Multi family vs SFR

[Brian Turnbough]

I read on here all of the time about all of the newbies or new to REI wanting to buy Multifamily units instead of SFR. Why is that? Is it because they don't know enough and just want to do what they think everyone else is doing?

My question is, what's the difference between owning a 5 unit multifamily or 5 SFRs? Can't you get a bigger return on the SFRs?

[Joel Owens]

Brian a lot has to do with SCALE and TIME. As you get more money you have LESS TIME.

Think of an owner operator for a restaurant business. They work in the business constantly and hit a ceiling on the money they can make. By making systems and processes they can now scale and take themselves out of being in the business. They can keep growing exponentially this way.

With SFR you might can squeeze out additional yield but it is more work for that yield. Younger investors tend to be in wealth creation mode at about any cost or headache as long as the additional return is there. As investors gain more wealth and get older they tend to value TIME more than return. Doesn't matter if a millionaire or billionaire the time is what is most precious.

With SFR you could have 10 houses and they are spread out over multiple counties using different property managers. The properties also were built in different years and have different layouts etc. I have known investors with many houses where it becomes hard to manage. The extra yield eventually is not worth it to them. They would rather take an easier 12% annually than a very hard 18% because they already have millions and the difference is not that much for them.

It's all about perspective and current place in the investing cycle with your goals as to what makes the most sense and what doesn't.