Possible 4-plex vs SFH Analysis

[Brian Dudash]

I'm in the process of looking at a SFH and a 4-plex. While running my numbers in my spreadsheet plus the BP calculators, I'm getting mixed results. Just note that this would be my first rental (w/ hopefully many more to come!) and I do have some cash to to get started (around 200k). At the moment, I've been looking at mainly "rent ready" places for my first rental since I would like to learn the ropes a bit more "on the job".

I've done a lot of reading, videos from various places (youtube and BP), etc but it still scared on trying to do a BRRRR type of property. Anyways, below are the 2 I've been recently looking at:

SFH:

Expected Purchase Price: 105k
Units: 1 (SFH)
Est. 2-3k for small fixes but then it's rent ready
Expected Rent: Between 1100 and 1200/month
Solid location (schools, parks, area, etc)
Net Operating Income: $8,038/yr
Cash Flow: $2,100 - 3,079/yr (depending on 1100 or 1200 for rent)

https://www.biggerpockets.com/...    (not sure if this works since I'm not 'pro') - BP rental calc has it avg $4,680/yr (for 1100 rent), even though I put the same exact numbers/expenses, etc as in my spreadsheet...not sure what I'm missing or how that number is really calculated

4-Plex:

Expected Purchase Price: 250k
Units: 4 (MFH)
This is a recently rehabbed building, so no other upfront costs needed
All units are rented at 850 per unit, per month = 3,400/month (supposedly there is a wait list too, which I will be sent tomorrow)
Location is not the greatest (no crime issues, just in a more isolated location. For example, a drive to a big city is about 1 - 1.5 hours)

Net Operating Income: $18,104/yr

Cash Flow: $5,212/yr

https://www.biggerpockets.com/...   (not sure if this works since I'm not 'pro') - BP rental calc has it avg $8,964/yr even though I put the same exact numbers/expenses, etc as in my spreadsheet...not sure what I'm missing or how that number is really calculated

Just to note -- that this specific county the 4-plex is located, they classify 3+ units as commercial. This doesn't stop me from renting it out to residential but I'm a little worried about the loan situation. I'm not worried about the loan for myself (have it ready to go), but mainly if I were to try and sell this building many years down the road because for me to get approved for a commercial loan was a bit of a pain and a process (hopefully it was just my "issue"). Maybe I'm just over thinking this part.

Also, the current owner does pay for all utilities (expect electric, but does have his own electric for the common areas of the building), he even pays for basic cable and internet (for each unit), which is factored into the #'s above (around $2,640/year for that bill). Like I mentioned before, the area isn't the greatest with regards to the location itself, not the crime or anything like that but because of this, the average rent for the area is only around 650 per 2bd/1ba, according to rentometer and zillow.

I believe that is why he "throws" in the basic cable/internet and utilities as "incentives" but I could be wrong.

Lastly, I'm not too worried about the short term (regarding the 4-plex), but in the long term. For example, is it possible that I have issues finding tenants int 5-7 years from now due to it's location? It's hard to say and no one really knows but some ppl say the area is slowly growing and has potential but others aren't as big of fans :)

Now my question:

Would you do either of these deals considering the information I've given? If so, which property would you go with?

[Brian Dudash]

@Frank Chin thanks Frank for the quick lesson :)

This is out of state but back near my hometown area in Ohio, only about a 1 hr drive away.

Luckily I still have my family there so my parents are willing to help me out regarding being my "eyes" for showings. They already went to a few different houses and plan on going to this 4plex tomorrow.