single unit vs multi unit question

[David Davis]

Is there a difference that I am missing between a multi unit vs a single unit? I understand that I could house hack in a multi unit. But all other things being equal, if I make 10% COC return, does it matter what type of building it is? Is there some advantage to multi family that I am missing?

[Carl Millsap]

@David Davis it depends on your goals, investment criteria, and market.

Multifamily operation isn't much different than single family, but the benefits far outweigh single family.

a. Loans can be non-recourse - essentially you don't have to personally guarantee it. Not that you plan to default but its a nice benefit. Non-recourse is usually for values over $1m.

b. You're not dependent on one tenant (SFH) to cover your expenses. The more tenants you have under one roof, the less likely you'll have to cover expenses. 

c. You determine the value based on how you operate the property. You can have 2 identical properties next to each other but have a $500k - $700k difference in value. This would apply more for 10 units and up in my experience. 

d. Your cash on cash return will increase with multifamily because cashflow is greater.

e. Your cost per unit is less. If you can buy a single family house for $50-$75k, you can probably buy a small multi for $35-$40k per door. 

f. You can scale faster.

The list goes on, but if you run the #s you'll see the benefit of multifamily is the better option, again, depends on your goals, investment criteria, and the market you want to be in.