I see a lot of "guru's" out there advertising buying brand new homes, even with negative cash flow of $200-$300/month. yes, these will appreciate in value, principle is being paid down, etc, but why have negative cash flow when you can have positive cash flow, in good areas, with apartments?
I have done both, and actually manage quite a lot of single family homes for out of state investors. I guess out of state investors look at things differently then I do. A California investor that sees something with a 10% cap rate and they can't get their tongue off the floor. Especially when they are used to seeing 3% and 4% cap rates in California.
For example, in the Indianapolis area, a nice duplex for $135k can be had that rents for $1,500 total for both sides. This is in a great area, will be full brick, etc. For the same money, a brand new home can be purchased for 135k, that rents out for $1200/month. The single family brand new home will not go up in value for over 5 years, in fact, a few years after purchase, the home will probably be worth less then it is now!(if previous history on new home construction in Indiana is any indication).
Purchased a used duplex in a good area, and it will more then likely appreciate at 3-5% per year, and even better if you are managing it better and was able to raise rents. If one side is empty, you still are able to bring in 1/2 the total rent, a single family home, if it's empty, you get nothing.
This is from someone that owns many single family homes and many, many more multi-family buildings, with 2-12 units in them.
So, IMHO and from 10 years experience, purchase multi-family. If I had a chance to start all over again, I would have started with duplexes and moved up from there instead of starting with single family homes.
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