Correct Me If I'm Wrong - SF v. MF

[Terri David]

I am currently a SF investor; however, been hearing for years about the advantages of MF/apartments. I think I may finally understand why - based on my experience. Kinesthetic learner, hands-on experience teaches me, sometimes the hard way. Please correct me if I am wrong as I am about to jump ship to MF.

1) My SF properties often are empty at the same time - summer - because everyone is moving after the school year. Expensive. MF/apartments have vacancies throughout the year - more manageable.

2) SF properties are more likely to have kiddos, teenagers in particular, that are hard on houses. MF/apartments are smaller and tend to have smaller gatherings and less kiddos, easier on property.

3) I have to pay a realtor a month's rent to place a new tenant in a SF. Expensive. I would not have to do that in a MF/apartments because I would have an on-site manager. However, is on-site management more expensive than paying a realtor one month's rent and vacancy loss for about two months, per year?

3) The make-ready on a 1600 sq.ft middle class SF is much more expensive than a 1000 sq.ft apartment. Obvious. However, the profit I am making on SF ($300-$550 a month) could be made on each door of a MF/apartment complex. More profitable.

4) I chose middle-class SF homes, great area, great tenants - right? Well, there have been a few exceptional tenants; however, the middle class tenants will leave a house in a big mess too, which is more expensive to repair - and more frustrating. Tenant quality in middle class SF homes has NOT been the significant difference that I expected. I hired  a property manager thinking they could do a better job finding tenants - nope. Might as well do MF/apartments and clean up the mess that is less expensive.

Ok - where am I wrong? What am I missing? Where am I right? Thanks!

[John Warren]

@Terri David I think you are totally on the right track. The two big reasons that multifamily makes more sense than single family are scale and reduced expenses. With more units, you have a lot more income than you do with one door. For instance, I just purchased a 19 unit deal in Berwyn, which is an area I invest in quite a bit. Our gross revenue for the year once stabilized should be around $210,000 per year. Now if I jump to the 40-50 unit sized buildings, it is very achievable to get to gross revenues that are more than double that. That allows me to hire more people to help me and still make a lot of money. 

On the expense side, multifamily is just a lot more efficient if done right. For instance, the yard at my 19 unit costs me $20 per week to cut. I am sure a single family home would cost the same or more!