Why Multifamily? 5 Reasons Apartment Investing Beats Single Family

When starting out, potential investors often have to make the decision between Single Family Rentals (SFR) or Multifamily Rentals (MFR). Certainly, both can be done, but I strongly recommend focusing on one area. And that area is multifamily. Here’s why:

1. Buying from Investors. The owners of multifamily are not in it because they love the landscaping out front or that it is close to the school or because they grew up in the neighborhood. They might like those things if they raise the value, but they have no emotional investment in the property. As such, buyers can focus on the numbers more. You might think that means you can’t get good deals, but that’s a myth. Good deals come from finding value to add and MFRs often have that.
2. More Value-Add. MFRs are bigger and have more areas which can be deferred by owners, leaving money on the table for purchasers. Those 18 garages which the owner is giving away to renters might have been a good enticement to rent 5 years ago, but now, they are just free storage units. Tenants who really want them would be willing to pay for the opportunity. Finding these is value-add. And, you won’t find 18 garages in a SFR, nor can you ask extra to use the one garage it has (usually).
3. Repairs are Easier. Fixing things becomes easy because you can purchase 8 door knobs and have them sitting in a closet for when you need the next one. You can get a deal on flooring and paint because you can buy so much of it and have it ready to go for the next turnover. Each unit is similar, so its easier for contractors to give a bid, rather than going through multiple SFRs.
4. Working with Contractors is Better. Contractors look at the SFR repair as a one-off and don’t know if you’ll ever use them again. With MFRs, they see a steady stream of repairs and can give you a better deal to do a bunch at once. You only pay the trip charge that one time if you can stack a day’s worth of repairs.
5. Economy of Scale. This is the best reason for MFR. All the work you do on a rental house is very similar to the work you do on an apartment building. Except that the same amount of work translates to rental income for multiple units, vastly eclipsing the SFR income. Sure, you expect the tenant to do their own lawn care in the SFR, but take that over in an MFR and the tenants are reimbursing you as part of the rent. There’s only one lawn service to contract with for as many units as your apartment has. Still don’t believe me? Property tax goes off the property value. One unit of an apartment building might be worth $100,000. That won’t buy a very nice house. Put 10 of these together and you have a 1 million dollar property. The property tax on this will be less than 10 houses. And, you only have one tax bill to pay for that many units.

There are so many more, but these are my favorites. You can make it big in SFR, but MFR is a much better way to make it big quicker. Best of luck!