Making offer before property can be seen

[Moe Joseph]

Im in the learning phase of real estae investing.Im 65 and was wondering  if it is better to invest in multifamily or single family.My theory is single family if empty is not good and at least with multi family if one apt is empty the others can still pay the bills.Am I missing something?

[Brian Kantor]

Hi, @Moe Joseph. I also invest in the Detroit area. Nice to meet you.

There are pros and cons to both SFH and multi-unit:

SFH pros:

• Cheaper/lower out-of-pocket cost to get started
• More inventory/more available options
• Easier to sell (whether immediately because you want out or later down the line because you want to recapture your investment) due to the fact that both investors and buyers looking for a primary residence are potential buyers.
• "Easy" to get a loan from most banks.
• If there is a major problem with the property, you only have 1 tenant that it affects (what happens if the hot water goes out or pipe bursts, for example?)

Cons SFH:

• Higher risk due to vacancy, missed rent, etc
• Typically will cash-flow less than a multi

Multi-unit pros:

• Diversified risk (due to vacancy, missed rent payments)
• Higher cash-flow (in most cases)
• Consolidated costs (ie, if your duplex needs a new roof, it won't cost you that much more than if your SFH needs a new roof and cost is split across 2x sources of income)

Multi cons:

• Less inventory/harder to find
• Tougher to sell (because typically only other investors buy multi-family; yes there are exceptions to this)
• More expensive (in most cases)
• Tougher to get a loan (if more than 4 units)
• More tenants are affected by major problems (like a burst pipe, etc)

Ultimately it comes down to preference. If you're just getting started, many people find it easier to learn the ropes with a Single-Family. Things will pop-up that you don't expect and sometimes it's comforting to know that your "mistake" is only affecting a relatively "inexpensive" SFH and one tenant vs an "expensive" multi-unit with multiple tenants. That said, if you find a great deal on a small multi-unit and you can afford it, there is more upside.