Multi-family or Single? Which is better investment in Detroit?

Question

Hi, I am happy to connect with investors in Detroit. Please provide your expertise with multi-family and single-family rental property investments.  Which is better to start with?

Isaura Orellana · Answer

Yes, lots of Duplexes in Detroit. We buy and flip them and tenant them typically with section 8 tenants and then sell or hold them. We like to stick to decent area’s and a minimum of 2bed and 1bath per unit so we get a minimum of $700 per unit or $1,400 Total. We also wholesale tenanted duplexes. We do the same with SFR’s. We tend to have an even mix of singles and doubles under our wing right now but that does vary from month to month. At the end of the day for us it’s more about where the best deal is so we can pass along as much meat on the bone as possible to our clients. All that being said I would have to say we are more focused on duplexes lately b/c there seems to be a growing demand for them in Detroit from our cash flow hungry OOS and OOC clients. I also enjoy the sheer size and enormity of the big brick duplexes in Detroit. Not unusual for them to be 2,400 to 3,000 sqft of big beautiful brick. There are some serious monsters or concentration of them in the 48204 and 48206 zip codes like on Calvert St, Tuxedo St, Lasalle, etc. It’s a shame the values are not quite there yet although you sure can’t beat those brick for brick prices. Sooner rather than later they will double in value also and we will all be wondering why we didn’t buy when the price was right! And don’t get me wrong with greater size comes more rehab, more upkeep or maintenance costs and we sure as heck also appreciate great 1800 sqft brick Tutors or Colonial deals in the heart of some of the better zip codes like 48224, 48227, 48219, 48234 etc etc... Happy Hunting :))

Travis Biziorek · Answer

This question is as old as time itself. And it's not Detroit specific. So if you just look up pros/cons of duplexes vs. SFH's you'll find plenty of opinions.

There is no right or wrong answer. It largely depends on your personal strategy, goals, etc. All things equal, a duplex should provide better cash flow, but as Rassan pointed out, you're likely trading that for decreased liquidity and perhaps appreciation.

IMO, there's a place for both in a well balanced portfolio just like if you were building a stock portfolio geared towards dividends. You'd want to have higher growth, dividend paying stocks (like Apple) that pay a low dividend along side of slow growth, high dividend paying companies (like AT&T). How you weight that portfolio largely depends on what's most important to you.

I own ten properties in Detroit, two of which are duplexes. The "right" mix for my wife and me is to pick up one duplex for every ~4 SFH's we buy. That may change as our portfolio grows in size.

David Harris · Answer

Isaura,

Thank you for your detailed and informative post.  It really gives me an insights as to why Detroit is a good area for duplexes.  I have lived in Detroit my entire life and I have always noticed the large numbers of duplexes in all areas of Detroit especially on major streets such as Wyoming, Meyers, Tuxedo, etc.  In fact, the first home I grew up in was a duplex that my mother and father purchased as a middle class family just getting started.  I look forward to providing housing to families like ours was who are just getting started and need quality renting options within Detroit city limits.

I especially like when you said: "At the end of the day for us it's more about where the best deal is so we can pass along as much meat on the bone as possible to our clients. All that being said I would have to say we are more focused on duplexes lately b/c there seems to be a growing demand for them in Detroit from our cash flow hungry OOS and OOC clients. I also enjoy the sheer size and enormity of the big brick duplexes in Detroit. Not unusual for them to be 2,400 to 3,000 sqft of big beautiful brick. There are some serious monsters or concentration of them in the 48204 and 48206 zip codes like on Calvert St, Tuxedo St, Lasalle, etc."

I am learning with my research that the "deal" seems to be what is most important for investors.  As a result, I believe that Detroit will be a good place to start because at the moment deals seem to still be prevalent many areas in Detroit (both good and not so good locations).  Thank you again for the post.

Drew Sygit · Answer

@David Harris: There are a lot of duplexes in Detroit if you know where to look!

Ask @Travis Biziorek!

David Harris · Answer

Hello Rassan and Travis,

Thank you for responding.  You guys both makes some excellent points.

To Rassan: I agree with that in Detroit there seem to be way more SFR there anything else.  I have been a Detroit my whole like and SFH is mostly all you see unless there is a busy street with duplexes or in the downtown/midtown area.  I think its really interesting because in Detroit we don't have as many 3-plexes and 4-plexes as other cities.

To Travis: I love the equation that you and your wife have derived for your rental property portfolio.  One duplex for every 4 SFH! Nice!  For me, I like the idea of duplexes because of the 1 place, 2 homes situation.  For example, with 5 duplexes I would essentially only have to travel to 5 locations rather than 10 locations if I had all SFH.  I know this would seem picky to most, but would be my preference.  Also, my exit strategy is still being developed. My wife and I would love to house hack our first deal by having a duplex renting out one unit and living in the other.  Lastly, I am more interested in cash flow as opposed to appreciation because my hopes is that I am eventually able to have enough cash flow from rental properties to pay for our expenses (mortgage, cars, food, phone bill, etc.).

Rassan Sampson · Answer

Hi David, I only have entry level experience but my thought is that it depends on your goals.  I recently got started and went with an SFR as they appear to be easier to find in Detroit, could potentially attract longer term tenants, and I might be able to sell it faster if needed.  However, a duplex could mean significantly more cash flow, which for some people may be more important than all my previous points, it all depends on your priorities.

Multi-family or Single? Which is better investment in Detroit?

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