Cap rates, cashflow, small duplex/TRI/4plex’s vs larger 8+ unit

[John Gach]

Hi there, so I own a duplex, a tri-plex and a 4plex.

Some are value add so they tend to have a better cashflow, and then my tri-plex is mostly turn key.

My plan once I have them at market rate rent, and fully renovated, I planned to cash out refinance the loans, they should still cash flow pretty well and I would have roughly 200k for down-payments to purchase more rentals.

The entire goal of course is the best long term return on my money with cashflow and appreciation. I wouldn’t buy a property that doesn’t start off cashflowing in hopes of rent appreciation and eventually cashflowing.

Option#1

So here’s an example, 200k down payment on a one million dollar 8 unit property which is supposed to cashflow around $1,000-$1,500 per month.

Option#2

Or buy 3 or more 150k-300k doubles/triplex or what not that cashflow probably closer to $800-$1,200 per month each.....

Seems like the option#2 would have a better cashflow return, and given the smaller buildings are more affordable to get into, maybe they have more market demand in the future for better appreciation?

Or would both options appreciate the same?

I just feel like cap rates don’t seem very good, I believe the option#1 was like a 6% cap rate, and of course the single building is worth more and might appreciate 3% or more per year

But so would the cheaper option#2 and it would cashflow better.

So I don’t see the point of the larger buildings.