Funding for multifamily or cash buy single family?

[Collin Smith]

I am looking at finding a multi family property to begin my personal portfolio.  I have a few houses with my brother in law that are geared for our kid's college in a few years.  He is not able to further invest right now, so I am looking at taking some of my savings to start building more towards my retirement and then kid's futures.  My main question comes in figuring out the best way to go.  I have enough $ that I could purchase a low income single family house with cash and have no mortgage.  This would likely bring in about $550 a month in rent (this includes deducting for a property manager that is used with the other homes), minus taxes and insurance.  The other option that I am considering is a mortgaged multi family property.  The down side is having a mortgage, but it would be able to generate about $1200/month in rent.  (lower rent, more units, "safer" if one is empty"...)  The mortgage would only be about $75,000 (or less) with the down payment I have available.  I would also look to set it up as a 15 year mortgage to get it paid off ASAP.  The other rentals I have 2 of the 3 paid off in full within 2.5 years.

For those of you that started out small like this, what would your suggestion be?  Or, do you go bigger with the mortgage and bigger with the # of units to make it more worth while in the long run?  If you go that route, does a lender look at what the property generates as income or just at what you can afford to pay?

Thanks!