Apartment vs SFH Investing

[Travis C.]

It seems I read on BP more frequently that apartment investing seems to be better overall than SFH investing. I have always bought SFH's, but may be open to multifamily as an option. From an investor's point of view, what risks are there with apartments versus SFH's? It would seem that maintenance risks are only multiplied which is one of the main risks that pops into my head. I like SFH's in this way because I can compartmentalize risks around maintenance. How do you multifamily investors get comfortable with this and other risks that may not reside as loudly with SFHs? Or am I viewing this all wrong?

[Michael Bishop]

Travis, that all depends on your level of involvement and whether you're interested in doing small MF with one or two investors, or whether you're interested in larger MF as a passive investor.

When it comes to the ladder, I'd say there are less risks due to economies of scale and other things:

1. Maintenance and other expenses can be marginally reduced based off of a discounted rate for a higher number of units.

2. Vacancy costs are far less risky. With a SFH, if a tenant leaves unexpectedly, you're left covering the mortgage. In a 100 unit MFH, if three tenants up and leave, you've still got 97 other rents covering their portion.

3. A number of studies have shown that MFH (large MFH in particular) are MUCH more recession-resistant than SFHs.

These are just a couple of thoughts that pop in to my head immediately. If you'd like to discuss the topic further, feel free to connect!