Single-Family vs. Multifamily Residential

[Graham Harvey]

Hey there!

First, let me introduce myself. My name is Graham, and I’m new here and new to real estate investing in general. I’ve been reading as much as I can about investing in real estate for a couple of months, and now I feel like I’m ready to really get started. I want to start out with a buy-and-hold rental property, probably in the Midwest (though I haven’t chosen a specific market yet). Before I do, I’d like to try to answer a question regarding single-family residential vs. multifamily residential properties.

I can see some advantages to having several units in one property, such as continuing to bring in rental income when one of the units is vacant. However, it’s not as clear to me how to add value to a multifamily residential property, especially if it’s already rented when you buy. With a single-family property, you can rehab it and make major upgrades before ever renting it out. With a multifamily property, I suppose you can fix up each unit a bit as tenants move out, but how much value are you really adding to the property? Doing a major rehab to each unit individually would disturb the other tenants who haven’t moved out yet, and would probably be a real pain to manage.

What it boils down to is that I’m concerned about buying a couple of properties and then running out of money to invest. At that point you can refinance or sell the properties, but there has to be enough value added that you can get enough cash to scale up. How do you make sure that you can always find the money you’ll need for the next investment?

Looking forward to jumping in!