Debating whether to buy multifamily or stick with single family

[Billy Rogers]

I hear a lot of podcast where people say multifamily is so much better than single family and for a while now it's been my goal to either buy a small apartment building or mobile home park.   My goal is cashflow to cover my living expenses and not long-term price appreciation.

  I've been investing in a market in the midwest where I can get houses for 30-35k that rent for 800-900 month.   In that same market the cheapest multifamily i can find is selling for 40k a unit (renting for $550) and most are higher.   I'm having trouble justifying paying more per unit to get a lower return.  Can anyone explain why i should be willing to pay more per unit for multifamily investments?

[Matt Souza]

If you look at this strictly from a penciled cash flow perspective, you are correct. I don’t think that tells the whole story though.

Multifamily properties benefit from economies of scale. It’s easier to maintain and manage one building with multiple units opposed to several units spread across a market. You also have more upside for forcing appreciation and valuation, since those are functions of the NOI of the property. Lastly, it’s MUCH easier to go out and buy one 20 unit property rather than 20 SFHs.

SFHs are maintenance intensive, time consuming, and heavily dependent on the market. All that said, it’s still personal preference. If you have a plan to achieve your goals through SFHs, by all means that is what you should do.