Apartment vs SFH Investing

2 Replies

It seems I read on BP more frequently that apartment investing seems to be better overall than SFH investing. I have always bought SFH's, but may be open to multifamily as an option. From an investor's point of view, what risks are there with apartments versus SFH's? It would seem that maintenance risks are only multiplied which is one of the main risks that pops into my head. I like SFH's in this way because I can compartmentalize risks around maintenance. How do you multifamily investors get comfortable with this and other risks that may not reside as loudly with SFHs? Or am I viewing this all wrong?

I would prefer to invest in apartments.

Hi Travis,

You are on the natural path which is most folks start w/SFRs like I did and then w/further study recognized their are some advantages w/MF I cannot get w/SFRs and the time hassles of more and more SFRs (loan challenges, etc) just don't get you excited anymore / natural limits. Now, I play in the big apartment space so keep that in mind. If you are a DIY person, then like anything, w/study you should start taking advantage of concepts like scale and perhaps forced appreciation where you find value add properties (5 units or more) and are now into a different valuation model which is income vs comparison value approach you are exposed to w/SFRs. Most would argue that w/some ingenuity and the right value add opportunity / purchase that the "ball is in your court" so to speak more so than SFRs in creating value. One example: We have a 320 unit apt in Dallas that we added a carport. It created $60K in extra income but added $1m to the FMV (read 1st blog link below for the workup). I don't think adding a carport to a SFR would really add much value especially if my neighbor has one.

If you read the blog below you may get a greater appreciation for it.  Now w/larger apts, it will likely take a team (syndication).  You can play as a limited partner (passive) but get a lot of advantages you cannot get in your SFRs such as geographic diversification, professional management to find, implement and reward investors w/o a lot of involvement on your side.  Or, you can decide to start along this path as a DIY, perhaps partnering w/some other folks who are knowledgeable in some aspects of the apartment business and you find a role to play such as bringing own capital, raising funds (small syndication), time (mgt oversight of business plan - asset mgr), or unique skills such as finding properties and doing the underwriting to put together the deal.  It really all depends on your time, energy, talents and resources.



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