Should I offer on this multi-family that cash flows $300/mo?

Question

My agent just sent me a 4-unit property that rents for $600/door. My conservative estimate is that it will cash flow around $300/mo total. My other property in the area (SFH) cash flows $200 and the purchase price was half as much.

Is it worth investing in a multifamily that does not cash flow that much better than a single family home? I am not sure if the extra work associated with a multi-family makes it worth it.

Jonathan Greene · Answer

4 doors for $300 total is not worth it at all. Risk to reward ratio is not there. One major repair will ruin you for two to three years. You would be managing four tenants, four sets of appliances, four furnaces, four hot water heaters for $300/month. There is no value in that.

Jeff Plotkin · Answer

Thank you @Theresa Harris and @Aaron Hollingshead!

This makes sense to me. Unless I can get a steep discount on the purchase or if I think I can rent it for more than the current rent, I won't pursue. The block is filled with identical multifamily properties and it looks like the other units are renting for over $700 per door, so I'll need to investigate this possibility.

Aaron Hollingshead · Answer

Based on what you said, it probably wouldn't make much sense to invest in that property. The whole benefit of multi-family is the economy of scale. So if you're getting less per door, then you're missing out on the benefit of multi. I have a quad with average rents of 575 per unit and I paid 65,000 for it. After repairs and upgrades I'm all in for right at 100,000 and I cash flow more than 1,000 each month. So to me the deal you're describing doesn't sound like it leaves much meat on the bone.

Theresa Harris · Answer

The difference is if one unit is empty, you are still getting rent on the other three. $75/door is not a lot, but the rent is only $600/door. Why not look for two single family homes like your first rental? Your investment would be the same and assuming everything else is equal, you'd cash flow a total of $400 a month ($100 more than you are now, or double what you'd get for the multifamily).

Should I offer on this multi-family that cash flows $300/mo?

Should I offer on this multi-family that cash flows $300/mo?

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