Investment Showdown: Single Family Residential Properties vs. Multi-Unit Apartment Buildings


Recently, I was asked by a newbie real estate investor, “Is it better to invest in single family residences or multi-unit apartment buildings?” He wasn’t the first person I’ve heard ask this; it’s a pretty common question.

I think back to when I was a newer investor who was scraping and saving for that first rental property, and I remember thinking that multi-unit apartments were probably best, largely due to the idea that if one of my units went vacant, then I could still have the rent from the other unit or units. Besides, wouldn’t things be simpler if all my units were under one roof and in one location?

It wasn’t until years later, after having owned and managed both, that I really understood the answer to the question, “Which one is better?”


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It Depends

Let’s face it, the real answer depends on several factors, such as timing, financing, risk tolerance, number of units, experience level, and whether or not you’re trying to buy the property owner-occupied.

Related: Long Term vs. Short Term Vacation Rentals: Which Strategy is Better for Investors?

If we break it down, when I was new, my risk tolerance was pretty conservative, especially since I had limited capital reserves and my experience level wasn’t very developed yet. But I was also an owner-occupant, as well as a real estate agent getting a commission on the deal. Also, the financing was definitely favorable, as I wasn’t being chastised by the bank for the number of units I owned since this was my first building.

It was part of my plan that this property was a stepping stone into something else and that one day this unit of mine would be just another rental. It was all about affordability since I wanted to save some money for the next château.


It wasn’t until I owned several duplexes, a triplex, six-unit, and many, many single-family residential units that I realized some of the differences — most of which were bottom line items, like turnover rates and aggravation. For example, once you have a larger portfolio, a vacancy is a vacancy, and the fear of having a vacant single-family residential unit goes away, especially when you have adequate reserves.

To be quite honest, I usually make more money on single-family residential units due to the fact that my tenant turnover is lower. With houses, the tenants tend to stay longer than with apartments. They usually have fewer complaints about any neighboring tenants as well.

In fact, I have a very good buddy who had a lot of single-family units, and his dad had 52 apartment units in three buildings, and we always joked about how much more money he was making than his father.

Maintenance and Repairs

Some similar advantages of single-family residential properties are that the tenants usually take care of the lawn, the snow, the water bill, minor repairs up to a certain amount, and the heater contract — and you don’t have things like common areas like you do in an apartment. There’s no hallways, laundries, stairwells, shared utilities, trash dumpsters, and landscaping bills.

So, why do so many investors like multi-units?


Ideal Number of Units

If the investor acquires a larger number of units, the costs associated with multi-unit apartment buildings may not cut into their cash flow as much as if they owned less.

For example, years ago when I was a painting contractor who did many apartment complexes from 50 to over 500 units, I started to see a pattern. With larger complexes, especially those with over 100 units, the owner had enough scale to justify on-site maintenance and management.

Related: Newbies: Don’t Forget These 4 Areas When Evaluating Multi-Unit Deals

Oftentimes, key people receive a unit to live in as part of their compensation package, which makes it much easier for the owner to have 24-hour emergency service since the maintenance person would live there — or to collect rent since the manager would be there on site as well.

How You Buy

Another big factor for whether or not investing in multi-units makes sense is how you buy.

I know my good friend, Brian Adams, buys many apartment complexes using private placement offerings (and other people’s money), just like I did when buying mobile home parks and storage centers. It’s a great model when you can purchase a couple hundred units with 80 percent bank financing, and you can raise private equity for the remaining 20 percent, plus closing costs, plus any renovation capital that you may need.

Then over the next 3-5 years, Brian works towards improving the property by remodeling units, increasing occupancy and hopefully raising rents, so that in a few years he’s able to refinance and pay off all of the initial investors, while gaining 100 percent ownership of the apartment complex.

As you can see, a lot depends on the scale of multi-units you’re buying, but you can also see where financing and experience level come in.

So, those of you on BiggerPockets, which do you prefer — single-family residential or multi-unit apartment buildings?

Let me know with a comment!

