Which Multi to Choose?

[Alecia Loveless]

I’m usually very decisive but I’m currently in a quandary. I’m considering 2 multis. A 3 unit and a 4 unit. Both gross $3100 per month.

The 3 unit cash flows $675 a month and is on town water and sewer but is in a less desirable neighborhood that is blue collar with much less chance of appreciation. It has 2 bedroom and 3 bedroom units. My handyman says these rents are still under market value and I can increase by about $650 and one unit is vacant so room to improve immediately.

The 4 unit cash flows $200 a month has a septic and well and had 1 bedroom units. It is in a much more desirable town that is in a bedroom community with a greater chance to hold value and appreciate and draw tenants. This town has shops and restaurants and a theater. These are all rented and are slightly under market for a little room to improve. I can probably increase another $400.

Both are overpriced and may not appraise out which might adjust prices. I have calculated my estimates based on a reasonable negotiation of the list price.

Financially it makes sense to buy the 3 unit but from the standpoint of location it makes sense to buy the 4 unit. What would you do?