BRRRR or down payment on multi family?

Question

Hello I’m just getting started out and I’m very excited. That said I own a three bedroom two bathroom single-family unit in Michigan. I have quite a handyman background am in currently beginning the remodels to raise the equity. Basics like new floors paint etc. my question to everyone is should I raise the equity and take the money to buy another single family or use the money to make a down payment on a multi family unit?￼

Zeke Francisco · Answer

@Michael Glist

Thank you for the reply. I need to dig deep and truly analyze my goals however I do believe I’d like to start building a portfolio that nets me an average of $10,000 monthly in the next 5 years.  Since I’ve only had one rental and that was technically a roommate I’m feeling I might want to start first with a single-family unit that’s small but still generates after a rehab. I plan on self managing initially so it seems wise to start small. Earlier on the bigger pockets podcast I heard of the stacking method, by a single family-duplex-quadplex-8 unit-16 unit-32 unit.. this seemed enticing and a good way for someone with my low experience to get started.. thank you again for your response, the thoughts that are provoked could be priceless to my future👍😎

Landon Bleau · Answer

Zeke, definitely have to look at what your goals are.  I would say most people want to build up their portfolio so most would recommend buying multifamily, however, if you're able to get a killer deal on a SF, close on that. Make sure you look at your returns for both, whichever is greater, go that route.

Michael Glist · Answer

I would say this will depend on what your goals are.

If you are looking to build a large portfolio that you will self manage, you will want to make sure that you are able to manage everything on top of what you are already doing.

If you are looking to build a portfolio and pass it off to a property manager than you will need to make sure that all your numbers work with paying a property manager.

Although a multifamily would give you more units and potentially more cash flow it may also be more work which you may or may not want or be ready for. You can also look into purchasing a few SFRs and growing that way.

Zeke Francisco · Answer

@Landon Bleau

Thank you for the reply. I need to dig deep and truly analyze my goals however I do believe I’d like to start building a portfolio that nets me an average of $10,000 monthly in the next 5 years.  Since I’ve only had one rental and that was technically a roommate I’m feeling I might want to start first with a single-family unit that’s small but still generates after a rehab. I plan on self managing initially so it seems wise to start small. Earlier on the bigger pockets podcast I heard of the stacking method, by a single family-duplex-quadplex-8 unit-16 unit-32 unit.. this seemed enticing and a good way for someone with my low experience to get started.. thank you again for your response, the thoughts that are provoked could be priceless to my future👍😎￼