Which cashflows better per unit

[Carole G.]

I read people saying larger multifamily are better, but I haven't found any 5-15 unit buildings that cashflow better per unit than my 4plexes do (over $250/door).  I like B or C buildings in B or C areas.   If you can help me understand why the larger buildings are better, please fill me in!

[Jerry W.]

@Carole G., I think the idea is that if you can buy many units at once and get the same cash flow there is economy of time.  Lets say you buy a 20 unit instead of a 4 unit, while your due diligence is longer, it takes the same amount of time to get insurance or go to a closing.  The big deal however is in value add.  If you can get a 20 unit and do things to raise cash flow, or decrease costs the amount of yearly cash flow goes up.  Buildings with more than 4 units are valued based upon their capital return rate.  So if the cash return goes up, the value of that building goes up a lot.  You are not only making more money per year, your building has gone up in value.  Then you sale the building lets say 5 years after buying and improving it's cash flow and you profit in large part from the new price, plus you had the cash flow in the mean time.  Raising the cash flow on a 4 plex does not really change its value.