Multi vs SFH

[Tom Shepard]

Considering multi-family investments. Wondering if calculations for MFH Are the same or different than for SFH. Specifically are there things that you have to consider further with say a 16 unit small apartment building than a SFH or if you bought 16 SFH? I realize the numbers would be bigger/different but are there addition costs to consider with multi-family or would the same formulas apply?

[Michael Seeker]

The biggest difference is that the costs should be lower on a 16 unit building vs 16 SFRs.  You get economies of scale by having one roof, one set of plumbing, one common area, one parking area, etc.  It's also one location to keep an eye on and send contractors to vs 16 different addresses.

Financing will be different and will impact what your debt service payments look like each month. A single SFR might have a 30 year fixed loan at 3.5% whereas the 16 unit building might have a 20 year amortized 5 year term loan at 5%.

With SFR's you've got significantly higher transaction costs...if you're paying $2K in loan costs vs maybe 4-5K for the 16 unit building that's $32K for closings vs 4-5K.

The list goes on and on...they are different types of investments and each has it's pros and cons.