Your Favorite Reasons To Invest In Apartments

[Bryan Hancock]

So we have a new MFD and apartment forum now!

I wanted to kick things off by asking about your favorite reasons for investing in apartments instead of SFRs. I like the fact that capitalization rates are generally much higher for MFDs. I also like that the income capitalization approach is generally what is used for valuation and that things are run more like a business.

What are your favorite reasons for investing in apartments instead of SFRs?

[David Beard]

Financing. Lenders do not want to lend on high-cap SFR rentals (meaning 20-50k houses), whereas they're wide open to lending on MFRs. The closing costs are much less on a per unit basis on your MFRs, as opposed to a package of SFRs needing individual appraisals, title work, etc.

So you can buy a nicer B-class MFR property with moderate 75% financing, and enjoy higher ROI than your unleveraged SFRs.

Or you can buy a C-rated MFR with high enough occupancy to get financing, and really capture a huge ROI.

You can also lock in 30 year fixed rate financing on larger MFR properties that is totally unavailable on SFR packages.

And obviously you can take down a bunch of units at once and get your capital to work.