Buying first property.. single family or multi-family?

Specialist · Member since 2019 · 61 posts · 20 votes

Hi-

My wife and I are looking to buy our first property. I’m personally leaning towards a multi family home because I think it’s a great way to get started in real-estate while also having tenants pay for our mortgage. I want to start off with a multi-family 4 unit property. Should I lean towards a multi -family, or single family home as my wife’s and I’s first real-estate investment?

Thanks,

Justin

5 Reply

243 views

Most Popular Reply

Jim Pellerin

Real Estate Consultant · USA · Member since 2014 · 1k+ posts · 751 votes

@Justin Hayden I would lean towards a multi-unit investment. They are easier to cashflow. The qualification process is the same. The price will be higher but the return will be greater.

8 Reply

See this reply in the discussion

96 Replies

Jump to latestLatest

Sort by

Jim Pellerin
Real Estate Consultant · USA · Member since 2014 · 1k+ posts · 751 votes
6y
@Justin Hayden I would lean towards a multi-unit investment. They are easier to cashflow. The qualification process is the same. The price will be higher but the return will be greater.
8 Reply
Justin Hayden
OP
Specialist · Member since 2019 · 61 posts · 20 votes
6y
@Jim Pellerin thank you Jim! How many units should I start with?
0 Reply
Jim Pellerin
Real Estate Consultant · USA · Member since 2014 · 1k+ posts · 751 votes
6y
Originally posted by @Justin Hayden:
@Jim Pellerin thank you Jim! How many units should I start with?

It depends on what you can afford and what you can qualify for. 1 - 4 units are treated as residential. Anything over 4 units is treated as commercial by most lenders. Also, larger units (e.g. apartments) tend to have common areas and require more dedicated property management.
5 Reply
Justin Hayden
OP
Specialist · Member since 2019 · 61 posts · 20 votes
6y
@Jim Pellerin Thanks! Should I begin my real estate journey with a property management company, or begin managing my property myself?
0 Reply
John James
Member since 2019 · 30 posts · 20 votes
6y
you are asking questions you should be asking yourself lol it depends on what you want to do.
4 Reply
Justin Hayden
OP
Specialist · Member since 2019 · 61 posts · 20 votes
6y
@John James I want to manage it myself. I was just curious to know what other people have done on their first deals.
2 Reply
Jim Pellerin
Real Estate Consultant · USA · Member since 2014 · 1k+ posts · 751 votes
6y
Originally posted by @Justin Hayden:
@Jim Pellerin Thanks! Should I begin my real estate journey with a property management company, or begin managing my property myself?

Start by managing the properties yourself, to learn a few things. But I have found that property management activities get in the way of deal-making activities. Do you want to be a real estate investor or a property manager?

3 Reply
Justin Hayden
OP
Specialist · Member since 2019 · 61 posts · 20 votes
6y
@Jim Pellerin I want to be a real estate invest!
0 Reply
Andres A.
Specialist · Atlanta · Member since 2019 · 88 posts · 53 votes
6y
@Justin Hayden I would say start with a duplex and manage it yourself. You will only have to put 3% down if you live on one unit and you can rent the other unit.
1 Reply
Justin Hayden
OP
Specialist · Member since 2019 · 61 posts · 20 votes
6y
@Andres Amado awesome! Will you only have to put 3% down if you get a FHA loan?
0 Reply
JD MartinBusiness Member
Moderator
Rock Star Extraordinaire · Northeast, TN · Member since 2015 · 10k+ posts · 16k+ votes
6y
There's no good way to answer this question based on what you posted. Where do you want to invest? How much do you have to invest? What kind of tenants do you want? What is the housing stock in your preferred geography? Do you want to live on site? Do you want to self manage? Are you handy? Do you want housing stock diversity? ETC.
Both have their advantages and disadvantages. Neither one cash flows more than the other. It is market, property, and investor specific. There are huge conglomerates that own nothing but apartment buildings and others that own a hundred thousand single family homes. They can all be profitable.
You really want to ask this question in the general real estate forum, with more information. In the MFH forum you are going to find MFH cheerleaders.
Podcast Guest on Show #243
Skyline Properties
View Page
5 Reply
Taylor L.
Rental Property Investor · RVA · Member since 2016 · 5k+ posts · 4k+ votes
6y
Originally posted by @JD Martin:
There's no good way to answer this question based on what you posted. Where do you want to invest? How much do you have to invest? What kind of tenants do you want? What is the housing stock in your preferred geography? Do you want to live on site? Do you want to self manage? Are you handy? Do you want housing stock diversity? ETC.
Both have their advantages and disadvantages. Neither one cash flows more than the other. It is market, property, and investor specific. There are huge conglomerates that own nothing but apartment buildings and others that own a hundred thousand single family homes. They can all be profitable.
You really want to ask this question in the general real estate forum, with more information. In the MFH forum you are going to find MFH cheerleaders.

