will be painted brown. Downstairs we will replace floor with vinyl planks if its flat enough. All the downstairs carpet likely will go too. Hoping there are less layers!
Sunroom ceiling and insulation will be replaced, all wet from a roof leak.
Replacing kitchen countertops, they are everything from wood paneling to 1950 laminate. Cabinets will be washed, and washed a few more times then repainted.
Will replace the upstairs windows, 3 out of 4 have broken glass anyway. That will be hired out too.
Also will hire an electrician to wire the upstairs bedrooms, each room has either one overhead light or one wall outlet. We need more outlets in each room, but will wire outside the wall. Will try to bring this floor up to code.
Water is not on yet, not until demo is done so not sure of plumbing issues, other than the hot water heater is sitting on a 10"x1"x3' board with foam filling in the other areas under the heater!
So house was bought with cash, will be worth about $125k when fixed, will rent $1000. Other than a few items, most of our work is in labor. About 1950 square feet, in Tennessee where cost of living is lower than most places. Everything is paid for in cash for this house. Insurance and taxes together are less then $1200 a year. If I paid for it with a loan and bought it fixed up it would not cash flow.
I see. Lynette. Now it makes sense. Paying cash really keeps the costs down. Im from Massachusetts where finding a 40k fixer upper is hard to come by but I’d reep the benefits of more rent.
I see. Lynette. Now it makes sense. Paying cash really keeps the costs down. Im from Massachusetts where finding a 40k fixer upper is hard to come by but I’d reep the benefits of more rent.
I buy the houses right after they are foreclosed on when I can. I have been offered several foreclosures that are not market ready and can get them fairly cheaply as they are cash only, won't qualify for most loans-broken windows, leaking roofs, etc. I can buy them as soon as they are vacant, owners evicted, their stuff gone, and the bank does not have to do anything for clean up, or put up with offers that will not pan out.
I am lucky to have found a realtor that lists a lot of the foreclosures. Then again, she puts in my offer, but cannot represent me, against the rules, and I am ok with that. I can represent myself. Works for us, but not for everyone, or many. And she likes working with me as I don't waste her time.
Was just told of a 3/1 little under 1000 sq ft house for $35k, AMV $70k. Ihave driven by and the yard and their car are both clean and taken care of. Hoping the house is too. Folks being evicted now, can likely see the inside early next week. It will be listed and marked sold immediately.