Opinions Please... Turn Key: Single vs Multi- Family, Turn Key??

[Ryan Zweng]

Wondering if people have pros/cons to share about TURN KEY investments out of state?

I am researching my first Investment Property.  I live in San Francisco, CA (ultra expensive market) and wondering if a Turn Key out of state would offer me a safer, higher return, than if I go sourcing a property by myself in a an area like Sacramento or outskirts of Los Angeles.

Also, is a SINGLE FAMILY a safer/smarter 1st investment than MULTI FAMILY?

Cheers,

Ryan

[Derek Daun]

@J. Martin Here's my breakdown of the Sacramento market:

A and B neighborhoods are too expensive. Even though the costs are still less than on the coast, the price to rent ratios still make them a non starter.

Instead, I look for the niche C/D neighborhoods that are in the process of transitioning into B neighborhoods, and are adjacent to A/B neighborhoods. If I'm lucky, I might find a recently remodeled SFR in the 120k range. The key will be to find one that is either a 3 bedroom, or has a bonus room, since a lot of the central Sacramento homes are 2/1. With these stats I will be able to attract B tenants from the adjacent neighborhoods looking for cheaper or bigger options, and are willing to do a little urban pioneering. I'll be able to get 1100+ a month, and have short vacancies due to high demand. Not quite 1%, but it will generate a little cash and have great appreciation potential.

A 4-plex in the same neighborhood will run me 250k-300k, and generate revenue in the ~700 per unit range. On the surface, the cash flow is a little better than the SFR, but the tenants will be much lower quality, with higher turn over. Plus the building will be in rougher shape, and likely have more repairs. Plus there are 4 tenants, and 4 kitchens, and 4 bathrooms. I suspect that the extra cashflow would get eaten into really quickly. All this for a lot more work. Oh and appreciation will be less than a SFR. Overall, I'd rather buy two SFR than one 4 plex