Fewer large investments or many small ones?

Question

I am currently house hacking by living in my granny flat and renting my 3 bedroom house, but currently have no other rentals.  I have the funds to purchase a few small rentals or a larger multi-family, and would like advice on where to start.

What I'm currently weighing:

* Multiple cheaper rentals spread risk out, but multiply the effort (rehab, lower income tenants, more repairs, etc)

* A single larger multi-family focuses the risk a bit, but has less long term effort (little to no rehab, higher income tenants, etc)

* Each property means a new loan which means higher interest rates... Not sure how quickly this stacks up or if it's more based on total overall debt.

Any advice would be greatly appreciated.  I generally want to keep my roof count lower especially to begin with, but I know smaller investments can have greater CAPs.  And slum Lord is also not a term I want to be associated with.

Thank you for your input.

Taylor L. · Answer

Agreed with @Joshua Parr, there is no right answer, just what's right for you. We have large properties because the scale allows us to hire 3rd party property management and other partners who specialize in the things I don't want to do. More units in one place help with economies of scale a lot and will keep your travel budget down as well!

Joshua Parr · Answer

No right answer, just the answer that's right for you. Personally, I think fewer properties with more units is the way to go. Like you said, less closings, less loans, easier to keep track of, etc. Most people will say with single families you can get better returns overall but I know people who get great returns on multi-units as well. The multi-family properties are going to make it easier and quicker to scale up. That's just my opinion though.

As long as you have quality properties and treat tenants fairly, there is no reason anyone should associate you with being a slumlord.

Best of luck!