BRRRR Single family or multi family
Good morning everyone, I had some general questions on which idea would be better to start off. I was looking into fixing up and renting a single family home but I just want to make sure I'm starting off correctly. Since the price of a multi unit is double or sometimes 3x the price of a single family home, would it be smart to start off with a SFH and scale up from there or just make the leap into a duplex that I can force some appreciation with minor repairs. Would like to know your thoughts about this thank you.
Most Popular Reply
From a lender's perspective, starting in 1-4 units gives you experience and many more lenders will be open to first time flippers in this space versus multifamily. It is possible to get 90% of your purchase price and 100% rehab funded as a first timer in 1-4 units.
For multifamily, leverages won't be as much until you have some experience not only with 1-4 units but also 5+ units. With experience, expect 15-20% on 5+ unit properties. Many lenders are also a bit hesitant with the current market for 5+ units. It's interesting to hear the different opinions and outlooks and how they differ from one lender to another. Many have an unfavorable outlook on the 5+ unit market for the next 2 years or so, while there are a few who are still hungry and actively funding deals in the space.
One major things to consider that many newer investors miss with 5+ units, is that if you intend to hold, the property will need to be at least 75% occupied and stabilized before you will be able to find reasonable financing terms. Refinancing to perm while vacant is almost never an option. While with 1-4 units, refinancing to perm when vacant is not that uncommon at all.
Cheers!
- Nick Belsky
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