Single-Family vs. Multifamily Rentals: Which Is the Best First Rental?

Summary

BiggerPockets Real Estate Podcast – Episode Summary

Episode Title: Single-Family vs. Multifamily Rentals: Which Is the Best First Rental?
Date: February 18, 2026
Hosts: Henry Washington & Dave Meyer

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Episode Overview

In this episode, Henry Washington and Dave Meyer tackle the timeless debate for new and aspiring real estate investors: Should your first or next investment be a single-family rental or a small multifamily property? The hosts weigh the pros and cons drawing on audience questions, their own experiences, and practical data. In addition, they provide nuanced advice on inherited tenants, managing below-market rents, choosing between BRRRR and fix-and-flip strategies, and house hacking in expensive markets like Seattle.

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Key Discussion Points & Insights

1. Single-Family vs. Small Multifamily for New Investors ([00:00]–[07:36])

Question from Christopher:
New California-based investor, buying out-of-state, wants to know if he should target single-family or small multifamily rentals in the $80–125k range, aiming for BRRRR or buy-and-hold.

Core Insights:

• Small Multifamily Preferred for Scale:
  Dave advocates for small multifamily, arguing that “the best asset class” balances risk, scale, and cash flow while not adding much management complexity—especially for properties up to four units ([02:20]).
• Financing Realities:
  Dave clarifies that 2–4 unit properties qualify for residential loans, often with low down payments. “Anything 4 units or fewer is considered a residential mortgage. And so you're still going to have pretty favorable financing.” ([02:20])
• Risk Mitigation:
  Multifamily properties allow vacancy risks to be spread out. “If you have a vacancy in one unit, it's not all of your income for that entire property. When you buy a single family home, if you know you can't find a tenant for two months, you're losing 1/6 of your entire revenue for the whole year.” ([02:20])
• Quality Over Type:
  Given the limiting budget, both hosts agree it’s better to prioritize a quality, easier asset (often single-family at that price point in growth markets). Avoid “trash multifamily” that may bring headaches and higher risk ([05:54], [07:00]).
• Personal Satisfaction vs. Financial Outcome:
  Henry distinguishes between properties he “loves” (often single-family) and those that build the most wealth (usually multifamily):

  “Some of my favorite properties are single families ... But … I get the most cash flow and I've built the most equity in my small multifamily, and it's not even close really.” – Henry ([05:03])

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2. Handling Inherited Tenants with Below-Market Rent ([10:31]–[20:06])

Question from Nick:
A 19-year-old house hacker in upstate NY inherits a long-term tenant paying $635, well below the $1200 market rate, with a strong payment and care history. How to approach raising the rent, especially since the former owners are family friends?

Host Guidance:

• Value Good Tenants:
  Henry emphasizes striking a balance between being human and upholding a sound business model. “Most people will work with you if you give them the opportunity to.” ([13:09])
• Transparency and Inclusion:
  Bring tenants into the conversation with honesty and data.

  “I would go to the tenant and try to work out a situation where I could get them to stair step their rent up ... realising that yes, I think you're also in the right mindset of saying, hey, I'm willing to take a little less than market rents because she's a great tenant. That is the absolute right mindset.” – Henry ([13:09])

• Strategy: Show Rents and Costs:
  Dave refers to Dion McNeely’s “binder strategy,” where you show tenants area rent comps and explain your costs. Don’t try to “squeeze every drop” out—mutual benefit is the goal ([16:49], [17:48]).
• Net Cash Flow Is What Matters:
  “Experienced investors know it's your net cash flow that matters, like the gross rent number doesn't matter. If you have vacancy, it's going to eat away at that and that crushes your deal.” – Dave ([18:44])
• Underwrite Conservatively:
  Both hosts remind that deals must be analyzed using realistic, not optimistic, rent numbers from the start. “If you underwrite conservatively... you have room to be able to take care of people like this.” – Henry ([19:27])

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3. BRRRR vs. Fix-and-Flip for Rookies ([21:28]–[25:53])

Question from Morgan in Houston:
Has over $100k to invest but is torn between the long-term approach of BRRRR and quicker (but riskier) fix-and-flip. Hesitant about being a landlord, but open if it's financially advantageous.

