What's the Deal with all these Deals?

[Scott Trench]

I was debating this the other day with a friend of mine - why is it that investors seem to really be focusing on finding as many deals as humanly possible? It seems like everywhere I turn folks have the strategy of "acquiring 10 deals over the next two years" or similar language that is gauged at acquiring many properties over rapid periods of time.

I am unable to understand the merits of this acquire-as-many-properties-as-possible approach when compared with the approach of purchasing just 1-2 properties per year (or even one property every couple years), but purchasing larger and nicer properties each time . 

For example, instead of acquiring 50 $100,000 SFRs, why not attempt to consolidate all your holdings into one $5M apartment building? Or, if you wanted a little diversity, maybe a small strip mall, a 10 unit apartment complex, and a mixed-use property, each at $1-2M in value?

To me, this approach seems like it will produce the same financial rewards, with the added benefit of being much less work and management!

Am I missing something here? Would love to hear thoughts - both from people who went the 50+ properties path, AND from those that sold their early small investments and bought bigger commercial properties. 

While I realize that it's possible to systematize the acquisition and management of small properties, it seems to me that the systematization of large commercial buildings is far less expensive and far simpler - fewer units, fewer tenants, more scalable projects, etc.

[James Masotti]

@Scott Trench - While I'm definitely not on the scale you are referring to, I can tell you my logic behind acquiring SFR, is in the ease that they will have at disposing them down the road. With larger commercial buildings you will always be dealing with investors, which means you may wait longer to sell, and unless you've been able to significantly improve the revenue stream or costs of the property, you're buying based on the cap rate and still again selling there. Where as with my SFR portfolio, I have more options...I could more quickly liquidate to another investor and recoup my investment, I could upgrade a bit and then sell off at retail, I could lease option to my tenant. And probably some more exits that I can think of. This is why I'm interested in acquiring a base of SFR rentals, before I even start looking at larger commercial deals...this will be my cash flow base that I leverage to start...a larger more consolidated approach like the one you discussed with commercial units.

At least that's my logic...I can't speak for other investors...but I do look forward to reading their responses.