1st proprety: duplex or go big?

[Laura Thorne]

My husband and I are looking to purchase our first rental property, with the intention of acquiring more and more units over the next 30 years.  We have enough money (currently invested but not making much and we have huge management feeds) to purchase a 24 unit building.  We are prepared that beginner investors will make the most mistakes on their first property.  My question is should we break our teeth on a duplex, learning and possibly losing money, on a less expensive property, or buy as many units as we can afford?  Appreciate your feedback!

[Brad M.]

One strategy might be to diversify across two or three moderately sized properties. I don't think you will get the same experience needed for a larger multifamily by doing a duplex first. Some, yes, like tenant screening, but the operations side will be quite different. Diversification will also help spread your risk across properties. You could have a bad outcome on the first property for reasons outside of your control - you wouldn't want that to be your only property.

Just thinking based on unit size, you could do a 4-6 unit to start. Use this time to get your systems in place. Accounting, tenant screening, maintenance contacts, etc. Then move as quickly as you can to one or two larger properties. You are in a great place to have the capital to get going. Use it wisely!