always in plexes), you will have to pay the utility bills or divide them between the tenants. I have done both, and I now avoid a multifamily that isn’t separately metered. There is higher tenant turnover in an apartment building vs. a house or plex. Apartment tenants stay an average of 2.5 years. Our house tenants average around seven years. Our record is 23 years, and she would likely still be there if we hadn’t sold it. Lesson: take care of your tenants (That’s another article). A rental house has another ad- vantage over a multifamily property because only one family lives in it. When you have multiple tenants in one building you will have multiple problems; disputes can range from the trivial to the criminal. You may find yourself or your manager having to mediate or even call the police. That rarely happens with rental houses unless you buy in the wrong areas. Remember that apartment buildings are often not in the best neighborhoods and the rent is lower

than houses, so they don’t always at- tract people who will be voted citizen of the year. Apartment tenants are more likely to sue you than sin- gle-family tenants. The more tenants you have, the more likely you will have problems. Do I have statistics to prove that? Just one—38. That is the number of years I have had tenants. Apartment buildings usually don’t appreciate as well as single-family houses. Their appreciation is based on rental income. When rents are flat, so are the values of apartment buildings. Also, values can fall with new laws and regulations (such as recent laws in west coast markets that control rents and increase taxes). When you sell a house, the potential pool of buyers is almost unlimited. Not so with an apartment building. The potential pool of buyers is limited to deep-pocket investors. But, this is not true of plexes. In my town, they sell almost immediately to mom and pop investors. There is no “best” type of real es- tate investment. You have to compare


the pros and cons of each and decide what fits you. It all depends upon how much money and time you are willing and able to invest, how much you know about the investment, how much risk you are willing to take, and what your goals are. When you know all that you can choose the type of real estate that is right for you. •

W. J. Mencarow has invested in various kinds of real estate since the 1980s and offers a free e-course on notes at www.

thinkrealty . com | 77

Made with FlippingBook Online newsletter