About Author

Dave Van Horn

Dave Van Horn is President at PPR The Note Co. - an operating entity that manages several funds that buy/sell/hold residential mortgages, both performing and delinquent. Dave has been in the Real Estate business for 25 years, starting out as a Realtor and contractor and moving onto everything from fix and flips to Raising Private Money.


  1. Brian Adams

    Great article Dave and thanks for the shout out.

    I have owned single family rentals, but now that I have bought and sold 1000+ apartment units, in my opinion multi’s are the IDEAL investment as they provide great returns, solid cash flows, and the ability to quickly increase the value by solving a problem and forcing appreciation.

    One deal I did, a 200+ unit complex, I forced the value by taking occupancy from 86% to 98%, spent over $600k on exterior and interior upgrades and increased rents over $100 per unit.

    Within 15 months the property appraised for $4+ million more than I bought it.

    Pretty cool right??

    To date I haven’t found a single family rental where I create this much velocity on the capital invested.

    • Daniel Eisman

      Thanks for the informative article! I have a couple questions regarding your example with @Brian Adams. When he purchased the apartment complex with 80% bank financing and 20% private funds, who is responsible for the refinancing in 3-5 years? I am assuming this is done by his entity? After refinancing was he able to pay back all debt services as well as the private investors? Or did he just pay off the private investors to gain 100% ownership? Any more details regarding this deal would be greatly appreciated!

      Brian- I love your insight on why you choose multi’s. The fact that by problem solving and forcing appreciate can increase value is what really attracts me to multi’s as well.

      • Brian Adams

        Daniel, the owner operator/loan sponsor is the person responsible for doing the refinance and for my deals, the properties are held in LLC’s so the entity is doing the refi.

        With the refi on the 200+ unit deal, the new loan paid off the old mortgage and the equity investors.

        • Kevin Wong

          @Brian Did you have to get a bridge loan to finance it at 86% occupancy? I generally have a tough time getting good permanent financing for vacancies higher than 10%. Do you still find it’s a good market to buy large Multi-fam with current CAP rates and potentially increasing interest environments?

          @Daniel, the Syndicator/Sponsor/GP will decide when to refinance out the loan. 80% back financing is also unlikely these days, only Fannie/Freddie could potentially get you that sort of leverage if you’re lucky.

  2. Segun O.

    Thanks for the article Dave. I have always wondered about this myself and always thought that you have to start small with SFR and scale up over time to multi units. I just learnt from your article that raising private equity could help speed things up, which is great!

    Brian, how does one raise private equity to get 20% downpayment before getting the bank to finance the 80%? Could you please also recommend a good resource from which I could learn more about this? Thanks!

    • Brian Adams

      Segun, for my deals I use a group of accredited investors as defined by SEC for the 20% down payment and closing costs.

      Honestly you can find accredited investors anywhere.

      It is important to note though it does take time to develop a relationship with the investor.

      As you build your real estate empire, make sure to devote enough time on not only finding good Deals, but also the Dollars like creating and maintaining investor relationships.

  3. Jason V.

    Coming from the complete opposite end of the spectrum: in my area, tax rates are so unbelievably high (and property values so low) that it becomes another consolidated expense with Multi-Family properties, even small ones.
    For example, I have a SFR right now that the monthly taxes are higher than the PI&I. I pay almost $3600 a year in taxes on a house that’s probably worth $65,000. Meanwhile, I can buy a Duplex/Triplex/Quad right around the corner for $85,000-$95,000, and the taxes will only be a couple hundred dollars a year more. So my taxes per unit can be 3600 a year, or 1000 a year. In an area where rent on the SFR is 750-950, and rents for the units is 650-750, you can see why it doesn’t make a ton of sense for me to invest in SFRs over MF.
    This obviously isn’t the situation for everyone, and is very specific to my market where we have some of the highest tax rates in the country.

    • Dave Van Horn

      And I thought Pennsylvania was the land of taxes!

      I’m in a similar scenario with some of my properties where my escrow (taxes and insurance) are higher or equal to my P&I, but their SFR’s I’ve owned for almost 30 years so what I owe only decreases. My problem with Multi-Units in some of the areas I tend to buy in is with sewer and trash, since I’m charged double for multi-units. But like you said, every area is different and so it’s all about knowing what to buy where.

