Multifamily Units; Side by Side or Up/Down?

Question

BP Community,

I am starting my search for multifamily units in central Connecticut to begin my real estate investing through house hacking.  I am wondering if people have suggestions around the type of units in multifamily homes.  Are side by side units preferable for tenants as opposed to up/down units, or is that just my personal preference?  How about maintenance, noise, and expenses between the two types?  Any information and advice would be greatly appreciated.

Thanks,

-Jacob

Des Shei · Answer

if you are buying your first property to house hack; don't worry so much about the up/down vs side to side. Your main concern at this point should be how to maximize your returns. Therefore focus on finding the absolute best deal you can afford (4 fam-) using the least amount of your own capital (CFHA- 1st time homebuyer bonus!). Getting this right from the beginning will exponentially increase your chances of successfully scaling up your future holdings. Here's my high level analysis of how it may play out:

If you can lock up a 4 Fam in Central CT for 150K or so ( i know they tend to be less expensive up there) you can theoretically rent 3 doors for at least $2.4k/month on the low side and live on the fourth. With a $145K mtg (assuming 3% down), and say 5K in taxes, you should be able to generate a "net" cashflow of about $900-1000 after PITI (but before accounting for vacancies allowances and CapEx). All this while living for free. Doing it this way will also significantly derisk the R.E investment/learning process. On the back end, live in a unit for 1-2yrs, save your earnings during that time and use for 10-20% downpayments on future purchases. rinse and repeat.

hope that helps,

Des.

Jason Arcuri · Answer

I'd say side by side would be better.  If there is a leak it won't damage the unit before it.  If there is a basement it's much easier to run and fix electrical and plumbing.  Also, most people like to be on first floor hence why rent is always higher for first floor in equivalent units.

Jesse Peña · Answer

@Jason Arcuri

Welcome to BigggerPockets! Below are some links to get you started. Much success to you!

I received this info from @Nathan Sharp when I first started.

https://www.biggerpockets.com/renewsblog/2013/11/02/hack-housing-get-paid-live-free/ (House hacking)

https://www.biggerpockets.com/renewsblog/2014/03/13/investing-multifamily-ben-leybovich/ (Podcast 061 - How to succeed in multifamily investing)

https://www.biggerpockets.com/renewsblog/2013/04/09/how-to-buy-a-small-multifamily-property/ (How to buy a small multifamily property)

https://www.biggerpockets.com/renewsblog/2015/11/16/how-to-choose-areas-multifamily-deals/ (Choosing multi-family deals)

http://www.biggerpockets.com/renewsblog/2014/07/19/how-to-buy-a-duplex/(guide to buying a duplex)

https://www.biggerpockets.com/renewsblog/2013/12/12/bp-podcast-048-duplex-managing-tenants-darren-sager/ (Duplex investing)

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REI books suggested by BPers

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Jeff B. · Answer

That's not a given and depends, I've seen the opposite due to the privacy and quietness of the upper unit.

Mike Wood · Answer

@Jacob Reilly  I build up/down two story duplexes. There is a couple reasons, but the primary reason is space.  In my town (New Orleans) property lots are narrow 30-50ft wide, which can make a side by side house have very narrow configuration (we have tons of "shotgun" side by side houses here, where each side is 12-14ft wide).

I have house hacked a up/down duplex (my first house) that I still own.

I believe that noise is less of an issue with an up/down duplex, than a side by side.  I have lived in each kind.  You will hear walking in both, but voices are less of a concern in an up/down.

Some tenant will prefer the first floor, while some prefer an upper unit (I personally due), this can be for several reasons (less noise in the upper unit), more natural light, better breeze, etc.  Obviously the stairs will be a deterrence with upper units.

I believe that your maintenance could be less with a up/down (half as much roof, gutters), but that does mean more yard space.  I don't think that your expenses would be any different between two of the same size duplexes.

Sometimes you can fine a townhouse style duplex (where each unit is a two story unit) and would think that its issues would be similar to a side by side duplex.

Jacob Reilly · Answer

@Mike Wood @Jason Arcuri NA Beard,

Thanks for the responses.  Definitely seem to be benefits to both.  It might come down to the numbers instead of unit type. I was just curious if there was an overwhelming preference for either type.

I could also see families preferring side by side units, so that way sleeping space is separate from living/entertaining space.

Michael Noto · Answer

No problem.  Best of luck @Jacob Reilly

Jacob Reilly · Answer

@Des Shei and @Michael Noto,

Thank you both for your input.  I am looking to maximize my cost per unit with an FHA or 203k loan which is similar to CHFA but with a slightly higher interest rate. I looked into the CHFA, but you are required to live in the property for the life of the loan.  I am hoping to move to my second purchase after the year requirement for FHA/203k.

Michael, your idea about supply and demand of side by side units also makes sense.

Thanks again,

-Jacob

Michael Noto · Answer

@Jacob Reilly I am an investor and realtor in the same market you live in. Your agent should be giving you some guidance on this topic but in general side by side 2-families and 3-families are way more desirable in this area than up/down.

This is simply because there are less of them out there. The housing stock is filled with probably 80%-90% up/down and opposed to side/side. If you can get your hands on one that fits your investment criteria and strategy the side/side are more attractive to renters for the obvious reasons mentioned in this post already.

With that said, there is nothing fundamentally wrong with an up/down style.

Anthony Crecco · Answer

great. success to you. we are not too far away. I'm in westchester county.

Multifamily Units; Side by Side or Up/Down?

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