Multi Family Investing Strategy Discussion

[Alex Babayev]

Is it better to buy higher price point rent per unit apartments as opposed to buying more units with lower rents. You can buy 20 a unit building that rents for $1,000/month, gross rent = $20,000 or you can buy a 40 unit building that rents for $500/month, gross rent = same $20,000

You have less exposure when you have less units, less maintenance, less move in/move out, less expenses overall.

Anyone want to chime in on your thoughts regarding the pro’s and cons of each strategy?

[Ben Leybovich]

YEah - so what newbies have a hard time understanding is that most costs in RE are actually fixed. In other words, while it's popular as hell just to use % of the topline to represent costs, most costs are actually fixed dollar amounts.

Fir instance, replacing a water heater in a $900 rental costs the same thing as it does in a $500 rental. Same is true of a light fixture, faucet, toilet, flooring, paint, etc.

Additionally, contract services such as mowing, electrician visit, plumber visit - all cost the same regardless of the rent topline. So does the pay roll.

If you do the math, and you bother to allocate proper $ amounts to all of the line-items, you should realize that $500 is just not enough to cover all of the bases. This leads to a decision - do I pocket whatever little money I am making and call it CF, or do I set it aside for reserves for when the water heater does need replaced...?

$500 rents just don't work mathematically.