      Thanks for the comment Jason.


    • Dave Van Horn


      I agree with you in many scenarios, but I’ve seen the opposite prove true. For example, when the roof of a property that holds all of those units leaks and buliding is condemned. So instead of being out of one property for a certain period of time, you’re out 5, 10, or 20+, etc. Just something to consider.


  4. Michael Swan

    Hi Dave and all,

    This an interesting debate and is much more convoluted then you suggest Dave. I am presently on an 8-10 year trajectory of current tax deferred cash flow of $120,000.00 cash flow per year to $1,000,000.00 tax deferred cash flow per year. In the past 12 month’s I have traded in using the amazing tool of the 1031 exchange, pricey San Diego, Ca. single family rental properties in for Multifamily Apartment complexes out of the pricey San Diego, Ca. Market. I currently have 4 single family left in San Diego. 12 month’s ago I had 10 single family her in San Diego. Now I have 4 still in San Diego, 8 single family in a different state and 4 Apartment complexes in another state too. I now have 57 front doors.

    My plan is to continue trading up, using the 1031 exchange and to have two or three large apartment complexes with onsite apartment manager, HVAC certified maintenance guy and assistant to that maintenance guy for each apartment complex.

    Dave when analyzing these two options, I find that one element you have not covered in your comparison and contrast of these two distinctly different financial freedom options are the valuation models for 5 units or more and the single family valuation model for 4 units or less. What I have found is that. I am solely at the mercy of comps or comparative value for my single family (4 units or less). However, with apartment complexes (5 units or more) valuation is primarily based on the business. That business I am speaking of is the NOI of the complex. The bank I use for my Apartment complex deals say that if I increase the NOI of my apartment complex by $15,000 in the next 18 months to 3 years, then the value of my Apartment complex rises ten times that increase in NOI. That means, if I purchase a 15 unit complex (like I did) for $600,000 in another state and pay $150,000 through a 1031 exchange and not pay taxes, but defer taxes, in 18 months to 3 years, I have increased the value of the property from $600,000-$750,000.

    Here is what is spectacular that happens next. I have 2 options that have tax deferred benefits at this time. Option 1: Refinance and take $150,000 out tax free. Option 2: 1031 exchange the property in for a 1.2 million property and increase cash flow, while deferring all taxes.

    Ultimately, I will defer, defer, defer, defer, defer, and die. Then, get this. My kid inherits the property at a stepped up basis and depreciation starts all over again. Consequently, if they choose to do the same and NEVER outright sell the property, they can defer, defer, defer, defer, defer, and die too.

    When I read David Lindahl’s Multifamily Millions and Loopholes of Real Estate by Rich Dad Advisor to Robert Kiyosaki, Garrett Sutton, I was blown away and my single family paradigm I believed in was shattered and replaced by the Multifamily Apartment complex financial freedom plan. I also listened religiously and attended a 2 day seminar from the founder of Lifestyles Unlimited Inc. (LUI) for 2 years straight on their podcasts to switch away from the single family paradigm.

    If a lowly paid educator that has a combined family w2 earned family income in a pricey place like San Diego can create financial freedom and now take in $120,000 in tax deferred cash flow, clearly surpassing 25 years of earned W2 earnings after 5 short years, anyone can do it!! Just now watching the story of Nancy Reagan and amazed her and Ronald’s story. They made it big, with Ronald coming from a family with an alcoholic dad!! I love this stuff!!!

    What a country!!


    If you change the way you look at things, the things you look at change right before your eyes!!

    • Dave Van Horn

      Hi Michael,

      That’s a great point about 1031’s! I’m also a fan of David Lindahl’s and have taken some of his courses. 1031’s are definitely better than paying the tax especially if you can find and close on a property in time.


      • Michael Swan

        Hi Kevin,

        Good point. The problem with that is to make the planets align and sell my remaining 4 single family in a timely fashion, while negotiating on a 2-3 mil property. In theory it is doable. However, a little more complicated and I have not researched the fees involved.


