Single family or multiplex

[Adam H.]

Hi! I have just purchased my first property. It's a 3 bedroom 1 bath in Drexel Park, PA. This area has high taxes but I'm happy so far with the numbers. We have good, clean tenants and I clear $450 each month after all expenses (I put 25K down in case, rest is mortgage). Now I'm looking for a second property and I'm torn. It would be very easy to repeat this again in the same area. However, because of the high taxes on this single family, I've been looking at places with 2-4 units in neighboring towns. I can't seem to find anything that would create the same cashflow compared to what I would have to put down in cash. Some books and people advise against single families.. but others say the exact opposite. Would love to get some feedback from this group. Thanks!

[David Ribardo]

You make your profit when you buy, and there are price points that will make SFHs and multi-family homes equally profitable. If you can buy four SFHs that bring in $250 per month in cash flow, or one 4-unit that brings in $1,000 per month in cash flow, in the end you will be equally successful. Yes, bigger properties will get you economies of scale. However, you generally will see lower Cap rates as the building size increases. I have SFHs as well as multi family properties (2-8 unit) in my portfolio... my SFHs have been just as profitable, making 20%+ cash on cash each year.

I'll agree with @Brian Adzadi and @Thomas S.. Overall, I think people invest with what they are comfortable with. You can be just as successful with a portfolio of SFHs, a couple of multi-family properties, or a combination of both- but go pick out what is best for your market and crush it!