Guidance:

• Know Yourself First:
  Henry: If you don’t want to be a landlord, don’t force it. “Because if you go into this not wanting to be a landlord ... you’re going to get punched in the mouth. Being a landlord is tough.” ([21:56])
• BRRRR = Lower Risk, Longer Payoff:
  Dave: “If you want to just safe investment, go buy bonds ... But if you want to take a risk, you have to be comfortable with the loss.” Flipping is higher risk/shorter term, BRRRR is lower risk/longer term but takes work to find deals that pencil ([23:02], [24:28]).
• Clarify Your Goals:
  Decide: Are you looking for short-term cash or long-term wealth? “Once you figure out the goal ... it sort of just makes every question after that easy.” – Dave ([25:28])

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4. The Challenges of House Hacking in Expensive Markets ([28:59]–[34:21])

Question from James in Seattle:
Finding it hard to house hack in Seattle without large negative monthly cash flow (e.g., –$1400/month). Agents claim that’s “a great deal.” Is it worth it? Are there alternative strategies?

Hosts’ Take:

• Don’t Force a Bad Deal:
  Dave: “My short answer to this question is don’t. This does not sound like a good deal. I wouldn’t do it if I were you.” In high-cost markets, buying just to house hack often doesn’t make sense anymore ([29:52]).
• Alternative Paths:
  • Heavy value-add/flipping is one way to make deals work in expensive markets (Dave’s new strategy in Seattle).
  • “Invest out of state for cash flow and for long-term rentals” is another practical option.
• Framework for House Hacking:

  “If you’re living in a place where you’re looking at a duplex … and your remaining mortgage payment is still as much as it would cost you just to go rent a place by yourself. You should not house hack.” – Henry ([31:46])

• Run the Numbers:
  Dave has created spreadsheets/calculators for listeners. “You will see that you’re putting 80, $90,000 into this deal. Even if you put that in a bond, you’re going to be making more money than this house hack deal.” ([32:11])

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Notable Quotes & Memorable Moments

• “The name of the game is don’t lose. ... My fear is that if you ... buy a three unit or four unit at 125, like there’s going to be something wrong with that.” – Dave ([06:01])
• “If [a tenant] moves out and you have two months of vacancy, that’s pretty much a wash. ... People get obsessed with their rent numbers. ... It’s your net cash flow that matters.” – Dave ([18:44])
• “If you underwrite buying that deal assuming you’re going to get the highest best rent number possible ... and then you get into a situation like this ... you realize I’m not going to get that ... So, if you underwrite conservatively ... you have room to be able to take care of people like this.” – Henry ([19:27])
• “Being a landlord is tough. There’s a lot of problems that come with it. ... And the benefits are more long term than short term.” – Henry ([21:56])
• “House hacking ... was just a no brainer. ... But in the expensive, the truly expensive markets in the country right now ... it does not make sense.” – Dave ([29:52])
• “If you’re living in a place where ... your remaining mortgage payment is still as much as it would cost you just to go rent a place by yourself, you should not house hack.” – Henry ([31:46])

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Timestamps for Key Segments

• Choosing Single-Family vs. Multifamily for the First Investment: [00:00]–[07:36]
• Handling Inherited/Under-Market Tenants: [10:31]–[20:06]
• BRRRR vs. Fix-and-Flip for New Investors: [21:28]–[25:53]
• House Hacking in High-Cost Markets: [28:59]–[34:21]

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Episode Takeaways

• Small multifamily properties usually win for cash flow and wealth-building—if you can buy a quality asset.
• Good tenants matter. Value the human relationship and make business decisions transparently.
• As a new investor, avoid deals that only work if everything goes perfectly—underwrite conservatively.
• In expensive markets where cash flow is negative, seek value-add projects, consider out-of-state investing, or rent yourself.
• The right strategy depends on your risk tolerance, timeline, and personal comfort with landlording. Clarifying your “why” makes tactical decisions easier.

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Transcript

[A]

Should your next investment be a single family home or a multi family property? It's a critical question. You want to scale a portfolio and progress toward financial freedom as quickly as possible, but taking on the wrong type of property could leave you overwhelmed and slow down your progress in the long run. The good news? This choice does not need to leave you paralyzed. Today we're sharing a simple framework to help you pick the right type of property for you. The answer isn't the same for everyone, but by the end of this episode you'll know how to think through big, big decisions of whether single family or multi family is right for your experience level financial situation or investing strategy. Plus, we'll tackle how to balance getting your rents close to fair market value without forcing unnecessary tenant turnovers, where the new investors should take on birds or flips, and so much more. What's up friends? I'm Henry Washington here the copy co host of the Bigger Pockets podcast, and I am here along with Dave Meyer. Dave, you're looking a little bundled.

