Why I Switched from Buying Small Multi-Family Units to Single Family Homes

After buying a city lot at the age of 15 for the purposes of a speculative real estate investment, I learned a few things as I moved forward. 3 years later I sold the city lot for a nice 47% profit. Indeed the speculative investment paid off. But looking back, rather than being a sound financial move, it was more of a series of events that properly fell into place. Why I Switched from Buying Small Multi-Family Units to Single Family HomesI had always heard growing up from my father who invested in real estate that raw land over time will always go up in value, which is why he was happy to co-sign the purchasing papers for me.

At the age of 18 I bought my first duplex followed by a number of duplexes, triplexes and four-plexes. Of course, I learned many lessons while owning these properties and dealt with my fair share of tenants.

Any investor who has managed their own property has learned that there are great tenants, good tenants, fair tenants and the unpleasant BAD tenant. As the old saying goes, “the bad apple will spoil the whole bunch”. The problem is, you may have 10 good tenants but the 1 bad tenant will ruin your spirits and consume all your time.

My “AH HA” moment

After learning how to interact with the various kinds of tenants and their personalities, there was one common emotion that came from all of them. They all called their unit their "apartment". Not once did I hear anyone refer to their unit as their HOME.

Meanwhile, as I attended many REI club meetings and had conversations with various investors, I discovered that tenants of single family homes were typically happier tenants with fewer calls to the landlord. When I questioned these other investors about their experiences, they confirmed my suspicion that these tenants refer to their rental property as their home.

LIGHT BULB!

This was indeed an “ah ha moment” for me. The simple emotion tenants have when they share a building versus having their complete independence was completely different. Thinking about this made sense, common hallways and yard space versus the independence of having complete privacy was the difference between having an apartment and a home.

Why a tenant calls it their apartment

An apartment is a place you hang your hat at night, a place where you have no emotional connection with. A place where, at the time of lease renewal, you start looking at the “for rent ads” to see if there may be a better or cheaper apartment for you. An apartment is a place where you share your outside play area. A place where you often share common hallways. Definitely is a place where you have to deal with neighbors coming and going in all different times of day and night. Privacy is limited on a multi family unit, so it makes sense that a tenant does not consider this their home.

Why a tenant calls it their home

The ole saying goes “a man’s home is his castle”. Whether they may actually own the home or not is not relevant to the pride of having a place you call your own. When you can play in your own back yard and have privacy you feel at home. When you do not have to share any of your property with anyone else you feel right at home. When you do not have to deal with noises through the partition walls and all the comings and goings throughout the entire 24 hour period you feel right at home. Most importantly for you, the landlord, when your tenants feel right at home they are typically happier tenants with fewer things to complain about. As they feel right at home they tend to renew leases which helps your profitability.

My conclusion

Owning a number of multi-family units was indeed a great experience. Of course there are certain benefits to owning multifamily units over single family homes. Having done the multifamily investing for a period of about 15 years, I decided it was time to promote myself. It was time to reduce my management headaches and start investing in single family investments. For me the benefit of easier management was compelling. I was also able to enjoy higher equity growth on single family properties.

Exit strategy

The last great benefit to buying single family investment properties what that I could have an exit strategy to sell to a retail buyer looking for a family home instead of just being able to sell to other real estate investors who are looking for a "deal". Now my buyer pool went beyond just the investor buyers that the multifamily arena was limited to.

If you want to find out more about buying turnkey single family investment properties, give me a call today 941-718-7761 or join the Equity Builders Real Estate Investing Group.