All Forum Posts by: Justin Brickman

Quote from @Justin Brickman:

One of my client's asked me if I had to choose a portfolio between one 15-unit apartment or five single family homes, which would I choose? If all numbers were equal (purchase price, repairs, cash flow, expenses, etc). I know my answer, but I thought it was a good exercise to see how some of you would answer in today's market.

Like V.G Jason says above, there is a lot of information missing that could help answer this properly. But considering this is all cash AND assuming that your client can qualify for a commercial mortgage (there are very different requirements and lenders want to see past experience managing similar size portfolio), then these are my thoughts:

- If both 15-unit apartment and 5 x SFH homes cost the same, this may mean very different things in terms of valuation. Assuming both are selling for $1 million, then this means you have to assess whether the 15-unit apartment is truly valued at this based on cap rate and NOI. But your SFH portfolio valuation may be a combination of NOI and/or comps. So you have to figure out which is a better value. In addition, where they are located will also play into future appreciation.

- Another factor to consider is efficiency. Obviously, an asset with one roof (assuming 15-unit has one large roof), one location, one insurance etc, is relatively easier and efficient to manage compared to dealing with 5 SFH roofs, different locations etc.

- The most important exercise would also be to figure out exit strategy. In terms of 15-unit apartments, this is could be exit after BRRRR strategy. Which can be accomplished by forced appreciation, provided the market will bear possibility of higher rents. Similarly, SFH exit would be appreciation through higher rents/ improvements resulting in possible appreciation and exit after BRRRR.

- Of course there are other ways to go around it, but based on the information listed, these are my thoughts..

15 units class B.