Buying one 8-plex better than two 4-plexes?

[Nir]

Hi,

Assuming same CAP, same city/neighborhood, same property condition, same financing conditions, etc.,
do you agree buying one 8-plex is better than two 4-plexes?

I think I`m aware of most pro`s and con`s. bottom line, do you agree 8-plex is better?

THANKS.

 

[housingrental]

No worse
If same cap who cares
Its less salable
Harder to finance generally
You could sell 1 4 plex in future if you want to and still have 4 units
No benefit of 8 plex if same cap
Rarely same cap
Rarely same financing
In theory easier to manage as you can get more done on one visit - but the big benefit of efficiency would be lost of true cap rates equalized

 

[housingrental]

if above not clear - In practice you`ll never find 2 4 plex with indetical cap rate / financing / everything else as 1 8 plex

 

[Thomas Beyer]

QUOTE (investmart @ Feb 7 2010, 09:25 AM)
Assuming same CAP, ..


Usually CAP rate on a 4-plex is lower, i.e. more land and higher common area cost like: front entrance, boiler & roof, per dwelling for same rent and expenses, thus higher price per unit in a 4-plex than a 8-plex, thus lower CAP rate !



Thus: 8-plex is better .. but if CAP rate is the same it don't matter .. expect more drive time and more due dilligence cost: 2x mortgage application, 2x accounting, 2x lawyer !



Advantage though: you can sell one 4-plex and keep the 2nd .. whereas in an 8-plex is all sold or none .. unless of course you can do a condo conversion !



Items to consider when buying an apartment building: http://myreinspace.com/public_forums/Real_Estate_Discussion/62-14548-Buy_vs_Build.html



Multi-Family Primer in May 2009 Issue of Canadian RE Magazine:

http://myreinspace.com/rein_members_only1/Members-Only_Discussion/81-10996-Multi-Family_Primer_-_May_2009_Issue.html

 

[Nir]

Hi Adam. taking longer to sell is a good point.
However, I think with the assumptions made (same cashflow) perhaps the most important question is time spent to manage.
Therefore, by "easier to manage" you answered the question. less of your time spent per unit! I guess that is the winning factor!
Ask Thomas and others who grew their RE business to that level. T-H-E-R-E- I-S A R-E-A-S-O-N why the more successful an investor`s RE business is, the more apartment buildings you see them buy and less townhouses, duplexes, single families.
call it "less headaches per unit."
Thoughts?
Cheers.

 

[gwasser]

QUOTE (investmart @ Feb 7 2010, 09:39 PM) Hi Adam. taking longer to sell is a good point.
However, I think with the assumptions made (same cashflow) perhaps the most important question is time spent to manage.
Therefore, by "easier to manage" you answered the question. less of your time spent per unit! I guess that is the winning factor!
Ask Thomas and others who grew their RE business to that level. T-H-E-R-E- I-S A R-E-A-S-O-N why the more successful an investor`s RE business is, the more apartment buildings you see them buy and less townhouses, duplexes, single families.
you can call it "less headaches per unit."
Thoughts?
Cheers.


I thought you were comparing bachelors with 1 bedroom apartments?

 

[Nir]

QUOTE (gwasser @ Feb 7 2010, 09:46 PM) I thought you were comparing bachelors with 1 bedroom apartments?

Hi Godfried, as you probably noticed I`m trying to learn and share as much as possible on RE.
the bachelor VS. 1-bedroom was a real life dilemma and I thought is a topic relevant for other investors too.

now, re new question, to be specific - it`s the very high taxes in Hamilton that made me think about 2 4-plex VS. 8-plex.
I saw properties where for 4-plex you pay $2500 tax a year, and 10-plex $16,000!
proportionally 10 plex should be closer to $6,000! so 16000 is more than double what it `should" be.
as a result CAP rates of apartment buildings are not really higher. still you get more units, hence higher net income (but again, not higher per door).

 

[Thomas Beyer]

QUOTE (investmart @ Feb 7 2010, 09:39 PM) ..
call it "less headaches per unit."
Thoughts?
true .. different ones, though !

 

[invst4profit]

The only slight downside to a 8 plex is when you end up with a bad tenant. Potentially they could effect all 8 tenants to some degree where as only half of your total tenants in 2 4 plexes.
With a 8 plex it`s like all having of your eggs in one basket. There is efficiency with other minor downsides.
Could be a minor or major situation depending on the tenant issues but not something you can prepare for so not necessarily a factor in selecting a property.

 

[gwasser]

QUOTE (investmart @ Feb 7 2010, 10:00 PM) Hi Godfried, as you probably noticed I`m trying to learn and share as much as possible on RE.
the bachelor VS. 1-bedroom was a real life dilemma and I thought is a topic relevant for other investors too.

now, re new question, to be specific - it`s the very high taxes in Hamilton that made me think about 2 4-plex VS. 8-plex.
I saw properties where for 4-plex you pay $2500 tax a year, and 10-plex $16,000!
proportionally 10 plex should be closer to $6,000! so 16000 is more than double what it `should" be.
as a result CAP rates of apartment buildings are not really higher. still you get more units, hence higher net income (but again, not higher per door).


That is quite a difference in taxes. I am not sure how that is here in Calgary. Something for me to check out.

As regards to my question about 4 and 8-plexes, I was just trying to pull your leg a bit

Thanks

 

[Nir]

QUOTE (gwasser @ Feb 9 2010, 07:01 AM) I was just trying to pull your leg a bit

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