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Updated about 6 years ago,
BRRRR MFH's vs Apartment Bldg.
I have a few small MFH's and am considering two options for my next purchase. The BRRRR strategy for small MFH's is appealing as I see the following:
Pros
- recoup my capital (after seasoning)
- good monthly cashflow ( I've been averaging $250/door with conservative numbers for expenses)
Cons
- Takes a bit longer to reach my cashflow goal ($5k/month) -- 20 units (5 quads)
- smaller economies of scale (i.e., need different PM's if different area, more insurance policies, more P&L to review)
- similar risks as a fix-n-flip (budget creep with rehab, appraisal is lower at refi time, holding costs)
Alternatively, small apartment buildings (up to 24 units) are also appealing. I see the following benefits:
Pros
- larger economies of scale
- value of property can be increased by increasing NOI (and usually not dictated by comps)
- potential profit if the bldg. is a value-add opportunity
Cons
- more expensive (need more personal capital or need to have private investor/syndicate).
- cash flow/unit appears to lower (i've seen several posts that mention $100/unit
The above pros and cons are just my assumptions. Anyone here contemplated this same thing? I'd love to hear the thoughts of the community.