[B]

Are you wondering why I'm dressed like Macklemore right now?

[A]

Is there something going on at the thrift shop we need to know about?

[B]

My heat went out two days ago over the weekend. On Saturday morning I woke up at my house like 40 degrees and they actually just left my house and fixed the furnace. But it's still freezing in here. It's like literally 42 degrees. But the show's got to go on man. So I'm just here dressed in full winter gear.

[A]

Well, today we're giving people what they want. We're answering questions you, the audience asked us on the BiggerPockets forums. So let's jump into it. The first question is from an investor named Christopher and he said, I'm a new investor based in California looking to start my portfolio out of state. My target is the $80,000 to $125,000 range in landlord friendly markets with steady job growth. I'm most interested in Brrrr and buy and hold rentals and I'm deciding between starting with a single family or a small multi family. He goes on to say, here's where I'm stuck. Single family seems easier to manage, less intimidating, but the cash flow might be a little less. Whereas multifamily could bring stronger cash flow and efficiencies of scale. But I've heard they can be tougher to finance and tenant issues could hit harder if I don't have a solid team yet. So which one should you start with and what do you think the best path is for someone investing out of state for the first time.

[B]

All right, I'll take this one. First off, Christopher, good question. And I think a great approach. If you're based in California, super expensive, you want buy and hold or burrs, they're hard to find in California. So out of state is a great option for you. I'm going to start with actually the second question because basically what you said is, you know, which is better, small multifamily or single family? All things being equal. I don't know how you feel about this, Henry, but I personally think small multifamily is just the best asset class. And I don't actually think it's really all that different from a management perspective. Still got one roof, you got one tax bill. You know, you do have multiple tenants. But I think what you'll learn, as almost every investor does over the course of their career, is it's really not that hard once you place tenants. It's just reacting and trying to do some repairs proactively. But I personally just think small multifamily are better. I would challenge you, Christopher, on your question, saying that you, you think that they're harder to finance small multifamily, and that tenant issues could hit harder. I think they're very similar to finance. Even if you are out of state, not owner occupying, you can get very similar types of loans for small multifamily. Anything 4 units or fewer is considered a residential mortgage. And so you're still going to have pretty favorable financing. Some you can put 5 or 10% down, so you still have that option. And the thing that I would challenge about. Yeah. If all of your tenants decide to up and leave at once, that will be an issue. Or if they all complain at once, months, that can be an issue. But I actually think that having a small multifamily mitigates risk because if you have a vacancy in one unit, it's not all of your income for that entire property. When you buy a single family home, if you know you can't find a tenant for two months, you're losing 16 of your entire revenue for the whole year. Whereas if you have two months of vacancy in one of four units, maybe you're only losing, you know, one and a half percent of your revenue for the whole year. So I actually think it helps you mitigate risk, which I, I really like. That's just on principle. But I will say buying a multifamily for 80 to 125 is probably not realistic in a decent market. I think if you're looking for a place with job growth, you're going to be really hard pressed to find a duplex. I invest in the Midwest, you know, maybe in Detroit you could probably find a duplex for that range. But if I were you with that price point, I actually would focus on buying the best asset I could and not on whether it's single family home or multifamily. The advice I gave earlier was all things being equal, if you could afford both, I'd say small multifamily. But it sounds like you might want to focus on single family because you'll be able to get a high quality asset that's not going to be a pain in your butt.

[A]

Very well said. When you were sitting there explaining why you liked multifamily as, as an answer to this question, I started thinking through like what are my favorite properties? And some of my favorite properties are single families. But when I ask the question differently and say what are my most profitable and or wealth building properties? I get the most cash flow and I've built the most equity in my small multifamily and it's not even close really. So. Yeah, yeah. And so I think you're right. Small multifamily in terms of financial benefit, cash flow and wealth building seem to be the best asset. But my favorite properties are some of my single families and that's. Who cares about what your favorite is, right?

[B]

But why, why are they your favorite? That just because you like, proud of what you did to them and like the renovations.

[A]

Proud of what I did to them. The locations that some of them are in, just prime locations, just excellent properties.

