Bigger Purchase vs. many smaller?

Question

I have a question for the group and would like some opinions, particularly if you have lots of experience.  Anyway, I started off with student rentals which are single-family homes, but operate like multifamily, because you charged by the bed if that makes sense.  I have accumulated several and I would like to make a bigger move to larger multifamily of 20+. The only reason I would like to move up really because I feel like I should.

My question is should I? It's easy for me to get these single-family deals, the returns are very good, and I have a great manager.  These things are making me money, so should I save up for something larger or keep buying these single families whenever they become available.  Keep in mind, all I do is a student rental. Thanks and I hope that makes sense.

Greg Scully · Answer

@Anthony Abdullah - There are many benefits that go with moving up to larger multifamily, specifically the tax benefits. It my be worth diversifying into the commercial space to offset some or all of the earnings from your student rentals. Look into "accelerated depreciation" and/or "cost segregation", basically the depreciation from the commercial building is used to lower your tax liability. I would bring it up with your CPA.

Student rentals (commercial) are considered a sub category of multi-family, especially when it comes to lending and management. You might have more success in that niche considering your experience.

Student rentals (commercial) are considered a sub category of multi-family, especially when it comes to lending and management.  You might have more success in that niche considering your experience.

Spencer Gray · Answer

You should absolutely look to go bigger if you see yourself continuing to expand your businesses.

Smaller multifamily and especially single families, regardless if you are renting by the bed, are extremely difficult to scale.

Without going into all the reasons ask yourself this: do you want to do 20 closings with 20 PSAs, 20 inspections, 20 addresses, 20 tax bills? Or one 20 unit (I would go bigger so it self manages) with one closing, one yard to mow, one address, etc?

There are not major operating differences. It's the same strategy just you'll be working smarter not harder.

I would bet everyone who is telling you you keep going small also has SFRs and are trying to justify their own decisions.

Michael Le · Answer

I think if it's working for you, it's easy, and making money... keep on keeping on.

Alina Trigub · Answer

@Anthony Abdullah

Welcome to BP community! Congratulations on successfully implementing RE investing strategy.

My answer will differ from the other posts. I think you must always be thinking about growth but be smart about it.

1) If your business model is working, ensure that you can automate as many steps of it as possible.

2) Whatever cannot be automated, delegate to others. Build a team by hiring people and teaching them the manual steps.

3) Once the process runs more or less on its own, start looking into other RE strategies. Sounds like you're interested in MFH investing. So start educating yourself on the topic now. Once you have your first business automated, you can take action by investing in MFH.

My best!

Anthony Abdullah · Answer

Thanks for all of those perspectives!  I really appreciate it and believe it or not, it has helped me to make some decisions.  I appreciate everyone being so welcoming.

Kurt Jones · Answer

Lots of good advice here. If you find a niche and excel there, keep doing what works.

Edward Liu · Answer

If you already have success in this niche, then keep on doing it.  No point to be sucked into something larger and unfamiliar.  If you use conventional loans for these purchases, only note is there is max # of conventional loans you can take out.  But hit that limit first before considering something else.

Bjorn Ahlblad · Answer

@Anthony Abdullah welcome to BP. If you have found an investment area that meets your goals and makes you an acceptable return stick with it. Especially since you are able to repeat the process. I would even go so far as to jot down the steps in the process for myself and not deviate.  All the best!

Bigger Purchase vs. many smaller?

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