Which would be better for appreciation?

6 Replies | Salt Lake City, Utah

This is a super vague question but I got thinking about it today and thought I should get some insight.

We are selling one SFR which should give us enough for down payments on 3 new SFRs or a down payment on one fourplex plus maybe one more SFR if we're lucky. The fourplex option gives us more doors, but I was thinking about appreciation. It seems like the more separate properties you own, the higher appreciation you're likely to see. In that way SFRs would be the better option as far as gaining net worth. Multifamily would be easier on management and repairs. This mainly stems from conversations where "everyone's house has gone up $100K in value" whether they paid $180K for their house or $480K.

I don’t think the premise is correct here. Lower-priced homes have appreciated at a higher rate in this cycle, but it is definitely not true that every house in SLC has gone up by around $100,000. I have single family in different price ranges in SLC, but the high end one I have in the avenues has gone from $515k to probably $800k in the last 7 years.


My hunch is to not worry about that metric as much and focus on cash flow, property condition, and ease of management.

ROI &/or cash flow would be worse on more expensive houses but I would expect them to appreciate more (under jumbo mortgage limit where appreciation may be lower.) but I also think almost all houses will appreciate more than 4plexes. The 4 plexus are better cashflow play but who's your buyer 95% of the time?

I’ll give you a hint, it’s another investor who won’t be emotional about getting their kids in to that school, or love that yard/kitchen/whatever. They’ll want a deal, they will only see the negatives and cap rates are currently pretty compressed. 


@Travis Fisher I completely understand what you are saying. I agree with the idea.
I think you would get more appreciation on more SFR rentals. However you can only finance so many and it could be hard to juggle a large number of SFR as far as property management as opposed to multi family. Personally Where I see exchanging properties to larger multi unit is when you are reaching your max amount of properties you can finance. I have found after 5 it starts to get more difficult, 10 being the max. That being said once one gets closer to their max I would sell a couple, buy a multi unit or small apartment complex with the proceeds which then dropping those few opens you up to buying a few more single family again on the loan side.

Originally posted by @Travis Fisher :

This is a super vague question but I got thinking about it today and thought I should get some insight.

We are selling one SFR which should give us enough for down payments on 3 new SFRs or a down payment on one fourplex plus maybe one more SFR if we're lucky. The fourplex option gives us more doors, but I was thinking about appreciation. It seems like the more separate properties you own, the higher appreciation you're likely to see. In that way SFRs would be the better option as far as gaining net worth. Multifamily would be easier on management and repairs. This mainly stems from conversations where "everyone's house has gone up $100K in value" whether they paid $180K for their house or $480K.

 I totally agree with Cherie. 

I've read that the maximum house limit varies per-lender, and portfolio lenders--particularly local ones--will allow you to go well beyond that. For example, sometimes you occasionally see packaged portfolios of 20+ properties for sale on LoopNet which are a mix of SFH, Duplex, Fourplex, etc. Those may have a single loan carrying all of them.