[B]

You get the warm and fuzzies with the, with the single families. You know, like you, you flip a house, it turns out great, A family moves in, they're happy with it. You know, that's nice, that's a good experience. Multifamily, you don't really get that as much. I agree with that. But I just think if you're trying to build that long term portfolio, it's great. But I just think as a first time investor, the name of the game is don't lose. You don't need to win by a lot. You don't need to hit a home run. The game is to hit a single. And my fear is that if you take my original advice and say, oh, I'm going to buy a three unit or four unit at 125, like there's going to be something wrong with that. Your tenants are going to be sitting there like Me with their hat and jacket on because their heat doesn't work or their, their toilets don't work or something like that. This is what you get when you buy assets that are not up to their highest to best use. So I would make it easy on yourself as an out of state investor and buy something that's in good shape. That would be my number one criteria.

[A]

The other caveat here is, Christopher, I would focus some of your time on learning more ways to finance deals. There are so many tools in the tool belt in terms of financing properties, small multifamily. Like I think you can get a small multifamily financed pretty easily, no sweat. And given the concerns that you've outlined here, I would say my answer to you would be definitely focus on small multifamily if you're going to up that 80 to 125k range. But if not, then I think Dave is right. Buying a quality single family asset will save you so much headache over going and buying a trash multifamily.

[B]

Great question, Christopher. Thank you and good luck to you. We have a new question asking about inherited tenants from Nick in upstate New York. But before we answer that, we gotta take a quick break. We'll be right back.

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[B]

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[A]

I love this question first of all. And second of all, 19 years old investing in real estate on the forums asking these questions, crashing. Man what a head start you had. I wish I was as smart as you were when I was 19. Unfortunately I was not.

[B]

I don't think I could have typed this sentence when I was 19.

[A]

So kudos to you Nick. I have had this situation a few times. Maybe not as nuanced as this where it's family friends and it's in a house hack. But I have inherited tenants paying very low rents and I've had to work with them to figure out how to get the rents where they need to be. And so first and foremost is you need to realize that you're a human being dealing with human beings. And it sounds like based on the way you phrase this phrase, this question, you're already in that mindset. Right? And so what I have learned managing my own properties as a landlord and trying to do it in a way that both balances being human and being a business owner. Most people will work with you if you give them the opportunity to. Right? And so I'VE always tried to approach these situations where I'm just open and honest with people, transparent, transparent. And I, and I let them know. And so if this was a situation I was dealing with, I would go to the tenant and I would try to work out a situation where I could get them to stair step their rent up to where you want them to be. And realizing that, yes, I think you're also in the right mindset of saying, hey, I'm willing to take a little less than market rents because she's a great tenant. That is the absolute right mindset. Because the first thing I tell people who ask me this question is, is the tenant a good tenant? Because if they're not a good 10, right. You need to focus on getting the tent. Yeah. Completely different process. But if they're a good tenant, they take care of the place, they pay on time, they don't bother you, that's perfect. That's ideal. The second key is getting them involved in the decision making process. So typically what I do is I pull comps for market rents and I sit down with them and I say, hey, look, these are the comps that I have. These are, this is what's available for rent close by, similar amenities, right. And I, and I let them see for themselves. Like, if you were to move and get something equal, this is the price point that it would be at. I understand that if you can't pay that amount yet, but I do need to get you somewhere closer to market rents. What would you feel comfortable paying as a rent for you to stay here and want to stay here. And a lot of the times they'll tell me, look, I can't do 12, but I could probably get to a thousand. Okay, cool, let's stand then. And then you have to decide, can I work with that number? And if the answer is yes, then you figure out, well, do I raise the rent next month or do you stair step? Right. You'll be able to tell through the course of the conversation and what they're saying and how they're saying it if things are reasonable. Because if you go to them and they say, look, I can't pay anything over 635, period, I'm done. That's it. That's all I can do. Well, then you can't. Right? It's not reasonable. You can't reason with that person. And you have to figure out, okay, what are my next steps? Now that I know they won't pay anything else. But when you're showing them the comps and you're trying to work with them and you're involving them in the decision making process. I found that that typically always works well. And so then you can determine based on what they say, do I need to stair step? Because you can do things where you say, okay, if we agree in a thousand, how soon do you think you could get to a thousand? I asked them that. If they say, hey, I could probably get there over the course of the next six months, if that works for me, then we just work on stair stepping that every month until we get there, their rent goes up a little bit until they're at that thousand. You know, maybe they say a year. If you can work with that, then you stair step them a year. You get to determine what works for you and your tenant. But involving them in the decision making process and being transparent with them because they understand if you bought a property, you have a new mortgage, you've got things to pay. They all people know these things. But where I think landlords fail is they dictate things to their tenants versus including them in the decision making process. And so if you treat them like human beings, try to include them. And I'm not saying because you include them, you have to do what they ask. What I am saying is it makes an easier way for you to transition to something meaningful if you include them.

