I'm more than halfway through Don Campell's book on the ACRE system and I really like the systematic approach he advocates. Before starting the book I made some effort to discover some price-to-rent ratios for properties in areas of Calgary that I thought might be up-and-coming.
The first thing I'm noticing is that the properties where (gross annual rent / purchase price) * 100 is 10% or more seem be pretty rare indeed. Is this ratio still realistic in a world of < 3% mortgage interest? I suppose I could buy and reno the dilapidated house to get the rents up, but I'd like to start simple if possible.
Secondly I'm wondering if anyone can offer thoughts on the advantages/disadvantages of a 4-plex vs a SFH especially for a first-timer? I'll start with my list:
4-Plex advantages:
- So far my MLS window shopping indicates the ratio above is a bit better for multi-unit structures
- One stop shopping for the time strapped investor
- Maybe easier to find a management company since they get four properties to look after in one location instead of one.
- One or more vacancies leaves you with at least some rental income.
SFH advantages:
- Cheaper to buy and (maybe) easier to finance.
- Easier entry into the landlord business
- Higher ratio of appreciating land to depreciating building
- Market when selling is bigger than 4-plex (could sell retail or to a developer or another investor). Maybe this leads to more appreciation potential than the 4-plex on the same sized lot next door?
- Maybe more room for creativity with renting rooms and garages (though I would want to stay legal at all times)
Any feedback is appreciated.
The first thing I'm noticing is that the properties where (gross annual rent / purchase price) * 100 is 10% or more seem be pretty rare indeed. Is this ratio still realistic in a world of < 3% mortgage interest? I suppose I could buy and reno the dilapidated house to get the rents up, but I'd like to start simple if possible.
Secondly I'm wondering if anyone can offer thoughts on the advantages/disadvantages of a 4-plex vs a SFH especially for a first-timer? I'll start with my list:
4-Plex advantages:
- So far my MLS window shopping indicates the ratio above is a bit better for multi-unit structures
- One stop shopping for the time strapped investor
- Maybe easier to find a management company since they get four properties to look after in one location instead of one.
- One or more vacancies leaves you with at least some rental income.
SFH advantages:
- Cheaper to buy and (maybe) easier to finance.
- Easier entry into the landlord business
- Higher ratio of appreciating land to depreciating building
- Market when selling is bigger than 4-plex (could sell retail or to a developer or another investor). Maybe this leads to more appreciation potential than the 4-plex on the same sized lot next door?
- Maybe more room for creativity with renting rooms and garages (though I would want to stay legal at all times)
Any feedback is appreciated.