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Author Topic: Flipping single family vs multi, pros vs cons  (Read 3682 times)

Offline windward

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Flipping single family vs multi, pros vs cons
« on: February 16, 2008, 02:49:12 pm »
Good Day all,

I am new to the web site and forum, so please bear with what may be a '101' question. I am looking to hear both sides of the 'argument' as my lender seems convinced that on the whole, multi family flips are safer bets but I find myself passing on seemingly viable single family deals.
                                                                                                                                              Comments please

Offline fdjake

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Re: Flipping single family vs multi, pros vs cons
« Reply #1 on: February 16, 2008, 04:32:40 pm »
The first thing you need to know is....WHAT'S SELLING IN YOUR MARKET??

Lenders are NOT real estate investors, they LEND MONEY to real estate investors.  I get ASKED more questions by my lenders than I ask them.
Get some data on days on market for single family's and multi's.

I don't know where you are but in my area (New England) I would NOT buy a multifamily now.  MY market is LOADED with them and rents are falling through the floor because of all the new UNSOLD Condo projects that are being converted into apartments.  It's very hard to compete with a brand new condo if your trying to rent a secong floor apartment for the same money. 

If your a new guy I would advise you to start out with a "paint and carpet rehab" in other words a cosmetic rehab.   You better steal it too, because this markets fall is FAR from over.  Your first deal HAS TO BE an out of the park GRAND SLAM as far as your BUY IN price.  You're going to make ALL the mistakes on the first one.  By being patient and waiting for a GREAT DEAL you can screw up and not get hurt.
The first house you do is like going to 6 years of a business college in 2 months.

Also....price wise??I would absolutley stay in starter home territory.  The last thing you want is to buy a home at a price point that requires the sale of ANOTHER HOME in order to close on yours.  This is KILLING people in this market.  Stay away!!!!

Offline windward

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Re: Flipping single family vs multi, pros vs cons
« Reply #2 on: February 16, 2008, 07:53:31 pm »
Fdjake,

Thank you for the reply. Maybe I should've been a bit more clear as I was thinking of 'all things being equal'. Essentially I am wondering if there is any formula or rule of thumb to use as I tend to favor comparison methods if/when they exist. Also simply curious as to what method the lender may be using to make such determinations(what does he know that I don't). Good call on the days on market, should have been an obvious one.

Offline brockovich

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Re: Flipping single family vs multi, pros vs cons
« Reply #3 on: February 16, 2008, 09:27:38 pm »
For flips, I am all about SFH simply because you have the broadest pool of buyers for your finished product. Multis are a long term strategy for me.

Offline fdjake

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Re: Flipping single family vs multi, pros vs cons
« Reply #4 on: February 17, 2008, 11:31:40 am »
I agree with brockovich,  single family homes are the EASIEST way to get going.  Think of it like this......with a single family STARTER home you have (usually) ONE bath room to deal with, ONE kitchen to deal with, ONE furnace or boiler to deal with, and on and on.  With multi's you have 3 or more of each, all of them may need rehab or repair $$$$$$.  Your new to this, so I would HIGHLY recommend cutting your teeth on a low priced single family starter home.   The other advantage to the starter home is your buyers aren't trying to SELL another home inorder to BUY yours.  That is a HUGE advantage in this type of market.

As far as comparisons based on all things being equal????  Nothing is equal, it's like asking us to compare how long it takes to sell a Mazda Miata compared to a full size van. It USUALLY takes longer to sell a multifamily home in MOST markets.  Check the days on market.

Don't forget one important point.....unless your a contractor who has rehabbed dozens of homes, tackling an old multifamily home can be a NIGHTMARE!!  Start off slow and LEARN.  I'll take a 1970's ranch house ANY DAY over one of those elephants.  Lower rehab costs, less time, less to go wrong, lower SELLING price (HUGE now a days) lower BUY IN price, better neighborhoods and usually EASIER TO SELL.  Think about this for a minute.....got a plumbing problem in your ranch house???  All those pipes go right into the basement, EASY FIX.  Got a plumbing problem in a 3 decker???  GOOD LUCK chasing 3 floors worth of walls to fix it.

Lastly....don't assume your lender knows ANYTHING about real estate.....mine doesn't.  Ask him how many properties he's rehabbed and currently owns?  My guess is ONE (his home)  These guy's are around this everyday so the think they know something.  If a seasoned investor were to sit down with most lenders it would be a very short conversation.  These guy's process LOANS, that's IT.  There's a HUGE difference between someone who loans people SOMEONE ELSE'S MONEY and a guy who is out on the streets using his OWN DOUGH to buy and sell houses.  THAT is the guy you want to talk with.  Most people listen to these brokers just like they listen to Wall St. brokers.   It's only AFTER they lose money that they ask HOW many homes or how much money have you made doing this??
Only to get the classic......"Oh I don't invest MY money in this stuff, I have a 401K for that."

Here's the bottom line.... find a single family home built in the last 40 years that's in good shape but needs updating.  If similar homes in that neighborhood have recently sold for let's say $100,000 and this one needs $10,000 worth of work but you can buy it for $50K......DO IT!!  Fix it, put it on the market at $90K and make yourself a nice $30,000 in 90 days.  Then your lender will be asking YOU a WHOLE LOT OF QUESTIONS....Just watch!!!

 I call my banker JOE FRIDAY because everytime I go into that bank I feel like I'm sitting under the little light bulb.  "So what are you working on now???  Wow, how'd you find that one??  Where is it??  Did they call you??
What do you think you'll have into it??  I gotta get into this!!  Call me if you ever need a partner on one of these flips??   

Yea.....I'll get back to you on that!!  (never give them any REAL info, unless you want EVERYONE he meets during the week knowing about it) 
« Last Edit: February 17, 2008, 12:27:59 pm by fdjake »

Offline phlemboy

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Re: Flipping single family vs multi, pros vs cons
« Reply #5 on: February 17, 2008, 01:20:16 pm »
It depends on what you want to do and how you want to earn your money. I personally like rentals. If you rehab it, there shouldn't be a lot of repeat maint.(unless the tenants break stuff). You won't the tax issues as you do when yo flip/sell. Although I can't ignore the possibilities of SFH's. I don't think you can exclusivley do one or the other all the time. How's that for middle of the road?! :rolleyes
"Fat drunk and stupid is no way to go through life son." --Dean Wermer

Offline windward

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Re: Flipping single family vs multi, pros vs cons
« Reply #6 on: February 24, 2008, 04:48:51 pm »
Thank you to all that took the time to respond, I've been away for a few days and would not want any to think that I simply take for granted the knowledge and thoughts that are imparted on my behalf. Cheers

 




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