Zona Properties, Inc. | P.O. Box 17937, Rochester, NY, 14617
Email: dick.zona@zonaproperties.com | Phone: (585) 506-9430

Single family investing vs. doubles & larger buildings

Posted on: March 23rd, 2016 by zonaprop

Single family investing vs. doubles & larger buildings

This is a question that comes up many times in conversations with investors. Which vehicle you choose depends a lot on what your goals are in investing in real estate. Are you looking for cash flow? Appreciation? A combination of both? Tax write offs? My observations come mainly from common sense than management experience. Just to outline some factors:

Single Family:

Pro:
– Single family is more desirable to renters in most cases
– Price of homes in the city of Rochester can be as low as $10,000
– Tenants usually pick up the total costs related to utilities, lawn care and snow removal
– On resale you not only have other investors to sell to but also owner-occupants
– Management could possibly be handled by the owner without a professional
Con:
– When you have a vacancy you have 0 income to make repairs etc.
– Resale in lower income or less desirable areas is much slower as owner-occupant buyers who want to live in those areas are usually less qualified for financing

Multi-family (2-8 unit)

Pro:
– When you have one vacancy there is still income to cover monthly costs
– Cost/unit is lower than single family on purchase
– Gross Potential Income (GPI) is higher than single family properties bringing in more money to cover costs and for cash flow profit

Con:
– Larger buildings are usually less desirables to some tenants (especially families with children)
– The cost of exterior upkeep is usually borne by the owner and not the tenants
– The cost of water is usually borne by the owner
– Parking is sometimes limited causing a problem for tenants with cars
– Resale will be likely limited to an investor instead of owner-occupant

Larger buildings (10-50 units)

Pro:
– Many units, thus increasing monthly income
– Cost/unit is lower on purchase
– Smaller units cater to mainly single people or couples (see below)
– Resale will be only to investors

Cons:
– Smaller units cater to mainly single people or couples (see above)
– Resale will be only to investors
– Management will usually require a professional
– All costs are the responsibility of the owner usually including the costs of heat and electric
– There is usually at least always at least one vacancy
– In most cases the cost of an on-site superintendent is recommended

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