Tuesday, February 24, 2009
Single vs. Multi
I am constantly asked in this market whether it is a wise investment to buy a single family dwelling as a rental unit. Why buy someone else's problem? Obviously if you buy it low it has been on the market for an extended time, so the value is not there. Also if you have a vacancy you are 100% vacant with only holding costs and NO cash flow. Buying a multi-unit existing that has a proven track record may cost more up front but it will minimize your risk and hopefully you can buy an existing solid tenant base. In fact this is how I got my son involved buying an owner occupied multi. It got him in at a lower down stroke with reduced interest plus being on site he took care of the day to day maintanance another cost savings. Check with your lender/accountant etc. and understand before you buy.
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I always looked at it from the cash flow standpoint. It is virtually impossible to cash flow a single family rental -- price would need to be very low. That being said, then you are counting solely on appreciation -- which we now know is not a good beat. That being said -- I sold a 16 unit building for 1 million to a gentleman for all cash. He owned many many single family units in our area.
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