Single vs. Multi-family

9 Replies | Los Angeles County, California

Is purchasing an MDU an aggressive move for a first-time buyer? I live in the LA County area so the cost of housing is exorbitant and I know an MDU would require more capital. Just looking for some guidance since I'm new to the process. Any advice is appreciated! 

@Andrew Lawlor Purchasing anything in Los Angeles is aggressive if your goal is to cash flow.  If you're looking to flop that may be possible.

Updated almost 3 years ago

*flip* not flop.

Originally posted by @Andrew Lawlor :

Is purchasing an MDU an aggressive move for a first-time buyer? I live in the LA County area so the cost of housing is exorbitant and I know an MDU would require more capital. Just looking for some guidance since I'm new to the process. Any advice is appreciated! 

 Hi Andrew. A duplex or triplex may be possible depending on where you are looking and your capital. I want to move from single family into multifamily myself, but I will say that as a newer investor, 2 or 3 or however many sets of tenants can prove to be more work than one, and you want to be mindful of that. I don't think it hurts to start with a single family or two and grow from there. 

@Andrew Lawlor

Hi Andrew,

Welcome to BP. I think everyone's situation is different, and each person's journey in discovering the kind of investor they want to be can be discovered by trial & error, or education through partnering with someone or learning through the books, podcasts or forums available to you. 

IF you have the funds to purchase a place in LA, then you can begin looking at options around you, You also have to recognize that if you purchase a place and inherit the tenants, all the downsides that come with rent control, the eviction process and of course the time and stress that can be associated with it. If that sounds like a challenge you want to take on, then there can be plenty of financial rewards. 

With the above, finding the right opportunity and doing your numbers should go without saying, and finding the ROI that meets or exceeds your goals should be what you work toward.

There are plenty of ways to make money in RE, find the one that excites you the most, and get down and dirty with it 

@Shiva Bhaskar  and @Nabil Suleiman Thanks for your insight. Are there certain areas in LA that you consider more risk-averse than others? I recall listening to a BP podcast where one of the guests recommended avoiding high-crime areas at all costs. Considering capital plays a significant role, would you avoid these areas? 

Originally posted by @Andrew Lawlor :

@Shiva Bhaskar and @Nabil Suleiman Thanks for your insight. Are there certain areas in LA that you consider more risk-averse than others? I recall listening to a BP podcast where one of the guests recommended avoiding high-crime areas at all costs. Considering capital plays a significant role, would you avoid these areas? 

 I don't think there are as many areas in LA that I worry about for the crime issues, as in, say, St. Louis or Memphis or Cleveland. I would avoid buying headaches, which includes, yes, warzones. The only areas I'd really avoid in LA are the Westmont area of South LA (90047), and also the areas a bit north (up to Slauson), and say a mile or maybe two west or east of the 110 freeway. 

A lot of historically bad areas like Compton and Watts have really calmed down and are seeing major appreciation (Watts has been crazy for that the last two or three years), and there can be good opportunities. Inglewood and Hawthorne were never great until relatively recently, and are now hot markets. Depends on what your capital situation is, but I think outside of the area I mentioned above, you can avoid crime as a major issue in much of LA. But, if you really want to avoid risks, West LA, most of the Valley, and the beach cities, are all low crime areas. 

However, if you decide to look out of state, or even in California cities like Oakland or Stockton or San Bernardino, you'll need to think carefully about crime. It is a real issue in those cities, more than in LA. 

@Andrew Lawlor

Hey Andrew, We all come from different life experiences and circumstances. So when it comes to areas, it really comes down to what you are comfortable with. Yes, there are podcasts that mention avoiding high crime areas, but there are also podcasts where people specifically work in areas that most people avoid... primarily for the reason that most people avoid it, and they have no issue with it.

If you are planning on managing the property yourself, then you need to know the kind of tenants you want to have, and that will help you narrow down which kind of neighborhoods you want to concentrate on. If you are hiring a property manager, then you can have more freedom with the decisions you make if you feel like certain areas are a factor that you wouldn't want to deal with. 

It took me about a year to figure out the exact areas I wanted to work in, and there are a lot of people that do not invest the way I like to, but I also don't like to invest the way they do.... Both are investments if they are purchased right, and if you know the number you want and how to get there, then taking baby steps to achieve that is what matters the most. Someone may have the means to purchase a 10 unit complex that cash flows 100+ right out the gate. Some of us want to keep it closer to home, and start at a much smaller scale.. then we build up from there... but if we never start somewhere then we stay stuck in analyze mode. 

Hey @Andrew Lawlor ..welcome to BP!

I agree with @Nabil Suleiman , that it's really what your comfort level is. I think purchasing an MDU is great for a first-time buyer but there are ways you can mitigate your risks. Partnering up with other people is a great way to get your feet wet if you don't want to go at it alone. Especially if you partner with someone who is experienced, you can learn a lot from that person and at the same time, share the risks and rewards. Then later on, when you get more comfortable and experienced, you can go off an venture on your own or partner with other people and you can teach them the ropes!

