Investment Homes : Single family vs Duplex ?

Question

Curious, what should be the approach of wealth building through investment homes for Buy & Hold strategy for atleast 5-10 yrs. What are pros and cons to consider investing in single family vs duplex homes. Appreciate your sincered advice and guidance as I plan to scale more investment homes ahead

Ryan Howell · Answer

I own small multifamily in the Asheville area, mainly because that's what I can find in my market that cash flows well.  You will tend to have more complaints from tenants living next to each other compared to single family.  I like single family from an exit strategy standpoint, because you can sell to an owner-occupant where a duplex is likely an investor-buyer.  I wouldn't push you one way or the other.  I think it depends on your goals and market that you are in.  I want cash flow to mitigate risk and value-add so I can BRRRR.  Based on that and my market, single family is more difficult.

Also, consider the lending perspective.  If you are going to leverage conventional loans and want to take every advantage of the low interest rates, multifamily will help as @Jody Sperling pointed out.  Assuming you can meet the DTI with 10 loans, you could have 10 fourplexes vs 10 single family's before having to go to other lending options.  You typically will get a higher LTV with single family though.

Jody Sperling · Answer

For the sake of ease, standard, single-family-homes are the properties to target. They're simple to comp, simple to show, simple to sell, and simple to buy.

Multifamily, including duplexes, increase your door count faster, reduce your vacancy percentage, and improve your loan position because you can have more doors with fewer bank notes.

I prefer single family property over duplexes in most cases because they're easier to find, the odds of long-term renters increases, and the typical tenant pool tends to be more economically stable than those looking to rent a duplex. (Any time you generalize, there are going to be outliers, but I find a few general guidelines help me to analyze quickly and define what is the best fit for me.)

If I found a large duplex big enough for my family to occupy one side, in a neighborhood we felt comfortable in, I'd snatch it up and house hack though, so a duplex for cost-sharing would be a huge win if that's something you'd be open to. Best of luck!