- vacancy rate: your risk is reduced here as you are amortizing vacancies over more units. Means a bit more work but you smooth out rent disruption if you spend the same amount of dollars on multi-fam vs a SFR
- liability exposure: kind of the same when you are in the rental business
- need for attendant: Depends on how many units. I believe in CA you need at least 12 units and then you are required to have someone on premise
- capital appreciation: I have seen it appreciate in alignment with SFR (because multiplex is already discounted, so look at the % gains)
- cost of maintenance & repair: lower actually. For example, i have 1 roof covering 4 units vs individual roofs if i have 4 SFR
- ease of re-financing: If you have been a landlord for at least a year or two, it’s pretty straightforward. more paperwork, but i have never been denied financing.
- mortgage rate difference: used to be higher, but there are now lenders focused on the market that can get you great deals (better then primary SFR!). e.g. my 3.625% on a 30 year jumbo from 2017. That did require some work (I could not use my rental income from the property in question to qualify and I had to hold some assets at the institution for at least 3 months), but anyone who is diversified could do it
- rent control: what keeps me up at night. Hence why we don’t buy in any city with rent control (we avoid San Jose despite multi-fam being cheaper there because of rent control). Nothing can block out of control legislatures from introducing JCE even for SFR. and if Costa Hawkins gets thrown out, even SFR can be affected by rent control. If we assume worst case scenario is rent of control is going to happen across the board, more reason to buy multifam if you want to be in the rental business as you can ensure you are cashflow positive from day one and not left holding a dog
Great insight @BA_lurker! A lot of the reasons above are why I’m interested in a multiplex. Did you ever get into duplexes before 4-plexes and above or did you go straight into multiplexes?
Leaving aside my Sac boondoggle (where i did duplex, 4 plex and commercial and learned many things the hard way), in the south bay we were 4 plex from day one because wifey had better instincts. Much of what i relay on this forum is learnings from wifey (who is much smarter then me). We looked at duplex last year and couldn’t build enough buffer into the cashflow to protect against downturn, so we went 4-plex again. Duplex tend to price almost as much as SFR on $/sq foot (and more importantly $/door is higher for duplex then 4 plex which is higher then commercial). So hard to make cash flow positive as they are not going to get the rent in proportion to their price.
15 units and above need an attendant. The best deals are 5 units and above. Harder to get financing and a lot less buyers. The best deals are value add. Are under market rent and need improvements.
Come on. Let’s face it. Much easier to buy a SFH. Rent, fix or flip. Less capital requirement, more appreciation potential, more liquid, much better flip, much more desirable!!! What’s not to like? Only desirably of a MPLX is the cash flow but when you consider a SFH in a cheap area can generate much more cash flow than a MPLX in an expensive area, forget about it!
Investors are going for yield desperately because of the current low-interest environment. Even with Fed rate hikes, interest rates are still historically low, so banging for yield ie. buying MF, seem like a good idea. I did briefly check MF many years ago, % increase of MF did increase faster than SFHs initially (guess is a kind of catch-up because they declined more than SFH in % term during the recession) before settling to similar % increase.
Antioch homes also increased much faster initially than South Bay homes because they dived more during the recession. Which brings another benefit to SFHs in this debate: they can hold value much better than MPLXs. In the event of a recession, MPLXs lose more value.
Thought everybody feel Fed is so good that economy is always goldilocks, any recession would be mild i.e. 2009 won’t be repeated
All the stock pros here made their money in the last 10 years. What about 1929-1953. 1967-1981. 2000-2009.
Same with RE. 2009-2018 was a boom. Won’t last forever.
True, SFH has flexibility, but MF does not have, only cash flow.
MF is good for buy and hold
SFH is good for flip.
We can not expect a return of 2008/2009, it will be lesser than that, but how much? No general population knows how much impact.
FED always hike the rates when economy is full swing as they want the economy to withstand the pressure and grow.
I bought stock in 80s and 90s still holding .
Never used them to make a living just for the
sep Ira tax deduction.
Probably will never sell and my wife inherit them and she hates stocks, too volatile, will sell them all. RE is my profession. I spend the most time on my profession. But I have decades of stock knowledge and was actively trading in the 80s. I prefer RE because my knowledge and experience give me an edge.
I think it’s good that you have employed a long term buy and hold strategy but I’m pretty sure your stock portfolio is tiny compared to your RE portfolio. I think you could have done much better had you put more effort into accumulating assets in stock the same way you did with RE.
I see elt1 picks are very clear dividend stock and he looks exactly when those stocks at near bottom level.
Everyone is a stock amateur unless you have inside info. I have inside info in RE and use it. Perfectly legal
But not for stocks.
Rather than debating, let check real numbers. Jil, elt1 and qijun PM me their net worth and age, I would apply my proprietary algorithm to churn out a ranking list, this list doesn’t rank by net worth only… is net worth adjusted by age.
(Just reading the end of this thread), I agree. On the flip side stocks are public and so are the financials. Companies’ performance will impact shareholders’ portfolios worldwide, but the biggest effect it has locally is on RE. Tech companies are inextricably tied to Bay Area’s economy and real estate in the last couple of decades.