Purchasing 1 Unit vs. Multi Family Units

[Rashad Jones Jennings]

I've been getting different information on this subject. My goal is to have 10+ units, but is it better to have 1 loan on a 10 unit building vs 10 loans on 10 single family residences? 

[Jay DeCima]

Rashad

I posted this to a newbie recently:

After 40+ years and 200+ of my own rental homes in Northern California, and teaching on this subject for 30+ years here are some things I did and recommend:

1. I buy groups of older houses on a single parcel. Maybe 5-12 small homes, duplexes, etc on a single lot. It would have taken me lots of time if I bought my 200+ homes, one at a time. Because the banks won't finance them, 80-90% of my buys are with seller financing and average down of 10% (about the amount of cash you would put down on a single family home).

Here is a sketch of what I do:

2. I do not recommend going out of state, especially IF YOU ARE A NEWBIE. You give up almost all your control. I like to control all aspects of MY business.

3. I like all kinds of real estate and have bought most kinds, like flips, wholesale, etc. I bought different kinds at different times in my career. But keep in mind that flipping and wholesaling are jobs. You are buying and marking up and reselling things like a retail store would. You pay ordinary income taxes, get really no tax benefits, pay social security tax and have to start over again after you sell.

4. I teach my students to EXPAND THEIR VISIONS FOR PROFITS.....like the following:

One question that I’m asked constantly: “Where can we find the kind of properties you talk about?”

The most common alibi I hear is, “There’s no property in my home town like the ones you write about.” With very few exceptions, I must disagree. The proper­ties are there! You simply haven’t found them yet. There are several different reasons why you haven’t, however, I’ve found most folks simply haven’t been looking for them.

Most investors I know tend to do the traditional kind of prop­erty searching. If they decide to be apartment owners, they look mostly at tradition apartment buildings. Single house investors generally drive through the ‘burbs’ in search of prey. Hardly anyone is goofy enough to buy 5 house on one lot or an old motor lodge. I’m going to suggest that you broaden your vision a bit. After all, non-traditional properties can be lots more fun-as well as more profitable.

First of all, don’t panic. My kind of properties are almost always avail­able; you just haven’t found them yet. Finding the right properties,meaning the kind that will produce monthly cash flow and long-term profits, is one of the most important skills you must develop to enjoy any success in this business.

You must always keep in mind that finding profitable deals is our goal, not just finding lots of deals!

Good luck.

Fixer Jay DeCima

Jay