Multiple single houses with high returns or 1 multi-family?

[Quy Huynh]

Hi everyone,

I have $100,000 and am so indecisive of what to do. I'm stuck at a fork in the road and I'm hoping for some help from some of the smartest guys on the web. 

The first option is buying single houses with a friend via tax deeds in the Midwest of the US for about $45k all in and the rents are $900 per month. I plan to purchase all cash and since this house will be worth about $65k, I plan to refinance, cash out and do it again to another 3 properties or up to 10 if I can find a portfolio lender. My cash on cash if I bought all cash would be about 12%. If I cash out and get my $45k back, I then have $0 invested in this house and the returns would be infinite (until a new roof, HVAC, etc is needed). Yes, I've already confirmed with a lender that we can do this, but of course the limitation is 4 properties (or 10 with a portfolio lender, if I can find one!)

The second option is multi-family. I'd use the $100k and buy a $500k 10 unit and my leveraged cash on cash would be 10%. I can't do the cash out refi to get my $100k back to buy multiple properties. With this route, it'd be a 2-5 year hold and anticipate rent increases to sell at a higher price via cap rate. The benefit I see here is really the possibility of forced appreciation and scalability.

I truly see multi-family as the better option because this was how I built my portfolio in the past, but the reason why the single houses are singing to me is because 1) the 12% returns and 2) the cash out/refi option. I don't want to rule out single house just being I can sometimes be bias and egotistical by wanting bigger things, so am turning to BP for guidance. 

My background is I got a divorce last year, lost all assets and am rebuilding my portfolio. If you were in this position, white route would you choose and why?