Instead of 3 by 2 is it okay to buy 2 by 2 or 2 by 1 or 1 by 1 sfh

Investor · Atlanta · Member since 2019 · 597 posts · 99 votes

Hi,
My market 3 by 2 sfh are expensive no longer meeting 1% rule. I do not like townhomes and candos due to restrictions to rent. Can I look instead for 3 by 1 or 2by 2 or or 2 by 1 worst case like 1 by 1 sfh. Please advise

0 Reply

309 views

5 Replies

Jump to latestLatest

Sort by

Ashish AcharyaBusiness Member
CPA, CFP®, PFS · Sarasota, FL · Member since 2017 · 5k+ posts · 3k+ votes
1w
Gp, I wouldn't force yourself into a 3/2 just to meet a traditional property profile if the numbers aren't working.
I'd compare the different configurations based on rent per dollar of purchase price, realistic expenses, tenant demand, vacancy, and how easily you could exit or refinance later. A smaller 2/1 or 1/1 can sometimes outperform a larger 3/2 if the purchase price and rent ratio are better.
From the tax side, I wouldn't choose the property type based on deductions alone. The depreciation and other tax benefits can improve the after-tax return, but they shouldn't be what makes a deal work.
If you're open to different unit mixes, I'd probably build your buy box around the return and demand you're targeting rather than locking yourself into a specific bedroom count.
[email protected]941-914-7779
INVESTOR FRIENDLY CPA®4.9242 Reviews
Website View Page
TaxMD® | Tax Planning Software
Website View Page
0 Reply
James JonesPro Member
Investor · Collierville, TN 38017 · Member since 2017 · 1k+ posts · 747 votes
1w
Gp, I would not drop to a 2/1 or 1/1 just because a 3/2 in Atlanta no longer hits the 1% rule. In Memphis a 2BR rents for less and sits longer. A 3BR hits the Section 8 rent band and the 1% rule much easier.
My play is to buy the 2/1 cheap and convert it. I buy single-family under $100K, convert 2/1 to 3/1, often adding 400-650 sq ft by turning a carport or garage into a master bedroom and bath. I also do 3/1 to 3/2, 3/1 to 4/2, and 2/1 to 4/2 when the layout allows it.
My test is simple: buy under $100K, ARV $180K-$265K, Section 8 rent $1,395-$1,950 for 3BR and up. If a deal does not hit that, I walk away. I never put earnest money down, and deal flow is the bottleneck — not forcing a smaller house to work.
0 Reply
Ametria Chaney
Realtor · Memphis, Shelby County · Member since 2026 · 425 posts · 140 votes
1w
Gp, yes — a 2/2 or even a 2/1 can be a fine rental, and I agree with Ashish that you shouldn't force a 3/2 just because it's the 'standard' box. The question isn't the bedroom count, it's who will rent it and for how long. A smaller home usually rents to a smaller household, and a one-bath home has a smaller tenant pool, so I'd want to see honest rent and vacancy numbers for that exact configuration in Atlanta before I stretched for a 3/2 that doesn't pencil.
Two things I'd weigh: first, how the home resells later, because a 3-bedroom almost always has a wider buyer pool when you exit; and second, whether the smaller home still leaves room for a real reserve. If the smaller home cash flows honestly and the bigger one doesn't, buy the smaller one.
0 Reply
Noah WrightBusiness Member
Lender · USA, Nationwide · Member since 2024 · 495 posts · 154 votes
6d
Yes, and steering clear of condos because of rental restrictions is a good instinct to trust. If you plan to finance one of these, the smaller the house, the more the loan side matters. On a DSCR loan the lender usually works off the appraiser's market rent figure, and that number comes from comparable rentals of the same kind. A 2/2 house usually has plenty of comps. A 1/1 house often doesn't, so the rent can come in lower than you expected. Many DSCR programs also have a minimum loan amount, and some set a minimum square footage, which a cheap 1/1 can miss. A house is only as financeable as the comps behind it. What price range are the 2/1s you're seeing? That decides whether the loan clears those minimums.
[email protected]737-773-3717
0 Reply
Gp G.
OP
Investor · Atlanta · Member since 2019 · 597 posts · 99 votes
6d
What minimum purchase price dscr loan need? I prefer around 100k sfh purchase price properties
0 Reply

Join the conversationCreate a free account to reply, vote on answers and follow this thread.