Which one would derive a much higher income producing asset? A Single family home or a duplex with like 2 to 4 units in the duplex? Thanks
A multi family would produce more income,more units more money.
pectin232,
The definition of “duplex” is a two unit building, so duplexes don’t have more than 2 units.
Which one would derive a much higher income producing asset? A Single family home or a duplex
As gameface said, generally more units should produce a higher cash flow. However, MOST small residential rentals LOSE money, which is why most newbies fail in a relatively short period of time. Therefore, everything depends on doing a proper cash flow analysis on any property you consider buying.
Single family houses are often the best choice for new landlords for a variety of reasons.
Good Luck,
Mike
Mike,
I’m pretty sure I speak for most of the people on the forum when I say that your input has been a great resource for the rental business. I was hoping you could elaborate a little more on why SFR’s would be better for new investors. I only ask because I’ve been trying to decide which would be better between the two, with townhomes included.
Thanks again for sharing your insight,
Zachary
Zachary,
SFHs are better primarily for 3 reasons:
- SFHs are easier to sell if you decide that the rental business is not for you.
- The tenants are generally better in SFHs that apartments (they’re a little higher up the food chain).
- SFHs generally appreciate better than multis.
Good Luck,
Mike
Can you elaborate? I was doing the math and found that duplex offer a much higher ROI [ok… theoretical] and also learn on other forums that for short to mid term a Duplex of even a 2 unit would generate a much higher income level and returns. I understand that a SFH is better in some ways but in terms of the math part it still does not cut as I am running a negative return on SFH… also based on this current sinking economy of 10000s of loss jobs…
Zachary,
Why not post the numbers for the deal you are looking at? We need purchase price and gross rents to evaluate the deal.
Mike
Let me get more details and will post info. I did this a while back and in fact I like anyone else here wanted to get a SFH… but later found that rolling over duplex might be better. I think it really depends on location, price and who is going to be living in there. I will get more info.
I dont want to take over this post but…I am having the same issue. I mean if I in the rental business for the long term+cash flow(which purely depends on the numbers) wouldnt it be better go with a duplex? I need clarity too
pectin232,
I would suggest starting with a few SFHs for the reasons I posted above.
Mike
ok mike will do…
my $.02…
now i do agree with the previous comments from PM… SFH do appreciate much faster and are easier to sell, but with that said…
IMO, with real estate your money is made when you buy so if buy the property for the right price with the right terms, it is very difficult to lose! a duplex is my favorite property quiet as kept! Usually I only buy a duplex if the rent from one unit will pay my holding costs totally, thereby leaving the other units rent as free cash flow.
In this market, good tenants are not hard to find as long as you have a nice property, fairly priced! Personally, I buy a property only if the numbers will allow me to do minor modifications to make my property the one of the nicest units in the area, which makes finding tenants easy… as they will usually call you! Secondly, as i renovate, i put up bandit signs in the area and I leave marketing materials at the local elementary, middle & high school and between those (2) things you should get at least 5 leads from which you schedule for them to all come and see the units at the same time and collect $30-50 for application fees and you pick the best tenant… allow the leads to sell you on why you should lease to them, the best strategy you can employ is to be the reluctant property owner…
IMO, i recommend a duplex because with a single family if you have a vacancy for 3 months you are screwed where-as with a duplex if you only get it halfway right, you still have one tenant who is paying and/or contributing to paying your mortgage…
Usually I only buy a duplex if the rent from one unit will pay my holding costs totally, thereby leaving the other units rent as free cash flow.
Unfortunately, that is not the way rentals work. Throughout the United States, operating expenses run 45% to 50% of the gross rents. Therefore, when you have a duplex (with equal rents on each side), one unit is paying the operating expenses and the other side is paying the mortgage and providing any profit that is left.
You can learn more about operating expenses by clicking on the SEARCH button above and searching “cash flow”, “operating expenses”, and “50% rule”.
Good Luck,
Mike
propertymanager, that’s a bit unfair. REI is not blessed with such frivolous functionalities. Search? Bah!
Btw, doesn’t TRandle hold up the forums? I’m wondering what’s keeping him on creating a search algorithm. I can provide help if he needs some>.<
Just a note, I’ve slipped off the grid to go even more in depth with my REI research. pm, your points in my “Predraft Business Plan” post brought a realization that I was half-a$$ing it, and that wouldn’t do.
I’m not sure what your trying to say. There is a “SEARCH” button just below the banner ad at the top of the page.
Good Luck,
Mike