Single Family OR Multi-family? Which Is Better?

Comments(10)

• 
  KyleGatton3rd December, 2003

  In my opinion the more units per property the easier and more cost efficient you become. The taxes per unit will also usually be cheaper as it requires less land than a standard single family. The downfalls are if something happens to one it usually affects both.
  
  Good Luck,
  Kyle

• 
  rjared714th December, 2003

  Thanks for the quick response.
  
  I am currently looking at a 2b 2bth , multi-family. After running the numbers through my excel spreadsheet, I came up with a positive cash flow for the first year.....but just barely. It would only cash flow for around $65 / mo the first year with both units rented.
  
  My question now is: What is an acceptable cash flow rate? I know that $65 / mo is not alot at first, but each year I believe I could raise rents just a little and the cash flow would get better as the years went by. Is that correct thinking, or should I be looking for something with a better initial cash flow?
  
  Also, what is a good way of determining market rent value? The current property will sell for around $115k and the rents are published currently at $585/mo. It is a nice unit in a nice neighborhood if that helps.
  
  Thanks for the info !!
  
  Jared[ Edited by rjared71 on Date 12/04/2003 ]

• 
  BethE4th December, 2003

  I have found that the sfd's appreciate at a faster rate and are easier to sell. multi's are harder to liquidate but the cash flow is very enticing! I personally wish I had started with multi's first ... but at least I started. The more you dive in, the better you know where you want to go.

• 
  edmeyer5th December, 2003

  Depending on where you are, SFRs may not give you sufficient cash flow. The advantages of SFRs are:
  
  1) Easier to sell
  2) Usually more responsible tenants
  3) Strong Appreciation (depends on area)
  4) Lower expenses
  
  Larger multis
  
  Advantages:
  
  1) Higher cash flow
  2) Single location management
  3) Value is tied to profit (improve profit and you increase value)
  
  You might try a compromise which is to look at duplexes, triplexes and fourplexes.
  
  You can acquire these without commercial loans so terms are better.
  There cash flow is better than for SFRs.
  They tend to follow SFR trends in value.

• 
  bansal5th December, 2003

  I would agree on trying to go with 2-4 unit proerties initially. Financing terms and appreciation are similar (though not quite as good) as single family homes, and it is easier to generate positive cash flow. Once you've built up enough equity/savings, you'll probably want to go into 5+ units, that's where the real money is, but they are commercial properties so you will have to generally have 20-25% to for a downpayment. Good luck.

• 
  rjared715th December, 2003

  Thanks folks for the advice and responses. I really appreciate them. Just one further question:
  
  Is there anyway to determine the actual vacancy rate in a given area? I am considering the purchase of this 2 unit apartment in northern kentucky, but i'm wondering what the fair rent value for the place will be (ie: how high can i set the rent?) Purchase price will be $115000. Previously rented for $585 / mo. but I would like to lease it for $625 /mo.
  
  Also, is it kosher for me to call the owner and ask him/her how hard it was for them to rent both units out?
  
  Thanks again !
  
  jared

• 
  Stockpro995th December, 2003

  I would ask all the questions you want to ask. Obviously you have looked at this unit. Open your paper and check other rentals in the area and go see them. See how they compare in quality and price. If yours is nicer than theirs and has more features etc. then you might be able to command higher rents.
  
  AS for the multi/single issue. I have found that duplexes and triplexes sell the fastest for the best $ in my personal experience. THis is because the same financing is required, people like the idea of someone helping with the payment etc. 4 plex's and larger are not the same.

• 
  loanwizard5th December, 2003

  A lot of these questions depend on your age and investment requirements and goals. If you are 25 taking out a 30 year mortgage maybe this would work, but for 60 it's out of the question. I love it here in the rural midwest where I get pos cashflow on a 15 year term but lower appreciation.... but I won't sell any of em anyway thats the kids job. Do you want the headache of being a landlord for 65 bucks a month? If you can find the upside in the situation then go for it.
  
  Good Luck,
  Shawn(OH)

• 
  DaveT5th December, 2003

  Quote:If you are 25 taking out a 30 year mortgage maybe this would work, but for 60 it's out of the question. Shawn,
  
  I am not quite following your message here. Are you saying that a 60 year old investor should not get a 30 year mortgage?

• 
  loanwizard6th December, 2003

  Quote:
  On 2003-12-05 14:22, DaveT wrote:
  Quote:If you are 25 taking out a 30 year mortgage maybe this would work, but for 60 it's out of the question. Shawn,
  
  I am not quite following your message here. Are you saying that a 60 year old investor should not get a 30 year mortgage?
  
  
  In my opinion, in my area, in my situation absolutely not. In my area there are much better RE investments to be had as far as cashflow. We don't have double digit appreciation on SFR's let alone commercial, although you and I both know on commercial prop we can raise rents and thus the value, although a smart banker is not going to allow for too much of a swing in appraisals if this is your exit plan. I am 37, and I wouldn't take a 30 year mortgage to run 6 units for a total of 65 bucks per month. Correct me if I am wrong, but that's $65.00 per month total, not per unit. Heck, I wouldn't do it for $65.00 per unit.
  That being sadi, I am strictly a cash flow buyer, because that is what works in my rural area of the midwest. I might not even be able to invest if I lived in LA or NY or any other large area. I am just a small town boy. Kinda like a 3lb bass in a 2 acre pond, not a 100lb shovelhead in the mississippi. I don't particularly buy for appreciation, although that will be gravy over time... for my heirs. I will close in Jan on a small MH park where I own all the little junk MH's. It consists of 22 MH's and I have it where I am investing 0 of my own cash, it will cashflow at approx $1,000.00 per month which is slightly over $45.00 per unit. However, it will be completely paid off in 10 years. I look at it that it still $1000.00 a month m/l (Newbies don't kid yourself, it will be less more often than it is more at least for the 1st year), and I will still be young enough to enjoy the $5000-$6000 per month income (todays dollar) when it is paid for. I don't understand why people would want to buy something major like a comm property if they are not going to receive the benefit. If you are 60 and take out a 30 yr mortgage, what quality of life will you have to enjoy it at 90? Of course in my position, I can't get it into my thick skull why anyone of any age would want a 30 year mortgage, but that's me. I'll probably get some heat for that comment, but remember, all of our opinions are based on our own personal experiences.
  
  Good luck, and good thread,
  Shawn(OH)