Purchase single family house vs small appointment complex

[Arta Montero]

Wondering if I can get some advice here. Having a difficult time deciding.

I live in Portland, Oregon. I have two kids, husband and my mom lives with us. We have a 3 bedroom house plus another single family rental.

Given that my mom has one of the bedrooms my girls have to split. My girls are 9 and 5 and would like for them to have their own room since I am thinking we will have no choice on that once they are teenagers.

I have three options:

1. Purchase a 4 bedroom and rent existing house. It would be a good rental. 4 bedroom homes in this area are about $600k.

So, if I purchase a 4 bedroom house will be harder for me to purchase multi family units for awhile since I will not feel comfortable.

2. Modify existing. I am worried that no matter what you do one can mess things up when they modify

Any advice. I feel that by purchasing 4 bedroom I lose flexibility with multi family units

[Eric Martel]

Focus on maximizing your return on equity. Keep in mind that Multifamily investment has much more potential to generate a higher return than single family. You have better opex on MF and appreciation (especially forced appreciation) on MF is based on economic value (NOI, cap rate) instead of comparable sales. A 100k SF house is always 100K whether you have a tenant paying 500$ or $5k a month.

1) If I read correctly you have 1 SF rental at this time. Is this property cash flowing? What is the return on equity of this investment( Net cash flow/equity)? If the ROE is < 10%  you should consider repositioning this asset. Sell and do a 1031 exchange.

2) Renting out your current 3 BR home. What would you be able to rent it for? What would be the NCF and Return on Equity for this property once you move out? Again if the ROE < 10% sell the house. If the capital gains is > 500k you may want to consider renting for a year and doing a 1031 exchange. but if you buy a multifamily you can do a cost segregation and get accelerated depreciation that would offset that capitals gains tax.

3) Buying a 4 BR house. Now here is the part that may blow your mind. Have you considered renting a house? If you invest the down payment money towards a multifamily you the NCF might just pay off your entire rent. As your family composition changes you can more easily change house to meet your needs. I sold my house in the bay area and bought a MF in Memphis and the NCF pays for all my living expenses in the bay area. The house I rent is bigger than the one I owned, I am in the hills and have an amazing view which I didn't have before. 

I hope this helps.