Duplex vs single family

9 Replies

Side by side duplex in a B/C+ neighborhood with minimal appreciation projection. 160k purchase price, minimal current repairs needed

Single family home in an A/B+ neighborhood with expected appreciation. 160k purchase price - 15k-20k repairs needed.

Cash flow is nearly the same for both.

Which would you choose?

I have a number of single family homes and I’ve been looking to move into multi family but when I run the numbers... cash flow seems to be nearly the same but appreciation is lacking in the multi family.

Looking for insight here

Thanks in advance.

It seems like the single family property would be the logical choice in this case, although I'm surprised the cash flow would be nearly the same. Depends if you have a better use for the money than spend it on a rehab.

What neighborhoods are the properties located in?

@Blaine Kosek It depends on your strategy. Would you move into the duplex??

If you are looking purely at cashflow, then the SFR sounds better. If managed well in a B+/A area, then it's reasonable to expect a stable renter and someone that will care for the home. Also it sounds like you could hit more real estate profit centers (tenant paydown, cashflow, appreciation, depreciation, inflation hedge). The biggest issue is you are 100% occupied or 100% vacant

However, I'll say my duplexes rock because if one side goes vacant, then I still have income coming in on the other side to cover costs. But it sounds like you will be giving up appreciation (which is honestly, the icing on the cake).  I'd vote duplex for scaling. 

Basically in my opinion multifamily gives better cash flow (generally) and better rich mitigation (2 units instead of one) and single family give better appreciation (obviously dependent on the market)

@Paul De Luca

Thanks Paul,

Most of our single family homes are in Downers Grove, Naperville, Plainfield. This duplex I’m considering is a little outside our typical area, in DeKalb where rents are significantly lower, but because it’s a duplex it evens out.

Originally posted by @Blaine Kosek :

@Paul De Luca

Thanks Paul,

Most of our single family homes are in Downers Grove, Naperville, Plainfield. This duplex I’m considering is a little outside our typical area, in DeKalb where rents are significantly lower, but because it’s a duplex it evens out.

I'm changing my answer to the duplex but it still depends on other factors like ease of management due to distance and long-term direction of your portfolio. But, you'd get a better CoC return from the duplex. Go with your gut though.

 

@Blaine Kosek I vote duplex. I’m sure with having other properties you have experience vetting tenants which would be my major concern, 2 sets of tenants instead of 1.

But all things considered over time with urban sprawl this duplex may end up getting some appreciation depending on how long you hold it if more people move away from the city.

And as others mentioned if one set of tenants leave the other set pays some of the bills if not all of them.

@Blaine Kosek I would tend to lean the SFH in the areas you are talking about. In Dekalb, the rents will be lower as you eluded to, or you may be renting to students at NIU which could incur more expensive YOY. As you probably know, the SFH homes in the area are very strong and you should never have any long term vacancies or problems when you go to resell. Neither sounds like a bad option, just my $.02