  5. Matt Hoyt

    These are all good thoughts on a worthy subject. Personally I started with SFR then moved to 2-4’s then on to bigger. Mostly didn’t really sell anything along the way so having had experience with both kinds I can agree there is no one right answer. Lots of pros and cons for both. One point important people missed is: 5+ multi the financing is actually easier if you have the big down. No tax returns. SFRs on the other hand you can put down very little if you have the tax returns. 2-4’s in the middle. So they can make sense for different people at different times, and not for just the financing reasons of course. I think it is important to understand all aspects of both so you can take advantage of good deal when it comes around that makes sense for you at the time. I like the flexibility of having all kinds in the portfolio for a balance of cash flow, appreciation, financing and tenant type.

    • Dave Van Horn

      Hi Matt,

      Thanks for commenting. You’re absolutely right about commercial financing being easier to obtain than SFR financing provided you have the down payment capital. Since you provided another pro, I thought I’d add an additional con that some investors may not be aware of. And that’s the possibility of the commercial loan recasting. This can happen every 5 to 7 years and could require the investor to re-qualify for their loan, which can be especially troublesome if they were to have different income, credit score, or amount equity in the property (which almost happened to me during the economic downturn). A significant change in any of these things could cause the lender to call the loan in full. So just another point to think about when weighing in on the SFR vs. Multi-Family debate. Like you said though, it’s all about using the right tool for the job and being able to buy either when the deal makes sense.


      • Matt Hoyt


        Strong point on the commercial loan cons. Your specific example while true they are generally looking at the building incomes etc which should be fine. But you never know and that doesn’t happen 1-4 which is your point. Additionally commercial loans have all sorts of other onerous terms like nasty prepays etc. Just this year I watched a $72,000 Chase lock fee happen in a transaction.

        Having thought about it further I think SFR vs Multi doesn’t really cover it. I feel like it is actually three categories. SFR, Multi Residential (2-4) and Multi Commercial (5+). They really are three different animals and I think most people don’t realize that.


  6. Jerry W.

    Excellent article. I would have said SFRs are the best way to invest in rentals when I first started. The first apartment building we ended up with was because we could buy it and it made money. I like the exits available in SFR houses, but I like the availability of buying multiple units at one time under one roof. There is risk and potential profit in both types. If you have a neighborhood deteriorate quickly and you have 200 units you will lose your shirt, if you have a single house you are probably fine. If the area improves and demand for rents go up you can make a fortune on a 200 unit as compared to a single house. If you buy 200 SFRs then your risk is about the same unless you spread the units over many different neighborhoods. For me large multi units are another step up the ladder from SFRs or 4 plexes.

    • Michael Swan

      Your welcome Joseph,

      My goal is to create one future multimillionaire a week!! Glad I could help you. Now you just have to educate yourself and then ACT on that truth you found.

      Winston Churchill once said, “I have found that man often stumbles over the truth. However, they just pick themselves up and move on, acting as if nothing ever happened.”

      I see this too. What a shame!!


  7. John bennett

    Mr. Van Horn, excellent information sir!

    In the scope of one blog, you managed to answer a half dozen relevant questions I hadn’t even formulated consciously!

    I appreciate the fact that when I close on my first rental property, it will be with greater confidence, confidence derived through the “Awesome” advice from Bigger Pockets fodder such as your blog!

    Much thanks to everyone who cares enough to participate in my success, I know Bigger Pockets members have already saved me a substantial amount of time, money, and headache!

    Oh my, a brown stain just appeared on my nose, and I feel somewhat nauseous!

  8. There is another book dealing with the advantages of house renting – “Building Wealth One House at a Time” by John Schaub. Most of his arguments are the same. But living and investing in Europe at the moment, in specific in Austria, I want to share that people here rent only flats and if they want to live in a house they either buy or build it. And this is not the only country in Europe where the house rental market is very restricted due to lack of demand. This is also the reason to achieve a much lower yield from a rented house than from rented. As usual the specific habits of the local people play a major role.

    • Dave Van Horn

      Hi Elena,

      You’re right, everywhere is different and the market can definitely be dependent on the habits of the people. The beauty of Real Estate though (with notes more than hard property) is that you can do it from anywhere.

      thanks for reading!


      I’m also a fan of John Schaub, I’m sure his influence seeped into this article somehow!

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