E127: Single Family vs Multifamily Part 4: Speed to Scale & Ability to Increase Value

When we talk about single family, we're talking about anything in the residential space, typically anything under five units, and multifamily refers to over 100 units or more. This week we're wrapping up our 4 part series on single family vs multi family and diving into: the benefits of single and multifamily, how these asset classes are valued and how quickly you can scale up your portfolio.

KEY TAKEAWAYS

1. Commercial property is based on NOI (Net Operating Income) which is net operating income minus expenses. You can increase the value of the property by decreasing expenses or increasing the income of the property. 

2. If you decrease the expenses of a commercial property by $1 at a capitalization rate of 5% then the value of that property goes up by $20 by every $1 earnt or saved. 

3. Capitalization Rate - The annual rate of return on a commercial property bought with 100% cash. Example: A 5 cap equals a 5% return. 

4. You must focus on due diligence. It can be harder to carry out proper due diligence on a single family property and just buy a commercial block. 

5. With single family you can renovate a property and sell it to a homeowner who will pay the highest price, plus you can manage the property to your liking. 

6. If you're looking for control, then go the single family route. If you want to be a passive investor, then go the multi family route. 

LINKS

Learn more about investing with Steven at 

https://theinvestormindset.com/invest

Join InvestorMindset.com for more!