Multi-Family Homes or Single Family Homes or Other?
I just wanted to get some opinions from fellow Bigger Pocket members who have had experience... What is your preferred type of rental property and what type of ROI are you yielding? Thanks!
There's some previous discussions on it if you just use the search bar.
Also check out Podcast 61 with Ben Leboyvich from a few weeks back. (Click on the "learn" tab above)
One of the more interesting points he made was that on a multi-family, you can force appreciation.
Hi @Frank Scala ,
I recommend investing any type of multi-family. I don't suggest a single family. Here is why:
Say you get a bad tenant, and they decide to stop paying. Then you have to evict them, then the place is trashed, then you have to clean it up, then you have to bring it back to rent ready condition. Often times this will be a slide of over $10,000 before you can get a new tenant back inside (and hope they don't put you in the same situation). My methodology when it comes to investments is having as many revenue streams as possible in the event one of them dries up (Ie: a deadbeat tenant). This way your other revenue steams (other units in the building) can help offset costs you will incur from a bad tenant. The thing with a single family is that it is one very large revenue stream, but it is a risky one to bank on. I have had successful rentals of single families, but it is from investors who have purchased it outright and have no note on it.
Though I don't have any, I'd much rather multi families over single.
@Frank Scala Besides the pros and cons you will hear from proponents of each, there are also market specific biases that might make one or the other more profitable in some places. But in reality, both have advantages depending on your personality, your goals, and even your risk tolerance.
Say you get a bad tenant in a MF. They effect the attitudes of other tenants before you notice it. Now you have one big nightmare because a whole block of tenants is causing trouble, arguing, etc.
In other words, both have a down side, both have an up side. It is a personal preference thing more than anything.
What's better pepsi or coke?
It's a matter of personal preference. I prefer duplexes.
I would say it depends on where at - what discount per door your receiving MF, how much more you are getting in rent SFH, type of tenants you are dealing with, etc.
One big advantage starting out is buying a 2-4 and live in one of the units, allowing all of the advantages of OO and still acquiring rental units.
Rentals that cash flow are my favorite. I have both, and there are reasons. In my area taxes are high, and multi units offer a lower tax rate "per door." SFH tend to be in stable, "nice" areas. They offer less risk, and greater theoretical appreciation.
There is no single answer to this, just like any real estate question. It's 1000% different from one market to the next. I buy SFH because in my market because they are cheap and command higher rents...but more importantly to me, I have a reliable exit strategy from SFH in this market. Your resale market of a SFH vs MF is exponentially larger if you decide the property isn't working out as you expected. I've seen some of the nastiest baths taken by people on MFs, but pretty rare around here for SFH.
But where you are may be 180 degrees different. There's no right answer.
All real estate is local, so it depends on your market and your goals. Remember that real estate makes you money in three ways. Cash flow, appreciation and mortgage pay down. SF and MF will potentially perform differently in these three areas, so it depends on your plan.
For example, a MF might cash flow better, but won't appreciate as fast and can't be exited as easily, so therefore is maybe a better choice for a long term buy and hold. If you want to be in and out of the property in a few years, then a SF might be a better choice.
There are advantages and disadvantages to both. For example:
Less Money to Purchase
Don't have to pay any utilities
Sometimes a higher class of tenant who will take more of an "ownership" mentality
Economies of Scale
Less Risk of Vacancy or Economic Vacancy Because it isn't all or nothing
Less Difficult to manage (than say multiple properties)
In my opinion, unless you are focusing on large properties, you go where the deals are, regardless of whether they are multi-family or single-family.
I think it's matter of your personal preference...
I do prefer with duplexes..:)
Its is mostly personal preference. . . Cash Flow, Time Commitment, Renter Demographic. These are only a few things that change when comparing SF to MF. Define your Goals in investing, Learn the business, understand your areas market and I believe this choice will become easy.
Awesome knowledge and thank you for sharing it with us. I have more experience with SFH than MFH. Where do I start looking for MFH and what are things I should be looking for? And if there is a topic already started about this I apologize I just could not find it.
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