Vacation Rental vs Apartment Building

[Khadijah Celestine]

My boyfriend and I are trying to decide which investment is better dollar for dollar. Neither of us are investors yet. However, we both agree it may be more of a hassle to invest in a building but he believes dollar for dollar, you would make more money with a vacation property. We've been using rent-o-meter + loopnet to look at apartment building numbers and airbnb + realtor.com to look at vacation rental numbers to answer the following:

If you had 1 million dollars to spend, anywhere in the us, would you buy a vacation rental or an apartment building? 

I want your opinions. Which investment would you choose? What would be your ROI? What are the rough numbers you are using for calculations? What occupancy / vacancy rates do you use for apartments (90%?) and vacation rentals (50%?).

Thanks in advanced,

Khadijah

[Scott Passman]

@Khadijah Celestine Personally, I would be more inclined to invest that money into multifamily properties because of the larger scale efficiency, scalability, cash flow, and equity build up potential. Even small changes to increase net operating income (NOI) on a multifamily property (such as increasing rents $25-50 per unit) could translate to equity increases of tens or hundreds of thousands of dollars. Having many units under one roof creates a lot more efficiencies than vacation rentals and they tend to be much more stable during up or down economic cycles. As far as specific numbers, there are way too many variations to put anything of value down and quite frankly I'm no expert in either. I would educate myself on the valuation and operations of each to determine what makes the most sense for you.