Where John started
We hear this question a lot from people who own a rental house or two: why multifamily instead of more single-family homes? John can answer from experience, because he started on the single-family side.
John owned single-family rentals and made money with them. Each one was a home he'd lived in before he moved. He depreciated them, collected rent, and had a low mortgage payment because he'd built up equity over the years. He couldn't complain.
So when he decided to get more serious about real estate, more single-family homes was his first choice. He learned about hard money loans and after-repair values. He checked listings, talked to brokers, got connected with wholesalers, and drove neighborhoods on his own. He started lining up contractors for the fixes.
He knew there was risk going in. What he didn't appreciate was how much work it would be, and how much of his time it would take.
What risks did he start seeing?
Hard money loans run hot, often around 12% interest, and every delay costs you. A project that runs two months long gets expensive fast. The market can turn too. A house can sell in a week one year and sit for months the next, same house, same condition.
Contractors are another story. If you haven't dealt with an unreliable one, you haven't been in the business long. And unless you're an expert yourself, you're paying an inspector or contractor to catch the hidden repairs. If they miss something, they have no liability. It's on you.
That's a hard way to learn the business. And when it works, you sell, make a few dollars or rent it out, and start over on the next one. John never bought a fix and flip. The further he got into it, the clearer the time commitment became, and he stepped away.
What changed his thinking?
Buying real estate is a skill. You do it once and hope you don't mess up. You learn, and you do it again, better. What John realized is that the skill to buy one small multifamily property is mostly the same skill you need to buy a larger one. That means the skill scales, and scale is how wealth gets built.
This matters because the properties we look for at Cardinal Oak, structurally sound buildings built since the 1990s with room to grow, reward that same discipline whether the building has four units or four hundred. The underwriting doesn't change much. The size of the outcome does.
How do single-family and multifamily actually compare?
Here's how the two stack up on the things that mattered to John.
- Vacancy. With a house, one vacancy means zero income. With multifamily, one empty unit means you still have the rest of the rent coming in.
- Loans. Banks like multifamily. The loans are larger, and lenders look more at the property's income than at yours.
- Contractors. You're more likely to find a reliable maintenance person because you'll keep them busy.
- Taxes. Profit from a fix and flip is generally taxed as income. Multifamily income and appreciation often have more ways to be sheltered. We are not accountants or attorneys, so get advice from your own tax advisor for your situation.
- Valuation. This is the part John likes most. Single-family homes are valued on comparable sales, which you don't control. Multifamily is valued on income. Increase the income and the value goes up with it. If you want control, that's where you'll find it.
That valuation difference is why we spend so much time underwriting the income side of a deal before we ever sign anything, and why worst-case rent growth and stress-tested exit cap rates matter more to us than the upside case.
Job or business?
Here's how John would put the choice. If you want your real estate investing to feel like a job, you can be very happy with single-family homes. If you want it to be a business, learn multifamily.
You don't have to buy a big building on day one to start. You can learn by investing alongside an experienced operator, by studying deals, and by asking a lot of questions. Learn the skill first, then decide how far to take it. We'll add this too: a coach or mentor is a third or fourth stage investment in that education, not the first one. Buy some training, make a choice about which direction fits, and get experienced before you spend money trying to shortcut the learning.
What should an investor ask before making the shift?
If you own single-family rentals and are wondering what the next step could look like, ask a sponsor how they underwrite income, how they stress test rent growth, and what happens when assumptions don't hold. Those answers tell you more about the deal than any projected return ever will.
What would it take for you to feel ready to make that shift? If you'd like to compare notes, schedule a call with John.