What to buy for next property???

Question

Looking for advice to streamline my Real Estate Plan and purchase of next property.

Situation:  Currently have two rental properties.  Property 1 is a SFR cash flowing $400/month with a conventional mortgage of 50% LTV.  Property 2 is a Vacation Rental Townhouse with cash flow of approximately $200 with conventional mortgage at 75% LTV.  I have access to 200k cash and an 85k HELOC.  Conventional financing is not a problem thanks to high income and great credit score.  I am looking to build my equity position more than need cash flow.  I also “Do Not” want to actively manage property.  My thoughts are to keep buying property for the next 5 years and then work on paying down debt for that 5 years after that.  10 Year Plan buying 2-3 properties a year would put me at 10-15 properties at end of 5 years.  I also consider cash on cash return a very important measure of my investing success.

My question:  Should I stick with conservative SFR or jump to MFR with higher cost and greater returns.

Patricia Steiner · Answer

The rental class that is in highest demand nationally is SFH.  One housing advisor reported that the demand for SFH portfolios (five or more SFHs) had increased by 650% following the pandemic (source:  https://www.globest.com/2020/04/29/demand-jumps-in-single-family-rental-market/?slreturn=20200420140840)

The greatest return in my market (Greater Tampa Bay) is with SFHs; tenants simply are willing to pay more not to have to share with "strangers."  Even houses that have a garage apartment are renting for less as the tenant renting the house finds less value if the yard and parking has to be shared.

Builders are now developing SFH rental communities as a way to hedge downturns in construction and capitalize on our year-over-year rental price increases.

The pandemic showed us that the worst was/is felt in highly concentrated housing markets.  Entering the "new normal..."  Hope this helps.