First Deal decisions!

[Ron Wayne]

Afternoon BP! My name is Ron and I'm from the Columbus Ohio area. I have a question on a first deal would you recommend a single family or multifamily as a first deal? Any information is welcomed! Appreciate it!!

[Alex Owens]

Ron, I think the answer you are looking for is going to depend on what your overall strategy is. If you are new to real estate investing and you need a place to live, I think house-hacking a small multi family property is the best thing you could do. Since you haven't racked up a bunch of conventional loans, you will be able to take advantage of owner-occupied financing for 1-4 units. This will give you a tremendous advantage because your cash flow will be a lot better than a non owner-occupied investor purchasing the same property on a 15 year am at 5+% interest rate. Also, you will be able to live for free as the other units should ideally cover your mortgage payment. 

Alternatively, if you do not need a new place to live then perhaps you should be looking at single family rentals. Especially if you live in an area where single family properties experience high appreciation, accumulating multiple single family properties may be the best overall strategy. For me, in Oklahoma, we do not experience high appreciation rates and for that reason I have chosen to leave the single family rental game in my past and begin to focus exclusively on multi family deals. When it is all said and done, it takes as much work (I actually think it takes less work) to purchase a 24-unit apartment deal than to accumulate 24 individual single family rental properties. Additionally, a package of 24 single family properties will more than likely be scattered all over the city and county and the time and effort it takes to manage that portfolio could be extensively more involved than an apartment complex where all 24-units are in one location. 

If this is your first deal ever, I would recommend staying in the 1-4 unit range and working your way up to the big boys. The analysis of large multi-family properties is completely different than a single family rental. Large multi family properties are considered a business and the valuation is based entirely on the income that is produced and not other "comps" in the area like single family properties. 

My recommendation would be to start with a single family rental or a 2-4 unit multi family to gain some experience. With that being said, I am one of those people with massive goals and I would hate for anyone to tell me to start small or that I am not ready for a bigger deal. If you want to go ahead and shoot for the big boys, I would just recommend partnering with someone who has experience with those larger deals. Hope this helps, good luck!