# Multi-unit vs single family rentals



## davidjean (Mar 27, 2014)

Hello forum readers. 

I'm looking for your rental preference? And would appreciate feedback from landlords that own either or both multi units and single family rentals. 

I own two rentals. One house and one half duplex. Both are cash flow positive and have been a positive overall experience. 

Should I look at buying a duplex or 4 plex for my next rental?


----------



## Just a Guy (Mar 27, 2012)

In this market, the trick is finding anything that is a good deal right now. Proper cash flowing properties are few and far between these days. 

Personally, I'd like to get more apartment blocks, but they are fairly pricy these days averaging well over $100k/door (including the bachelor suites), so I continue to look at picking up individual units at a significant discount to that. 

Of course, I've got price points for each kind of property out there that I'm willing to pay based on the number of bedrooms and the type of property. If one hits the market in those price points, then I look at it.


----------



## Ottawa Realtor (Aug 16, 2015)

I also own a duplex but the best deals in Ottawa are the 3 bedroom condo town homes you can pick up for between $160- $200K. Given they rent for $1200-1300/mo they give the best return for the money spent. They generally give a positive cash flow with 20% down. They may have condo fees of $300/mo but that is for exterior maintenance which you need anyways. Detached homes and semis typically worth $350-400K rent for $1800/mo. Although they are freeholds they do require periodic maintenance which most people agree is around 1-1.5% of the value of the home per year which amounts to the same as a condo fee really. These generally have slight negative cash flows with 20% down even if you don't include 1% allowance for maintenance. Multi units do slightly better than freeholds but you have to pay $700K for a decent one so the down payment is steep. You really can't decide unless you look at the whole picture but the main thing is you have to do the calculations, ROI, Cap Rate, etc. and do some comparing.


----------



## Rusty O'Toole (Feb 1, 2012)

Depends on your goals. If you want cash flow to live on, if you want to create a business to replace your job, I find the happy hunting ground is in the 5 - 10 unit buildings. The 2-4 units get bid up by people who know nothing about business and just want a little help paying the mortgage. This makes it hard to get decent cash flow or in most cases, any cash flow. When you get over 10 units, and especially 20 units and up, you are competing with some big investors and possibly getting into elevator buildings which are a hassle of their own. 5 -10 unit building usually have very few people interested in bidding on them and there are some great bargains.

One down side is that over 4 units counts as commercial with most lenders, while 4 and under is the same as a house. This makes financing harder and interest a little higher but this is not an insurmountable obstacle if you have a good mortgage broker. The typical small town banker is happiest dealing with a 3 bed 2 bath bungalow and is baffled by anything bigger than a 4 plex.

On the other hand if you do not need the immediate cash flow and are thinking more of having a retirement nest egg in 20 years the ideal investment is single family homes, or possibly a duplex or triplex. Easier to manage and they appreciate more even though they don't cash flow.

I know one investor who specializes in condo town houses. He has bought hundreds of them. He finds he gets practically the same rent as a house while they are cheaper to buy and most maintenance is take care of by the condo corporation. But, you need to keep an eye on the corporation management some are good and some are bad.

The kicker would be to take an apartment building and turn it into condos. This cannot be done overnight, it may take several years and cost some money but it doubles the value of the building. You heard right. Call a building rentals and it has a certain value. Call the same building condos and the value doubles. People outside the business have no idea how the law favors renters and how this affects the value of rental properties.


----------



## gt_23 (Jan 18, 2014)

davidjean said:


> Hello forum readers.
> 
> I'm looking for your rental preference? And would appreciate feedback from landlords that own either or both multi units and single family rentals.
> 
> ...


Assuming you would rent the entire house as is and not subdivide it up into suites, go with as many units in a multi-unit building as you can afford. The best economics for multifamily are for 1- and 2-bedroom units (cap rate basis), so if you can find a building with avg. of 1.5-2.0 bedroom suites, you can't do much better in a given market. Hth.


----------



## Berubeland (Sep 6, 2009)

I'm with Ottawa Realtor. My favourite property over time is the humble townhouse. You avoid inter tenant disputes and the subsequent frequent move outs. The rent prices are generally more affordable than single family houses, anything over 2K in rent seems to take quite a while to rent. There just aren't that many tenants in that price bracket. 

But it's not "affordable housing" either so you end up with the top 25th percentile of tenant quality. 

These houses tend to be very stable over time, one I rented over 10 years ago is still rented to the same people. 

Do they cash flow? Not really but for a long term hold, you can't really do much better.


----------

