Hey all!
I’m a relatively new investor & I was talking to some buddies and they basically told me to avoid single family like the plague because if one person leaves you’re at 100% vacancy.
What do you guys think?
I’ve also hear grant cardone say this & also say don’t shop for real estate based on your budget.
I have about 30k i’m comfortable investing eith right now.
My area is relatively cheap so I can buy a single family for 45k. 20% down and rent it for $700-$800.
Any suggestions would be great.
I’m a relatively new investor & I was talking to some buddies and they basically told me to avoid single family like the plague because if one person leaves you’re at 100% vacancy.
What do you guys think?
I’ve also hear grant cardone say this & also say don’t shop for real estate based on your budget.
I have about 30k i’m comfortable investing eith right now.
My area is relatively cheap so I can buy a single family for 45k. 20% down and rent it for $700-$800.
Any suggestions would be great.
Keep in mind the target audience for Grant Cardone. Accredited investors with at least $100,000 to invest. I agree with his advice if you fall into that category. I also agree with him in that owning one door is a bad idea.
Grant does not know or understand single family investing. He also doesn’t know or understand flipping, wholesaling, note investing, or even other commercial real estate investing. Keeping that in mind and the fact he is trying to sell his own product, he gives misleading advice to sway people away from the other investments.
I like single family. I think the barriers to entry are lower and it allows people who don’t own their own profitable businesses or have high paying jobs the opportunity to invest in real estate. I think owning a single door is a bad idea though and the only way investing in single family can work well is if you own enough units.
Rental Property Investor · Dayton, OH · Member since 2015 · 312 posts · 273 votes
8y
You are so close with 30 and needing 45.. If you could just get it with cash, it saves big on closing costs, insurance costs, interest, time. Oh, so many things get easier if you are buying low dollar SF with cash. Could you buy distressed at auction, then fix it up yourself?
Real Estate Broker · Hugo, MN · Member since 2016 · 688 posts · 596 votes
8y
@JR Rivas For our investors we assess their strengths and weaknesses. For some it is townhomes and Sfh others it is 100 unit section 42 buildings. All make money if done right and all can be disasters if not. Take inventory of what you can do well and go from there.
Rental Property Investor · NY · Member since 2018 · 571 posts · 332 votes
8y
Hi, as a new investor as well, i went back and forth between SFH and MFH. It's really just a trade off between risk and return (no risk no reward) so it boil downs to what you are comfortable with. I ended up starting out with SFH (and probably stick with it). Here are some pros and cons:
SFH
Pros:
better tenants (if you can afford it, why would you share a home with someone?) that may stay longer than 1 year.
can off load expenses (mowing the lawn, carpet cleaning, etc.) to the tenant
more liquid (only investors would buy multi family, where as SFH, can be purchased by people looking for primary resident as well)
Cons:
Less GROSS rent (typically)
more roofs and other capex to repair
MFH
Pros:
More rent
less capEx
even if some units are vacant, there may be SOME income to cover your cost (but not always)
Cons:
most likely attract not as established tenants. more possibility of eviction or tenants not taking good care of the home.
if you are managing it yourself, it's a headache to deal with multiple tenants (more work, more complaints)
you are liable for expenses around maintaining the common areas
I think you just need to run some numbers based on your area and see what you are comfortable with. MFH would have higher vacancy rate and faster turn over than SFH in general, and you would need to layer in additional maintenance expense that you would need to pay for SFH. Hope that was helpful!
Rental Property Investor · Phoenix, AZ · Member since 2013 · 919 posts · 911 votes
8y
@Michinori Kaneko, there are a couple of items that you left off between SRF and MF:
1. SFR rents can usually be raised faster than MF rents.
2. MF rents go up more slowly, but are MULTIPLES when compared to SF.
3. SFR are easier to sell because a larger pool of buyers.
4. SFR appreciate more than MF.
5. Vacancy rate is usually lower in a SFR than a MF.
6. My experience in MF is that of becoming a junior high school referee. Not a job I want. A good friend of mine (former partner) didn't mind the experience and now has 32 doors (and dozens of evictions) under his belt.
Real Estate Investor · North Ridgeville, OH · Member since 2016 · 97 posts · 81 votes
8y
We have three SFH, three condos, and a duplex. We only have a mortgage on one of the SFH. We can charge higher rents for the SFH's and the length of a vacancy is very short. The one house is a small 980 sq ft 2 bedroom house in a really good neighborhood. I have owned it for 17 years and have had it rented for 11 years. The longest vacancy I have had in 11 years was 2 weeks. The other two single family homes one we have had a little over two years and the other not quite a year. The one we have had a little over two years had one vacancy after a year of two weeks. The other home I am in the process of remodeling. Where I live the demand for SFH rentals is sky high. Especially if the property has a fenced yard and a garage.
Property Manager · Columbus, OH · Member since 2017 · 123 posts · 76 votes
8y
@JR Rivas I heard that too from Cardone and really thought it was bad advice. In his example on the podcast he said wait till you're able to buy a 16 unit and not a SFH as your first investment. So he means to have ppl that have never managed a rental before to all of the sudden manage 16?! Go slow on your first one and do a SFH or a duplex if you're that nervous about occupancy issues. See if you like managing tenants, repairs, etc for one before 16. You can say get a PM, but that is another relationship that assuming you've never had before and trusting that person to fill 16 units vs. 1.
The bigger focus over SFR vs. MFR should be the property itself and the market it is in. If you buy something in a good market with good fundamentals and a good property, it's a win.
