Do you own other units? Are you an experienced investor? If not, I advise new investors to stay clear of any multi-plexes. They can have a very sharp learning curve. The cash-flow is appealing, but most new investors end up over their heads. A lot depends on the building. Often multis have smaller units and attract that type of tenant. If you are an experienced landlord you can handle the increased tenant-landlord issues, but one of the surprises can be the tenant-tenant issues. Shared entrances & parking can complicate that dynamic and be difficult to navigate.
One night we had a drunk tenant bash through his wall and break into the neighbour`s unit. The drunk tenant called the police claiming THEY had been broken into.
Single family dwellings are our focus because they increase their value with the market and we are in a great market. The value of a multi is more dependant on the rents.
That`s my 2 pennies!
Carla
One night we had a drunk tenant bash through his wall and break into the neighbour`s unit. The drunk tenant called the police claiming THEY had been broken into.
Single family dwellings are our focus because they increase their value with the market and we are in a great market. The value of a multi is more dependant on the rents.
That`s my 2 pennies!
Carla
Great input Carla,
What do you think about triplexes? do they belong to the multiplex category you described above* or more to single family from the perspectives mentioned?
Or: are triplexes really an equal mix of both worlds with the pro`s and con`s of both multiplexes and single family properties, in your opinion?
Thanks,
Neil
*regardless of the definition, I understand multiplexes are defined as properties with 6 units or more by some.
What do you think about triplexes? do they belong to the multiplex category you described above* or more to single family from the perspectives mentioned?
Or: are triplexes really an equal mix of both worlds with the pro`s and con`s of both multiplexes and single family properties, in your opinion?
Thanks,
Neil
*regardless of the definition, I understand multiplexes are defined as properties with 6 units or more by some.
Clarification of "multi" is a good point. I admit I draw the line at duplexes. A single family dwelling is a very different dynamic than one where two or more "families" co-exist. A lot of duplexes and tri-plexes are reconfigured single family homes. The units are small and awkward and attract that kind of tenant, so they require careful management.
I was just discussing this with our realtors and they have noticed the same thing. They have seen a lot of new investors buy duplexes & triplexes and want out a year later.
In terms of resale, even duplexes and tri-plexes can be hard to sell if the rents don`t work with the listed value. There is a beautiful 4-plex for sale here in Cambridge. The tenants are long term and the rents are very low. The listed price is fair and based on potential rent, but it is twice what an investor would want to break even each month with the present tenants.
I was just discussing this with our realtors and they have noticed the same thing. They have seen a lot of new investors buy duplexes & triplexes and want out a year later.
In terms of resale, even duplexes and tri-plexes can be hard to sell if the rents don`t work with the listed value. There is a beautiful 4-plex for sale here in Cambridge. The tenants are long term and the rents are very low. The listed price is fair and based on potential rent, but it is twice what an investor would want to break even each month with the present tenants.
Thank you Carla for the quick response answering all my questions!
The 4-plex in Cambridge is an interesting example. I would expect at least 12% current annual rent to purchase price ratio as an initial filter.
Sounds like this is not the case there so I am not surprised it is less attractive from this point of view. (although other factos might be great like long term tenants etc.)
Regards,
Neil
The 4-plex in Cambridge is an interesting example. I would expect at least 12% current annual rent to purchase price ratio as an initial filter.
Sounds like this is not the case there so I am not surprised it is less attractive from this point of view. (although other factos might be great like long term tenants etc.)
Regards,
Neil
QUOTE (CarlaJohnson @ May 23 2008, 09:54 AM) Clarification of "multi" is a good point. I admit I draw the line at duplexes. A single family dwelling is a very different dynamic than one where two or more "families" co-exist. A lot of duplexes and tri-plexes are reconfigured single family homes. The units are small and awkward and attract that kind of tenant, so they require careful management.
I was just discussing this with our realtors and they have noticed the same thing. They have seen a lot of new investors buy duplexes & triplexes and want out a year later.
