Choosing between property types

Choosing between property types

Investor · Midwest · Member since 2013 · 253 posts · 34 votes

I'm looking for advice on what I should focus on for my first real estate deal. Should we go with a SFH, multi 4 or less or the 5 or more places?

Here's an example of SFH in the area I am looking:
Asking price= $30-$50k depending on whether foreclosure or work needed
Usually 2-3 bedroom home with 1-2 bathrooms and maybe a basement. Around 800-1k sq ft.

Multi-unit 4 or less usually:
Asking price= $40k-$130k depending on number of units
Usually 2 bedroom units with 1 bathroom around 700-900 sq ft.

Multi-unit 5 or more usually:
Asking price= $130k (5 units)- $275 (a seven unit with 6 fully rented)
Usually 2-3 bedrooms with 1 bathroom and 700-1k sq ft

Since I am looking at where I should focus on for my first deal, should I just nix out the multi-unit 5 or more due to financing constraints or just look at the lower priced 5 unit buildings and forget about the seven unit one?
I have been estimating that the SFH go for $750 and the apt units for $500 (even though I know they go for more). Some of the apt units have all renter paid utilities and some have owner paid water.

I'm really only looking at maybe 10-15 properties in each category, with less available on the muti-unit 5 or more end.
These are probably C areas with C buildings. I am not looking at any that have more than paint/carpet/few things to do because I don't want to take on major renovation on a first property.

Where should I focus my search? Any thoughts? Is there something I'm missing?

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  • Rental Property Investor · St Petersburg, FL · Member since 2011 · 79 posts · 24 votes
    13y

    You should start with your focus on what your end goal is and work backwards from there. It sounds like you're thinking to buy and rent long term vs a quicker flip - what return do you want to earn? How long do you want to hold them? Is this something you see keeping until it's paid off or do plan to 'trade up' your equity into a nicer/newer/bigger property down the road? All those have to be answered before you can really get to the right answer for you on the question you asked above. All of us have our own strategies that fit with our time/temperment/budget/level of risk. Any one of those answers could be the "right" one - but it depends on what your goals are. Once you clearly define that - it becomes fairly easy to run numbers on any property that comes up to see if it helps you reach that goal.

  • Real Estate Agent · Virginia Beach, VA · Member since 2012 · 2k+ posts · 1k+ votes
    13y

    I agree with @Scott Seaman as it is an individual choice based on your level of risk, time commitment, and many other factors. We want to focus on low time and maintenance, attract longer-term renters, and the ability to sell easily when/if necessary, so we focused on newer 3/2 single family detached, brick or vinyl in decent neighborhoods in higher growth areas. While we'd probably have more cash flow with 2-4 units, there's usually more turnover and maintenance. Plus, when we first got into investment property, we bought several townhouses thinking cheaper than detached, better cash flow, but found we had huge issues with the adjacent units (can't control who the other guy rents to), so we decided single family detached just provides a buffer from the guy next door.

  • Investor · Midwest · Member since 2013 · 253 posts · 34 votes
    13y

    Our goals are to over the next 20 years have paid off properties. This is a long-term buy and hold strategy that will also implement the 1031 exchange in order to trade up. We are focusing on one are of the country that is much cheaper than where we currently live and will give better returns. After a few years, we want to 1031 those properties into more expensive, but lower risk properties where we currently live, while still buying in the cheaper location.
    The strategy is to amass enough properties to be financially well-off, basically pretty high income. We want to be able to live very well and also do a lot of charity work both in our own community, the one where we are buying the cheaper homes and around the country.

    Since we have pretty lofty financial goals, I suppose I am stuck between many low-priced SFH or just starting in with the multi-units.

    Any thoughts on achieving our goal with the first posted info?

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