SFH vs MF investing pros and cons

[Catalin B.]

Investing into SFH or MF (more than five units) is still a heated debated among investors.

Below is a list with pros and cons for both options. I have tried to keep it simple. 

Please note that my assumptions are estimates from my own research…if they are off, maybe more experienced investors will be willing to comment and correct me.

1-Finding the Deal

SFH - might be easier to find, can buy in multiple markets.

MF - very hard to find good deals…investors with deep pockets are looking into MF also

2-Financing the Deal

SFH - to get a good deal one might need cash upfront and cash out refi/leverage later after rehab and renting…conventional financing is possible, but it is limited to ten properties...after ten SFH's, portfolio lenders are needed in order to scale-up...somehow easier to get discounted properties and follow the BRRRR method

MF -possible to finance with the right down payment, good credit score, documented net worth, MF proven high occupancy rate & financial records...because of higher costs, it might be difficult to purchase a MF at a significant discount and rehab it...BRRRR strategy hard to reach

3-Cash Flow

SFH – might be able to cash-flow $200/$300 per door/month in some markets after OPEX/CAPEX and loan servicing

MFH – most likely $100 per door/month after OPEX/CAPEX and loan servicing

4-Scaling

SFH – hard work, many transactions with different rehab issues...a well oiled system and a good team are needed

MF - definitely easier and faster to scale up.

5-CAPEX

SFH – more costly to maintain since there are individual properties.

MF – easier to maintain since all units are together.

Note: MF roof, siding, landscaping jobs might be discounted, but water tank replacements, furnace replacements, painting, flooring, electrical, plumbing, kitchen cabinets, etc., might have similar costs for both SFH and MF

6-OPEX

SFH – lower costs…usually the landlord doesn't pay for utilities

MF – higher costs…landlord pays for some utilities

7-Property Manager

SFH – more expensive since the properties will be scattered around...maybe with a large portfolio, the costs might drop

MF – cheaper, might come with the package

8-Vacancy

SFH - tenants with kids and/or pets might be more attracted to SFH's…decent schools, nice backyard, garage, no noisy neighbors

MF – typical for the market if the rent rates are right

9-Exit

SFH – might be hard to sell as a portfolio…the investor might decide to sell properties individually

MF – easier to package and sell

Didn't consider asset appreciation in this post , however, SFH's will appreciate more than MF's...for me personally, I look at the property appreciation as a nice bonus.