Commercial Multi-unit Vs. Single Family

Hey Guys,

Im 26 currently, my dad and i owned a 10 unit and a 5 unit about 8-9 years ago… I was pretty young but did alot of the management myself… I gotta say it was definitely an eye opener… Dealing with tenants that live right next to each other, the problems they can cause… Large commercial boilers breaking down (that cost 5-10K to update/replace), the whole bit… Quite honestly we bought too high based on the income (we fell in love with the look of the building)… We ended up selling it an making a nice chunk of change right before the bubble burst…

Im curious, im still trying to figure out whether to go into commercial multi-units or SFR?

What pros and cons do you guys see to commercial and why wouldn’t you do multiple SFR’s instead of commercial multi-units?

The way i see it, if you make a mistake in the numbers with a SFR (they tend to be more forgiving) can be sold to a family not based on numbers but based on emotion… Commercial multi-units are pretty much ALL numbers, there is no emotion so, you have to make sure you buy right! I have learned that through having to manage that commercial prop myself :wink: And learning again that a good tenant is worth their weight in gold…

The biggest pro to commercial/multi is the economies of scale… But, the downside is they are harder to sell as the pool of buyers is smaller and more professional (not joe blow with a FHA loan)…

Would love to hear your guys thoughts!


I like the fact that my 6-unit has only one roof, one set of exterior walls, etc. If one unit is vacant, it doesn’t eat you alive month to month. That’s the big adantages I see. You’re right about the buyer pool being smaller for multi’s. A new investor could pretty easily dump a SFH if they wanted, but it’s a little harder for the multi’s unless they’re willing to take a loss.

The biggest ? is what are you trying to do? If the answer is invest in real estate then you are not yet ready to do this. MOST PEOPLE THAT INVEST IN REAL ESTATE DON"T MAKE ENOUGH OR ANY $ AT IT.

Never mistake a bull market for ability, the bubble baled you out. My number one goal is cash flow. I NEVER invest in real estate only cash flow streams. Strange though how many of my cash flow streams are in the form of muti unit apartments. I prefer multi’s because of the numbers. Current sfr mediun cost per door in my area is $212,000. I purchase multi units in my area for $30,000 to $39,000 per door. Sfr rent is 1,200 per month. Apartment per month rent is 600.

sfr purchace= $212,000 buys you $1,200 per month rent goi.

4 plex multi = $39,000 per door = purchace $156,000 buys you 600 per unit monthly rent = $2,400 per month goi.

Lower purchace price + higher goi and noi. My personal advice is to stop thinking about real estate and think about cash flow. One other thing I beleive is so important is to have proffessional realty management takeing care of your property. It is cheaper on a cost per door basis to manage your units , by far. I always think in terms of CPD or cost per door, I want more doors NOT more property’s. As far as selling multi’s vs. sfr if you have a good cash flow stream why would you sell it??? I am with Warren Buffett on this in that the property’s holding period should be forever. If you get the NUMBERS right you shouldn’t want to sell it.

oh for sure, im not stating anything else :wink: We f’ed up and the bubble definitely bailed us out :slight_smile: After managing those properties on my own, i will definitely say that managing those props was a job i dont look forward to doing again! From now on, buy smart… i went from being a well paid professional to a $8/hr grunt…

You were lucky to learn some management skills at a young age.

The price of SFR varies greatly depending on where you are located. My feeling is that the middle of the country’s SFR prices will be pulled up as the country eqaulizes more. The high-priced coasts will stay high, but migration will increase prices in the south and southwest. Don’t know about the mid-west, that may take longer. So if you like handling SFR’s you could see appreciation and good liquidity for your efforts.

Check out your local area, and good luck.