10 single houses vs A 10-unit building

[Quy Huynh]

I've been torn between the follow decision. A 10-unit building financed making 10% cash on cash annually VS 10 single houses paid for in cash making 18% cash on cash annually I want to obviously go the 18% route but if ask myself why do I go this route when all the big players buy bigger buildings? Am I maybe trading risk for return? What have you guys done or experienced?

[Anthony Gayden]

Originally posted by @Quy Huynh:

I've been torn between the follow decision.

A 10-unit building financed making 10% cash on cash annually

VS

10 single houses paid for in cash making 18% cash on cash annually

I want to obviously go the 18% route but if ask myself why do I go this route when all the big players buy bigger buildings? Am I maybe trading risk for return? What have you guys done or experienced?

 So if you buy the SFRs you use no leverage. Also you lose out on your tenants paying down your debt. 

With the 10 unit, you can literally force appreciation. Also by using leverage you will have obtained a much more expensive property with the same amount of money. The goal of course being for your tenants to pay down the debt. Finally there will be efficiencies due to being a single location versus 10 different locations.

I am leaning strongly toward the 10 unit. Listen to podcast 131, cash flow isn't the only factor.