From your topic of single vs. multi-family, I prefer multi-family instead because it's faster to scale that way. I myself, like many others, started with a purchase of a condo, then to a single family, then to a 2-4 unit, now to commercial multi-family with 5+ units.

Figure out your goals and why you want to invest and work backwards on how you can achieve those goals. If you want to own 10 single family homes and cash flow from that, go for it! But you can also just own one building with 10 units, which would be easier to manage, and also cash flow!

Good luck on your journey!

I personally love 90047, not the whole zip, but certain pockets that are Inglewood adjacent are great.  This area also has non-rent control pockets of multifamily properties which is very rare for LA.  I always suggest starting with multifamily, due to it being easy to later purchase a SFR using FHA or low down payment conventional options.  If your first purchase is a single family, it eliminates your low down payment (3.5%) options for a multifamily property and you will need 20-25% to make it happen.  I live in Inglewood and can throw a rock and hit 90047, there is value there and my favorite pockets are within 2 miles of the Inglewood stadium development.


Originally posted by @Shiva Bhaskar :
Originally posted by @Andrew Lawlor:

@Shiva Bhaskar and @Nabil Suleiman Thanks for your insight. Are there certain areas in LA that you consider more risk-averse than others? I recall listening to a BP podcast where one of the guests recommended avoiding high-crime areas at all costs. Considering capital plays a significant role, would you avoid these areas? 

 I don't think there are as many areas in LA that I worry about for the crime issues, as in, say, St. Louis or Memphis or Cleveland. I would avoid buying headaches, which includes, yes, warzones. The only areas I'd really avoid in LA are the Westmont area of South LA (90047), and also the areas a bit north (up to Slauson), and say a mile or maybe two west or east of the 110 freeway. 

A lot of historically bad areas like Compton and Watts have really calmed down and are seeing major appreciation (Watts has been crazy for that the last two or three years), and there can be good opportunities. Inglewood and Hawthorne were never great until relatively recently, and are now hot markets. Depends on what your capital situation is, but I think outside of the area I mentioned above, you can avoid crime as a major issue in much of LA. But, if you really want to avoid risks, West LA, most of the Valley, and the beach cities, are all low crime areas. 

However, if you decide to look out of state, or even in California cities like Oakland or Stockton or San Bernardino, you'll need to think carefully about crime. It is a real issue in those cities, more than in LA. 

Originally posted by @Clarence Johnson :
I personally love 90047, not the whole zip, but certain pockets that are Inglewood adjacent are great.  This area also has non-rent control pockets of multifamily properties which is very rare for LA.  I always suggest starting with multifamily, due to it being easy to later purchase a SFR using FHA or low down payment conventional options.  If your first purchase is a single family, it eliminates your low down payment (3.5%) options for a multifamily property and you will need 20-25% to make it happen.  I live in Inglewood and can throw a rock and hit 90047, there is value there and my favorite pockets are within 2 miles of the Inglewood stadium development.


Originally posted by @Shiva Bhaskar:
Originally posted by @Andrew Lawlor:

@Shiva Bhaskar and @Nabil Suleiman Thanks for your insight. Are there certain areas in LA that you consider more risk-averse than others? I recall listening to a BP podcast where one of the guests recommended avoiding high-crime areas at all costs. Considering capital plays a significant role, would you avoid these areas? 

 I don't think there are as many areas in LA that I worry about for the crime issues, as in, say, St. Louis or Memphis or Cleveland. I would avoid buying headaches, which includes, yes, warzones. The only areas I'd really avoid in LA are the Westmont area of South LA (90047), and also the areas a bit north (up to Slauson), and say a mile or maybe two west or east of the 110 freeway. 

A lot of historically bad areas like Compton and Watts have really calmed down and are seeing major appreciation (Watts has been crazy for that the last two or three years), and there can be good opportunities. Inglewood and Hawthorne were never great until relatively recently, and are now hot markets. Depends on what your capital situation is, but I think outside of the area I mentioned above, you can avoid crime as a major issue in much of LA. But, if you really want to avoid risks, West LA, most of the Valley, and the beach cities, are all low crime areas. 

However, if you decide to look out of state, or even in California cities like Oakland or Stockton or San Bernardino, you'll need to think carefully about crime. It is a real issue in those cities, more than in LA. 

 Clarence, thanks for sharing. I have seen that there are some non rent controlled properties. I agree with you that the part right by Inglewood is good - I have also seen closer to the 110, on the other end of that zip code (i.e. past Normandie towards Vermont), and I think that section can be rougher, but as we know, people are making money everywhere - I'm sure it'll continue to improve in the future. Either way, Inglewood is absolutely on fire right now - I'll always wish I had gotten in there four or five years ago, but I think there's still plenty of upside in the long term if we invest now.