I have all SFRs except one duplex and they've been great.
Cranston, RI · Member since 2017 · 64 posts · 22 votes
8y
I have been having a tough time trying to purchase a multifamily in my area. I currently am looking for my first property and havent been able to get a MF for a good price although I am still on the search taxes tend to be an issue in the state of rhode island even with that being said I know there are good deals out there. Many MF I find have a very low ROI and I am beginning to see opportunity in single families. Also I do believe you can get alot more equity from SF if you purchase it in a good location vs MF. Even though MF is great for greater cash flow and is lower risk due to there being more income from the various units.
Lake Elsinore, CA · Member since 2018 · 235 posts · 300 votes
8y
I think Grant Cardone is great...but his advice is for experienced investors, IMO. Not to say getting into a duplex or fourplex is bad. But there are plenty of people making money on SFH because they're easier to buy, often in neighborhoods with owners that keep property values high, and offloading expenses is easier.
There's a risk in any asset. I'd highly recommend building a relationship with a PM prior to purchasing any property to determine rental rates/demand.
Real Estate Agent · Nashville, TN · Member since 2018 · 17 posts · 6 votes
8y
@JR Rivas
Just remember that SFRs are almost always easier to sell and get out of if you need to... and since they appreciate more/faster, there should be some profit when you sell.
Union, NJ · Member since 2016 · 49 posts · 29 votes
8y
@JR Rivas The short answer to your question is yes. The long answer is... yes. Im not a huge fan of Grant Cardone, and I agree that his advice does not apply to everyone but that’s expected. He shouldn’t be ignored though because he’s right. I dont know your market, so theres the caveat. Start with a duplex and house hack.
Specialist · Fort Lauderdale, FL · Member since 2016 · 187 posts · 128 votes
8y
The first mistake is believing that there is some black and white answer that will work for all circumstances. There are so many variations in investing the idea of staying away from SFH "like the plague" tells me one thing. What you need more than a place to deploy your money, is a plan with what to do with it. While I don't disagree that you don't invest to your budget, neither do you invest without regard to it. If all the money you have in the world is $30k for example, dropping $30k for a duplex (with some debt) and 5% return is probably not smart. On the other hand, if you are buying a SFH that you can fix and flip to turn your $30k into $50k, maybe not so dumb. At the same time, maybe SFH as a rental in the area you are looking at works $ wise while property value is appreciating more for SFH than it is in other asset classes so while sure you face the potential vacancy, if you want to avoid risk completely, you should put your money in a savings account and go back to work. Don't let the money burn a whole in your pocket. Take some time to have an end-game in mind. If you can get yourself there and properly plan, what to do next will come as an easy answer to an easy question. . If you don't know what to do next, you have no plan and without a plan, what you are really doing is gambling. If you are going to gamble, I recommend Baccarat as at least the odds are the best in the casino....good luck
Real Estate Agent · Mesa, AZ · Member since 2017 · 230 posts · 169 votes
8y
FInd out what you can get with a laon and do the BRRR method to add value and then make even more money to go get more houses. I wish I was in that position myself that's what I'm currently working towards.
Rental Property Investor · Lynchburg, VA · Member since 2017 · 8 posts · 1 vote
8y
Our first investment was a SFH. We offered full price and paid the appraisal price which ended up being less. If the numbers work they work.
I'm not sure what your area is like, but we use ours for short-term rental and have had no issues with vacancy. Our occupancy rate is probably 90-95% and short term rates are higher than long term, so we see significant cash flow every month. Another benefit of short term rental is property care. It's constantly being cleaned and inspected. One downside of short-term is slightly more work, but it's not that intense since you can run everything from your phone. Just find a good, reliable cleaning crew and run with it!
That being said, we considered long-term as an exit strategy and, though the numbers aren't as appealing, it still works as long term too. Always keep exit strategies in mind! Best of luck!
Monticello, VA · Member since 2017 · 3 posts · 2 votes
8y
I agree with @Jim K. When investing in sfh, choose the type of home specifically. The 2-3 bed/1 bath brick homes have been great. When you get into larger houses, you also add more complexity and can have a harder time renting. We've learned the hard way for sure on the larger house, but I definitely wouldn't shy away from single family home as an initial investment. Think of it as a stepping stone for figuring out some of the kinks on your first purchase.
Los Angeles · Member since 2018 · 13 posts · 0 votes
8y
I'm new here and still grasping the thought process in investing. When people say buy and hold or BRRR, does it mean MF or SFR? I'm guessing it all depends on location and other factors.
I'm new here and still grasping the thought process in investing. When people say buy and hold or BRRR, does it mean MF or SFR? I'm guessing it all depends on location and other factors.
You can do both with both types of assets. BRRR is all about buying below market and either fixing up the property or creating more value with modifications you make to the asset. Most investors will then refi out the additional value they added and use that to fund their next investment. You hear about it more commonly with SFH because it's "easier" for most investors to fix up a SFH.
Investor · Los Angeles, CA · Member since 2021 · 42 posts · 26 votes
4y
I think a lot of people try to find a "one rule fits all" type of guideline when it comes to investing. My angle is: If I can make money from it, then I want to learn about it. SFR's will have pros and cons just like anything else, so you have to decide whether it's something that fits your strategy. I don't completely write off any asset type particularly, I just know they come with pros and cons and if my DD satisfies those concerns, then I'll go for it.
There's no hard and fast rule, you'll have to see what you want out of it first and see if SFR helps you (or is more available to you) or if Multi fam fits better.