[B]

I completely agree. I think that's the absolute right approach. I, when I was self managing, used to just give this speech to everyone who was one of my tenants. I would just be like, I want our entire basis of our relationship just to be reasonable. Just talk to me like you would ask a friend or family member for a situation and I'll do what I can. And I'm going to be ask you to be reasonable about things, to let contractors in to, you know, like be reasonable. And that has worked for me 100% of the time. I've really never had an issue with that approach. I love what you said about involving them in the decision. People just generally, it's just human psychology. They want agency, they want control. And even though you're not giving up actual control, giving people a say is really powerful and meaningful and will matter for your relationship going forward. If you've listened to any of the episodes with Dion McNeely, he like sort of patented the binder strategy. Have you heard that what he calls the binder strategy? Yeah, it's the same idea, but he basically shows his tenants what rents are in the area. Like he pulls comps and prints them out and shows them to them. I think in a situation like this you can even if you wanted to show what rent was 12 years ago and how rents have changed over the last 12 years recently, if you want to. You don't have to beat people over the head with data. But like if you, you could show how much taxes have gone up over the 12 years. Like there are real reasons why rent goes up. There has been enormous inflation across this country in the last 12 years and not changing rents is not a tenable option for real estate investors. Now you don't have to maximize and squeeze every drop out of the tenant. I highly recommend against doing that. I don't think that's the human thing to do, nor do I think it's good business. And I think that what Henry suggest is absolutely the right way to do it. I think the numbers you gave Henry are a perfect example. Would you take, would you personally take a thousand over 1200?

[A]

Absolutely.

[B]

For the right tenant, 100%. If they move out and you have two months of a vacancy, that's pretty much a wash. Right. So wouldn't you rather keep a great tenant for a wash? Like it's, it's a no brainer. People get obsessed with their absolute. Like people really, I think in general get obsessed about their rent numbers. When every experienced investors know it's your net cash flow that matters, like the gross rent number doesn't matter. If you have vacancy, it's going to eat away at that and that crushes your deal every month of vacancy. Just keep this in mind. That's 8% of revenue. You lose, you lose, you know, two months, that's 16% of your revenue. That's enough to take almost any deal from cash flowing to negative. So just keep that stuff in mind.

[A]

This is why we harp so hard about underwriting conservatively. I think what happens when people get in this situation is they underwrote buying that deal assuming they're going to get the highest best rent number possible. And that's how the numbers worked. And then you get into a situation like this and you realize I'm not going to get that or if I do, it's going to take me a year before I can get there and I'm going to lose a lot of money in between then. So if you underwrite conservatively, where you underwrite based on a lower rent number, the mid tier of the rent price range, maybe even the low end of the rent range, and then you buy a deal that pencils yep, you have room to be able to take care of people like this.

[B]

This is playing out for me all the time right now. I don't know about you, but, like, I'm not getting top market rents these days. When I have renewals, I'm usually able to keep rent, but there have been a couple units where I've had to lower rent, especially in Denver. If you guys follow the news, Denver is not doing great on rent growth, which is fine because I underwrote them this way. You know, I have great property managers. I have great agents. They say, hey, you're going to get 1500, 1600 bucks. When I underwrite it, I say 1350. I'm like 10% below what they tell me because I want that flexibility. I don't want to be strapped. I love being in a position where the property manager comes to me, like, actually, I can only get 1450. I'm like, great, I underwrited 1350. This is excellent. You know, like, I'm not worried about that. But when you set yourself up to only succeed if things go perfect, that is just a recipe for failure all the time. So to Nick, I think you know what to do. Hopefully this is a good answer. And let us know what happens because I actually, I bet if you follow Henry's advice, you're going to find a mutually beneficial situation, which is what Henry and I are always talking about. Find mutual benefit. It's the best thing for business. It's the best thing for you. All right, let's move on to question number three, which comes from Morgan in Houston, where we just were, by the way. We ate at this great barbecue place, Pendleton's. I just saw it made. Top 10 barbecue in the country.

[A]

Best ribs I've had in a long time.

[B]

Anyway, go to Pendleton's. Morgan in Houston wants to talk about real estate, not barbecue, though Morgan says, I want to get started with real estate in Texas. And I'm going back and forth between the brrrr or fix and flip. I have a good amount of cash, 100k or more to invest, and I want to take a risk but not a huge loss. Don't we all? And I don't want to rent a property or deal with with tenants, but I am open to the idea if it is advantageous. What are your thoughts for a rookie?

