Single Family Residences for Buy and Hold.

[Jonathan Farris]

Why would anyone B&H on a SFR? Is it like... the end result of a BRRRR?

It just doesn't make any sense to me. SFR, I think flip. MFU I think B&H.

Obviously every deal is unique, so this is not as simple as stated.

If I am B&H I want the biggest building with the most rents I can afford.

The "why?" is simple: Repairs, Maintenance, Drive Time, Synergy, Closing Costs

I am in the process of buying an 11 unit building. If I bought 11 individual units (or even a few different 3 or 4s) I would pay 3 to 11 times the closing costs. I would have 3 to 11 buildings to maintain instead of 1. I would have to drive to the various locations to fix things, and do rent collections/evictions/etc. With bigger buildings, you typically have some kind of set layout, instead of all these cut up 1/2/3/4/5 units, decreasing repair costs/time.  

Also, occupancy on SFR is 0% or 100%, where you have middle ground on MFU's.

Obviously I am not enamored with the idea of paying 8-10% of rents to a PM, so maybe these guys are just pay someone to do it? Wouldn't that eat up all (if not more) of cash flow?

I also get that buying a bigger complex is more cash intensive, but if you are going to B&H, I think starting with SFR is a mistake!

Let me know how you feel!

[Thomas S.]

SFH investors operate on a different business plan. They fear large scale and justify individual SFHs by compartmentalise their investments.

They are also less concerned with cash flow and are more likely to speculate on appreciation. They are much more conservative investors believing a SFH is somehow easier to manage and easier to unload when necessary. They are often the type of investor that lacks a full understanding of the value of money and concentrate on parking their cash in a rental property. They are less interested in making money and more interested in saving money for some day in the distant and undetermined future.

Impossible for me to get my head around the "income investment" aspect in their strategy.

All only my personal opinions based on the SFH owners I know.

[Thomas S.]

SFH investors operate on a different business plan. They fear large scale and justify individual SFHs by compartmentalise their investments.

They are also less concerned with cash flow and are more likely to speculate on appreciation. They are much more conservative investors believing a SFH is somehow easier to manage and easier to unload when necessary. They are often the type of investor that lacks a full understanding of the value of money and concentrate on parking their cash in a rental property. They are less interested in making money and more interested in saving money for some day in the distant and undetermined future.

Impossible for me to get my head around the "income investment" aspect in their strategy.

All only my personal opinions based on the SFH owners I know.

[Matt Williams]

"Also, occupancy on SFR is 0% or 100%, where you have middle ground on MFU's"

What if you had 10 SFR's vs someone who has one 10-unit MFU? If one house is vacant and one apartment is vacant, then both portfolios have the same vacancy.

[Jonathan Farris]

Yeah this is the sentiment I get as well, as if they are hedging against a bad stock market with their retirement savings. If they are flipping SFR, I get it. Risky as hell IMO, but I get it. B&H just looks funny on SFR to me. I mean if the deal is right, its just right. No reason to dispute, I just don't think it is right very often.

[Jonathan Farris]

@Matt Williams Agreed. But you also have 10 buildings to service... 10 mortgages to obtain... etc. etc. Also, the cost of one unit in a multifamily being vacant is significantly less than the cost of an entire house being vacant. 

[Jim Shepard]

I have a mixed bag of single family homes, duplexes & commercial properties. I will give you my perspective on b & h of sfh's. In 15 plus years of investing sfh's I have never had a vacancy for longer than 2 weeks unless I am rehabbing it. I've never had to evict anyone during that time - I'm sure I couldn't say that if I had nothing but multi's. Renters of multi's tend to be evicted more often and cause more problems particularly if they are section 8 properties.
Since we are doing what if scenarios, what if you have a 10 plex burn down versus 1 of 10 sfh's? $0 coming in vs 90%!
I personally like investing in SFH's because if something happens to me, I doubt the wife will want the hassles of renters even though I think it is minimal. In today's market she could unload them in a few months. We invest in good C class neighborhoods and don't invest in lesser areas. With a multi it takes an investor that has money or access to it. Almost anyone can afford a SFH.
I also have another business (8 restaurants) and don't need additional hassles in my life. 80 employees provide enough problems - I tell people I run an adult daycare business!
I'm not saying my way of investing is best but seems to be best for ME. When I retire shortly, the tenants will provide around $180k / year to me as my retirement income without touching the dollars from the sale of the restaurants and other investments. If I give a pm 10% that still leaves me $162 large a year.
I think it comes down to what works out best for you.