A good time to buy multi-family?

[Jaden Ghylin]

I've been buying SFHs for a few years now and as the market rises am looking at other alternatives. I've been buying my rentals close to the 2% rule. In most cases, I have $50k in for $1,000 rent or $60k for $1,200. All are in good neighborhoods in the Minneapolis metro. As prices have gone up, I've had a tougher time finding new properties to purchase. I've been looking at multi-family, but the economics don't make sense to me, so I hope someone can help explain.

There is an 11 unit (1 beds units) apartment building in a decent area of North Minneapolis for sale for $560k ($51k/unit). Rents in that area for 1 bedroom is $725/mo. So, I'm looking at $51k/unit for rent of $725/mo. This isn't really close to meeting the 2% rule, it's at 1.4%.

So, my question is, what is the motivation for buying multifamily, when SFHs are so cheap? SFHs are more liquid, tend to appreciate better, have more financing options, command higher rents, and can be sold to the retail market. Is now just a historically bad time to be buying multifamily due to low vacancies and increasing rents?

I'd appreciate any insights people have to offer. I seem to get asked frequently why I'm not in multi-family and I just haven't figured out the economics of it.

-Jaden