Multifamily vs Single Family

8 Replies | Louisville, Kentucky

Hello all, last night KREIA had their monthly meeting, around 250-300 people showed up. The topic was multifamily rentals vs single family. I wanted to hear how you weigh in. My out of state investors tend to focus on multifamily. Single family seem to be much easier to BRRRR.

@Rob Bergeron Great topic. Having done both single-family and multi-family, I find the following to be true to me. Single-family is great to get started, build some capital up, get great hands-on experience and be active in real estate. Multi-family is great once you have some capital build-up, you've become an accredited investor and you prefer to be passive in your investing approach. I started with single-family fix and flips, buy and holds and vacation rentals and eventually transitioned into multi-family apartment syndication investing. "Live where you want to live and invest where the numbers make sense" - The Real Estate Guys?

One of the biggest advantages of multifamily is management. Of the single family owners at my meetup, 90% self manage their own single families. If you don't want to deal with tenants, multifamily has the margins to hire thrid party property management. From what I've observed, single families may or may not have the necessary margins.

Love the feedback. I love carrying single family for multiple units to appreciate, but multifamily seems to be the easiest way to scale quickly. Great to have amazing options! Go where the deal is! 

@Rob Bergeron Great topic indeed. I’ve only done single family and find it hard to understand why I should go into Multi-Family. My returns are so much better than what multi-family offers currently.

Good question O'Neil. I suppose that depends if you are an accredited investor or not. There are some opportunities out there for non-accredited investors who offer very low minimums like 5k, 10k etc. Most 506(c) offerings (accredited only) have minimums of 25k-100k. "Cash flow" really doesn't get exciting until you have enough capital backing it. For example, $10,000 invested @ 10% a year is only $83.33 a month; however, $100,000 invested @ 10% a year is $833.33 a month. In my scenario, I did fix and flips and single-family value-adds while working a full-time job to accrue enough capital to start investing in passive syndications. I would not have started passively without having some capital to work with. Hope that helps! 

I would say it depends on the financial situation of the investor.

Yes BRRRR works better on single-family. At the same time this isn't a strategy for everyone. It takes a lot of self-education, time and effort that not everyone can or is willing to do. Basically the investor is exchanging their sweat equity for additional return, and is best suited for someone that has more time than money. Lots of times they are pretty new, and their inexperience causes them to make one or more expensive rookie mistakes. A new BRRRR investor has to be okay with the risk reward trade-off.

If someone is in the opposite situation where they have more money than time, then BRRR is not a fit and they are looking for a passive investment. In this case, they have more options. SFR and MF both have their pluses and minuses, and in my opinion neither is a straight out winner in all cases. I personally feel a balanced portfolio needs to have both, and that's what I do myself. There have been some recessions where SFR has done better than MF and others where it's been reversed. So by diversifying, a person is best protected.