Denver, CO · Member since 2009 · 131 posts · 22 votes
I know this has been discussed before, but I'm just looking for some experience-based weigh ins on this.
SFH PRO
one tenanant, longer term. Will tend to take care of the property better.
lease option
appreciation
SFH Con
vacancy= no cash flow
cash flows typically not as good as Multifam
Mult PRO
better cash flow
can still cover mortgage with vacancies.
maintenance is all under one roof for 4 tenants.
Multi CONS
shorter term tenant(apt vs "home")
appreciation may not be as good
smaller target audience for selling (investor-only sales)
I'm debating this. My strategy is going to be long term B&H..(retirement) so not as concerned with appreciation play. Also I'm looking to build a portfolio up over the next few years, so I'm looking at the best ROI. from what I can see, multifam, even accounting for vacancy (excluding exit-aka selling) would be the best play.
Residential Landlord · Indianapolis, IN · Member since 2010 · 592 posts · 138 votes
14y
I don't think there is more management required for MF in all cases. You mention utility costs, but you can find MF with separate meters, or have sub-meters installed and billed directly to the tenants. I manage my rentals and, when there is not a maintenance request or other specific reason to visit a property, I just do some drive by inspections and an occasional interior inspection of the property, in that respect it would be more management intensive to have a couple SFHs in different locations than a single MF building.
Investor · Los Angeles County, CA · Member since 2012 · 962 posts · 279 votes
14y
Originally posted by Steve L.:
In my market, multi-family trade for between a 5-7% cap rate. The average single families I buy are 10-16%.
That is probably unique to a few markets.
For me, two major pros to multi-family that Chris F. missed are:
- economies of scale
- lending climate is easier (after 10 especially) in multi-family
Steve what market is it in Southern California that you're getting 10-16% cap?
~Thanks
Real Estate Investor · Hartville, OH · Member since 2010 · 148 posts · 174 votes
14y
Why be exclusive with either SFR or MF? Why not have both in your portfolio and see which performs best for your specific market.
I currently own 4 SFR and 1 Duplex for that exact reason. I've only been investing for a few years so I wanted to get some experience with both types of properties. That and the duplex property just sort of fell in my lap and was such a good deal that I bought it.....in fact I'm living in one side of it right now and paying rent to my own company. I'm my own worst tenant :-)
Clarkston, GA · Member since 2012 · 4 posts · 0 votes
14y
Originally posted by David Beard:
Michael -- I don't really know Dayton at all, haven't even driven up to look around. It's outside of my driving range for a target market. The zip code you mention is a pretty low-income demographic. I usually look for household income a little higher, but it's so hard to make generalizations. If you're having success with stable renters that's great.
How did you determine the demographics / income from a zipcode? Sounds very useful.
Investor · Los Angeles County, CA · Member since 2012 · 962 posts · 279 votes
14y
Originally posted by Curt Smith:
Originally posted by David Beard:
Michael -- I don't really know Dayton at all, haven't even driven up to look around. It's outside of my driving range for a target market. The zip code you mention is a pretty low-income demographic. I usually look for household income a little higher, but it's so hard to make generalizations. If you're having success with stable renters that's great.
How did you determine the demographics / income from a zipcode? Sounds very useful.
tnx curt
I also wonder if there's another way. But I do know on Redfin.com when you are looking at any given property you can also pull up demographic info. It's a link near the bottom of the page under "Community and Schools"
Investor · Omaha, NE · Member since 2011 · 475 posts · 211 votes
14y
Since I'm not looking for another job the only way to go for me is multifamily professionally managed by 3rd party company. I'm doing it for retirement income and when I retire I don't intend to switch jobs to property management. The economies of scale are best for my purposes in mulifamily. It is certianly more difficult to find a good multifamily than a good single family, but, for me worth the effort.
Rental Property Investor · Clarkston, GA · Member since 2012 · 2k+ posts · 1k+ votes
14y
Dennis, I'm slowly learning that point that multi-family has some advantages. There must be biggerpocket's blogs and forums to now jumpstart the how to sort through and find good multifamily properties with motivated sellers?
Investor · Omaha, NE · Member since 2011 · 475 posts · 211 votes
14y
@curtsmith It's always a slog. The only effective way I've found is to develop relationships with commercial real estate brokers so they can bring you properties. All of the apartments I've pruchased have been pocket listings and never hit the larger market.
Boca Raton, FL · Member since 2012 · 5 posts · 3 votes
13y
I also find myself thinking about this question. I'm currently searching for my first property. I'm leaning more towards single family houses. Mainly because I'll have more exit options with a sgf and the appreciation (specially in this market) is a better value.
Investor · Austin, TX · Member since 2013 · 113 posts · 30 votes
13y
One advantage I understand is that MF is valued based on its income, which you can change with improvements in rent and vacancy. all other things being equal. You can't as easily change the value of SF real estate since it's based on CMA.
One benefit of SFHs long-term is that the value can potentially scale up over the cashflow, whereas multi unit property values will most likely be tied to the cashflow.
I think that you hit the nail on the head. I've been scratching my head trying to figure out what to do in 2015. Expand the SFH portfolio, or go into multifamily. This point seems to make it much more clear to me. SFH should increase in value greater than multifamly in the long run.
I'd appreciate input to run an apples to apples comparison.
Multi-family values are tied to cashflow. To hit a grand slam, you need to buy under performing or destroyed properties, fix them up, and rent them out. You can do VERY well doing this, turning 15 caps to 9 caps, etc. But the long term value is going to be tied to NOI.
Single families right now, are not tied to cash flow, and across the nation are priced well below the cost to rent. Buying and fixing distressed SFHs generate solid NOI (comparable to apartments), along with significant equity from day 1 (also comparable to apartments). But the long term 10+ year play favors SFH in my book.
A significant % of buyers are locked out of the market. A significant % of foreclosures happened in 2008. Add 7 years to that, and you'll realize that many buyers are locked out until 2015. 2009-2012 there were LOTS of foreclosures as well. The SFH market has a lot of pent up demand that will come into play over the next 5 years.