All good points.
I started with large scale multifamily. In hindsight, it may have been smarter to take down a couple of single families first. Multifamily can take a while to get started, and most people give up too soon before they generate results.
Just strive to do good deals. If you find a single family that makes a return you're happy with then do it. Don't turn it down just because it's a single family. At the beginning the most important thing is to just get started.
5 Reply
Gaspare U.
Rental Property Investor · Cranford, NJ · Member since 2019 · 245 posts · 148 votes
6y
I think it really all comes down to is how much of a sacrifice are you willing to make? The more apartments the greater the potential for income BUT the cost is at privacy. Are you willing to have someone live above you? Will your wife? I know my wife would not want to live in a typical apartment. We came from a larger 300+ unit condo and was looking fwd to having our own space.
If you and your wife want to keep your privacy and still wish to house hack I would recommend a duplex. That is a two unit apartment that is side by side NOT under and over.
This allows you the quality of living in a townhome style home, similar to a traditional 2 floor home. Bedrooms on 2nd floor, living quarters on 1st. Think about not being woken up due to the people on the floor above you running around.
Most of these homes have separate utilities as well, which means less headache. The tenant handles their own heat, gas, electric, water, etc.
Good luck!
1 Reply
Terrin Horton
Rental Property Investor · Wilmington, NC · Member since 2019 · 2 posts · 1 vote
6y
@Justin Hayden my second time around i went with a duplex. Wish i wouldve done it my first time.
1 Reply
Justin Hayden
OP
Specialist · Member since 2019 · 61 posts · 20 votes
6y
@Terrin Horton how many units did you start off with? What experiences did you have to make you regret your first purchase?
Thanks!
0 Reply
Justin Hayden
OP
Specialist · Member since 2019 · 61 posts · 20 votes
6y
@JD Martin awesome thank you! I want to manage the property myself. I also don’t mind having roommates staring off. My plan would be to live their for one year in order to not have to put 20% down as an investment property. I’m not to handy, but my father in-law is. Thank you for your advice one which forum to put it in. I plan on looking for a property in the Maryland, D.C and Northern Virginia area. I want to get the most bang for my buck, so where ever I can get the best deal. I plan to put about 30k down on my first property.
Thank you for your words of wisdom!
1 Reply
Justin Hayden
OP
Specialist · Member since 2019 · 61 posts · 20 votes
6y
@Taylor L. Thank you Taylor! I just wanted to try and bring in cashflow while I have the benefit of living in the property while only having to put 3.5% down!
1 Reply
Justin Hayden
OP
Specialist · Member since 2019 · 61 posts · 20 votes
6y
@Gaspare U. Thank you! My wife has agreed to try the multi-family route for now. She said once we have kids she wants her own privacy. If we sacrifice now we can reap the benefits later. Would you recommend always having the tenants put the utilities in their name?
0 Reply
Gaspare U.
Rental Property Investor · Cranford, NJ · Member since 2019 · 245 posts · 148 votes
6y
I would yes, this makes them more accountable. When they are paying the water, they tend to be more inclined to shut it off. Or close a window when the heat is on.
2 Reply
Justin Hayden
OP
Specialist · Member since 2019 · 61 posts · 20 votes
6y
@Gaspare U.hahaha that’s very true!
1 Reply
Anthony Rosa
Rental Property Investor · New York City · Member since 2019 · 703 posts · 538 votes
6y
@Justin Hayden - They both have pro's and cons but I lean towards MF however, that's not to say that MF will always bring in more income. With SF you can put all expenses (water/heat/electric/garbage/lawn care) on the tenant. With MF the landlord typically pays for those expenses except the electric. With SF the tenants will likely stay longer because the house feels like their home and there is no noise complaints from other tenants. With MF when its time to replace a roof, its only one roof.

It depends on what you want to do so weigh your options and work the numbers thoroughly.

5 Reply
Justin Hayden
OP
Specialist · Member since 2019 · 61 posts · 20 votes
6y
@Anthony Rosa I agree with all of your points. I’m leaning more toward MF because my wife and I can live there as well while paying a reduced mortgage, and get our feet wet in Real Estate! Thanks for your input!
0 Reply
Ola Dantis
Multifamily Syndicator · Houston, TX · Member since 2016 · 1k+ posts · 2k+ votes
6y
As someone who started with House Hacking, I can say unequivocally that starting with Multifamily is a no-brainer and that it changed the course of my life.
Now, it can take some time for some spouses to get the idea so taking your spouse to see a few multifamily properties and explaining the impact it will have on your paychecks may be helpful.
Honestly, if you buy the multifamily (2,3, or 4 units) right and follow the process, you will be fine.
Real Estate Investing is, for the most part, forgiving.
5 Reply
Eachan Fletcher
Investor · Chicago, IL · Member since 2019 · 10 posts · 15 votes
6y
In addition to the higher cash flow and 'house hacking' advantages others have cited, multifamily properties often have strong maintenance cost benefits which improve with a greater number of units.
My wife and I have a few 6 flat buildings; one roof, one yard, one furnace, one boiler, but 6 separate units paying rent.
Also you'll often find multifamily buildings have some incremental income opportunities, for example detached garages or parking areas where you can add on parking fees, shared laundry areas that can be run coin op, etc.
Good luck, and congratulations (in advance) on your first property!
2 Reply
Henry Lazerow
Real Estate Agent · Chicago, IL · Member since 2017 · 2k+ posts · 2k+ votes
6y
I would go for a 3 or 4 unit. These tend to cashflow the best. If you can house hack it even better as allows for a low down mortgage. That's what I am doing in a 4 unit right now.
3 Reply

Join the conversationCreate a free account to reply, vote on answers and follow this thread.