In terms of resale, even duplexes and tri-plexes can be hard to sell if the rents don`t work with the listed value. There is a beautiful 4-plex for sale here in Cambridge. The tenants are long term and the rents are very low. The listed price is fair and based on potential rent, but it is twice what an investor would want to break even each month with the present tenants.Thank you Carla for the valuable input. I agree with so many of your points. I currently own 3 single family homes that are all doing very well. I must admit that although the cash flow sounds good initially on multi family dwellings, you are also taking on the type of tenant (in some cases)_that may be less than acceptable to deal with. In particular where a larger single family home has been converted into 3 awkard units, where 3 families must share a driveway, yard and a host of other uncomfortable commodities!! All the best to you. Chris
I was just discussing this with our realtors and they have noticed the same thing. They have seen a lot of new investors buy duplexes & triplexes and want out a year later.
In terms of resale, even duplexes and tri-plexes can be hard to sell if the rents don`t work with the listed value. There is a beautiful 4-plex for sale here in Cambridge. The tenants are long term and the rents are very low. The listed price is fair and based on potential rent, but it is twice what an investor would want to break even each month with the present tenants.Thank you Carla for the valuable input. I agree with so many of your points. I currently own 3 single family homes that are all doing very well. I must admit that although the cash flow sounds good initially on multi family dwellings, you are also taking on the type of tenant (in some cases)_that may be less than acceptable to deal with. In particular where a larger single family home has been converted into 3 awkard units, where 3 families must share a driveway, yard and a host of other uncomfortable commodities!! All the best to you. Chris
Hello Chris,
Wanted to ask what you mean when you say "all 3 single family homes are doing very well"? is it in terms of cash flow or appreciation? do you see more than $100/door with 10% down? I thought/I`m assuming you asked about multi-plexes due to higher potential income(?)
A triplex in Ontario for example is generating $400/month net with only 5% down.
Regards,
Neil
Wanted to ask what you mean when you say "all 3 single family homes are doing very well"? is it in terms of cash flow or appreciation? do you see more than $100/door with 10% down? I thought/I`m assuming you asked about multi-plexes due to higher potential income(?)
A triplex in Ontario for example is generating $400/month net with only 5% down.
Regards,
Neil
QUOTE (ccameron @ May 23 2008, 07:28 AM) Any comments on multi family dwellings. I realize that it is a whole new adventure(as opposed to single family units) however, can you give me some feedback with regards to mortgages, insurance or any other possible suprises? Thanks Chris
Negatives: 1) Mutli family dwellings requires more management skills and is much more management intensive than single-family homes. 2) Tenants take much better care of single-family homes than mulit-family dwellings
Positives: 1) Multi-fam dwellings nearly always have far superior cashflow as opposed to single family homes & 2) Don`t ever forget:
When a tenant in a single family home departs, the landlord is left with a 100% unoccupied vacant property. Zero rental income is coming in to service the landlord`s expenses.
An advantage of the multi-family dwelling over the single family home as an investment is that when a tenant departs in a four-plex building, the landlord only has 25% vacancy (assuming othe other 3 units in the 4-plex are fully tenanted).
Thus 75% of the property is generating rental income to service the landlord`s expenses... until a replacement tenant for that unit comes in to bring the property back up to full occupancy.
When the challenges of managment arise (again it is management intensive!) with my multi-fam properties, I always remind myself of this above law of property investing. How often do all tenants in multi-family dwellings jump up and leave all at once? Very unrealistic scenario. I`ve never had that happen.
Hope this helps,
DWB
Negatives: 1) Mutli family dwellings requires more management skills and is much more management intensive than single-family homes. 2) Tenants take much better care of single-family homes than mulit-family dwellings
Positives: 1) Multi-fam dwellings nearly always have far superior cashflow as opposed to single family homes & 2) Don`t ever forget:
When a tenant in a single family home departs, the landlord is left with a 100% unoccupied vacant property. Zero rental income is coming in to service the landlord`s expenses.
An advantage of the multi-family dwelling over the single family home as an investment is that when a tenant departs in a four-plex building, the landlord only has 25% vacancy (assuming othe other 3 units in the 4-plex are fully tenanted).
Thus 75% of the property is generating rental income to service the landlord`s expenses... until a replacement tenant for that unit comes in to bring the property back up to full occupancy.
When the challenges of managment arise (again it is management intensive!) with my multi-fam properties, I always remind myself of this above law of property investing. How often do all tenants in multi-family dwellings jump up and leave all at once? Very unrealistic scenario. I`ve never had that happen.
Hope this helps,
DWB