BRRRR strategy with multi family or single family properties?

Question

Thinking about trying the BRRRR strategy but didn’t know if multifamily or single family properties worked better? Having a hard time figuring the ARV on multifamily properties.

Account Closed · Answer

This recent thread will answer your questions.https://www.biggerpockets.com/forums/311/topics/729336-rant-stop-using-bad-math-to-analyze-real-estate-plus-a-hot-tipThe profit for multi-family properties is about 500% more that single family properties when you know what you are doing and you can purchase multi-family properties for about 30% to 40% less per unit. When looking at multi-family properties you do think in think in terms of 'ARV'. Most of the money made with multi-unit properties is earned the day you close escrow and increase the rents and when you increase the rents every year. You cannot analyze multi-unit properties properly like you would for a single-family because they are two entirely separate animals. The value for single properties is limited to comps in the area. The value for multi-unit properties revolves around gross annual income just like every other business.

Mike Sedlacek · Answer

With multi-family dwellings, especially if managing them yourself, one of the things you must account for yearly and every few years is replacement costs of appliances, HVAC systems, roof, locksets, etc., a budget for monthly/yearly  maintenance and grounds keeping, eviction costs, monthly/yearly management fees and increases. A budget is crucial a real must or you may find yourself in a shortfall hard to recover from. You have to treat these buildings as a real business entity. Now figure your ROI yearly and even monthly and determine if that property was a good investment and not something that turned you into a glorified janitor. Just saying.