All Forum Posts by: Phillip Massey

Assuming the returns are the same. I would go with multi family, because I believe it is a better return on your time. Having 16 units in one location is easier to manage than 16 single family homes all over the city.Right know it seem to me that the return on a single family home on average  in the same neighborhood is much higher in single family homes. Since it has been easier for me to get the return I want in the single family space. I am sticking to single family. 

Phillip excellent thread many good responses. Not sure what I can add but will give it a try. I own 60 +/- combination of 31 SFR and the remaining townhomes ( all in the same location ). We are also am in the process of building 12 duplex units and then another( 10 ) 4 families in 2019 . The duplexes are setup as condos from day one and the 4 families townhomes so we can pick off and sell when needed to scale other props . IMHO I prefer the SFR better for reasons already stated. I am a big believe in debt reduction along with cash flow, so have anywhere from 6 year fully amortized props to 15 with soon to be 20 on the new props. All our properties cash flow with monthly rental income of anywhere from 1-1.25% of values. We are custom home builders and as such have instant equity in all our deals with a current YTD vacancy rate of .7 and ,4% in both existing categories. For our purposes we apply the same concepts in new homes with our SFR in that we only purchase props that we can force equity in and get in and out with refi's with typically none of our own money. EG... we purchase for 50k ( lender gives us 100% off our LOC ) we put in 20k property appraises for 100k. We pay off the first loan get our rehab costs back and repeat. We have done this close to 40 times since 2015. We are of the same cloth in that at one point we too could have gotten better interest rates with secondary market money but could never have scaled as quickly. We have 5 companies but far and away love the rental game more than the other 4 combined.

Sounds like your off to a great start and have many informative posts within this thread.Best wishes moving forward!

@Phillip Massey ah, I see, it costs you more but it takes less time and involvement. 

@Phillip Massey ahh, I see. I am curious, why would take commercial loans and not conventional where terms are much better? Same for the renovation loans, HomeStyle FannieMae has renovation loans on investment purchases with only 15% Downpayment that includes the Reno costs plus you don’t need to make mortgage payments during the renovation, you can roll up to 6 months of mortgage payments, after renovation you can either sell or refinance as there is no pre-pay penalty 

Hey Phillip, I'm also from the Knoxville area. For the properties that you bought under 120k, what where you looking at in terms of rehab costs?

@Phillip Massey

Yes we invest in Greensboro, High Point and Kernersville. Most of our properties are in High Point and Kernersville.

@Phillip Massey is your portfolio of 7 SFR owned free and clear? Because on the conventional market you are capped at 10 financed properties, after that you need to enter the "gray area" of non-agency lenders (the infamous subprime). If you finance them ideally is too get as many multiunit as you can and perhaps do non-agency on SFR after

@Phillip Massey

I invest in northern Illinois and southern Wisconsin. Buying distressed properties rehabbing them renting them out and refinancing them, BRRRR strategy. Purchase prices range from 80K to 110K. Much harder to find properties under 100K today, but it can be done off market.

Hi Phillip, my wife and I have acquired 18 SF rental homes. We purchase 2-3 properties per year, our target is 20-24 homes.

We only buy homes in owner occupied safe neighborhoods and target an average rent which is aligned to the average family income of the Triad NC area. We target $900 to $1400 rental rates with a 8-10% cap rate.

We have focused our purchases in a 10 mile radius, in many cases, we have multiple homes in the same neighborhood or on the same street. This allows us to reduce our travel and provide better service to our tenants.

Also, we seek long term tenants and incentivize four year leases with a minimum of two year lease. While we may lose some rent increases with long term leases, we lower our turn over and reduce our expenses. Also, our area cannot support constant rent increases so long term leases have much more benefit to our strategy. However, we are able to charge slightly above market rental rates because we do a good job rehabbing and maintaining our properties. I do not believe this model is possible with multi family.

We closely manage and maintain our properties to insure the highest quality product for our tenants. Also, we are a buy and hold investor and believe in maintaining our properties in top shape. We hear horror stories from many of our tenants about their past landlords and the poor maintenance. We believe this helps maintain tenants in SF rentals. When we secure a good tenant, we want them to stay forever.

We target tenants who want to live in neighborhoods and do not want to live in apartments or condos. I believe SF tenants take better care of our properties because they treat it like their home and we provide a high quality product.

We buy distressed properties, rehab and rent. Our goal is to rehab enough properties each year to minimize our taxes on the positive cash flow. I prefer to invest in more properties vs paying taxes to Uncle Sam. Our goal is to re-invest 100% of our profits for the next five years while paying down all of our mortgages. It is hard to find distressed multi family properties that would allow the same rehab cost to offset my cash flow and minimize taxes. One of our biggest goals is to minimize taxable income.

After our first four Homes, our progress slowed because we could not get under written by Fannie, so We only purchased with cash for a few years which slowed our progress. Several years ago, I found a local bank which allowed us to accelerate our purchases. We have decided to only take 10 yr loans because our goal is to pay off all the properties in the next 5-7 years. The principle pay down on a 10 year loan if 60% of the total payment. We typical finance one free and clear property to purchased the next property. After you acquire 3-4 free and clear properties, this model allows you to quickly add additional rentals. This model is possible with SF or multi family since we use commercial loans.

We believe SF homes offer lower risk if not leveraged to heavy and purchased at or below market price. Also, the rents must be aligned with the family income of the local market. If family incomes are NOT rising at the same rate as rents, increased rents are not sustainable.

I agree with other comments that multi-family should offer higher returns and faster equity growth. However, it requires much more due diligence than I have time to commit while working in my career.

We have developed a business model for our area and the numbers are easy to predict without much effort or added risk. We are conservative investors and looking for long term income growth and not short term profits.

As I get closer to retirement age, I believe SF properties offer lower risk with our business model vs MF.

Also, In our area, their our many major MF construction projects ongoing which will soon place a major strain on MF rentals. I believe SF properties are not competing with that market and have lower risk to the current over building we see in many markets.

My story is very similar to yours. I started almost three years ago, I have six SFH in Atlanta and am closing on two more SFH in Birmingham, AL, this week. So far, it's been good for me. I'm getting great returns, but I have had to buy five new roofs out of the six Atlanta houses and a roof repair on the sixth. There is some appeal to me to having just one roof after all that. I think my long-term plan will be to do a cash-out refinance on the six in Atlanta and use that to buy a multi, assuming I can get even better returns.