[A]

Yeah, this is an interesting one based on what was said in the question because it says I don't want to rent a property or deal with tenants, but I'm open to the idea if it's advantageous. Well, first of all, being a landlord is very financially advantageous. I think that's why a lot of us are here. And so I think that that's the question you need to get comfortable with first. Right. Because if you go into this not wanting to be a landlord and trying to get yourself sold on being a landlord by taking on your first property, I mean, you're going to get punched in the mouth. Being a landlord is tough. There's a lot of problems that come with it.

[B]

Yeah.

[A]

And the benefits are more long term than short term. Getting into this business and expecting to buy a property that's just going to go perfectly, you're going to be making all this cash flow from day one. It doesn't work like that. You have to have a long term mindset. So if you aren't mentally prepared to be a landlord, take on some short term pain and get the gain in the long term, then you probably shouldn't be looking into burrs at all.

[B]

Totally. I think you basically have, you have a choice to make. Morgan 1. You said I want to take a risk but not a huge loss. Those things aren't 100% compatible. Like risk and reward work on a continuum. The higher the risk you take, the bigger the potential reward. So if you're saying that you want to take a risk, you have to be open to the idea of loss. Like that is just investing in general. People who invest in bitcoin have had amazing returns. People have also lost fortunes in bitcoin. If you want to just safe investment, go buy bonds, you'll earn a 4% return and you'll be fine. But if you want to take a risk, you have to be comfortable with the loss. So I really think you need to figure out where you want to fall on this risk continuum. Because if you're comfortable with, with risk and loss, go flip houses. I think that's prob the right answer for you because you seem to not want to deal with tenants. In my opinion, burr is a lower risk strategy than flipping. And so if you instead want to focus on not taking big losses and are can warm up to the idea of having tenants, then I would say bur, because with a bur you don't have the same time pressure as a flip. You still want to do it as quickly as possible. But if you, you know, finish your renovation at a bad time to sell, you just keep it and rent it out like you, you lose that like pressure for disposition. So I think you need to sort of make a decision here because you can't have it all.

[A]

Yeah, I agree. And you need to figure out are you looking for short term money or long term money? Right. Because if you want to do a fix and flip, you'll get money faster. Right. You'll get paid hopefully in six to eight months. A brrrr is probably going to take you longer. You'll probably pull out some of your cash, but the likelihood of you finding a deal that pencils as a burr in a short term time frame, that's going to allow you to pull all of your cash back out and some additional profit, that's, that's a tough sell right now.

[B]

Yeah.

[A]

Can it be done? Yeah, yes, it can be done, but it takes work. Like you're going to have to be searching for off market deals or putting in a ton of extremely low offers on on market deals and it's just going to take a long time to find that. So it sounds like you need to A, figure out what kind of risk reward you want and B, when is that timeframe that you're looking to get paid? Because a BR is going to take a longer period of time, a flip can be a whole lot shorter, but a flip is going to be a bit riskier. So you've got some decisions to make for sure.

[B]

Honestly, once you figure out the goal, I know it sounds boring and like no one really wants to think about it, but I promise you, it sort of just makes every question after that easy. You're like, okay, should I buy this? You have this frame of reference that you can analyze any question through. It's like, should I buy a steel? No, it doesn't meet my goal. Should I buy the steel? Yes, of course. It gets you over analysis paralysis. It gets you over that overwhelm feeling. So just take the time and think through what you really want to accomplish here.

[A]

All right, well, we've got time for one more question, but before we get there, we've got to take a quick break.

[B]

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[C]

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[B]

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[D]

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[A]

All right, we are back on the BiggerPockets podcast answering your questions from the forums. And we've got one more question and it comes from an investor named James in Seattle. James says he's looking to buy his first house hack in the Seattle area and is finding it incredibly hard to find a property that will cash flow positive when he moves out. He Says I've had agents and lenders tell me that's a pretty great deal when I would be getting negative 1400 dollars a month in cash flow. How am I supposed to continue buying a house hack every year or two if I'm racking up more and more payments? Am I supposed to buy the house and hope that I can eventually rents and refinance help me make a deal in this expensive market?

[B]

Well, first of all, I love that this comes from someone named James in Seattle. I love the idea of this just being James Danar Submitting questions what's this whole cast flow thing?

[A]

There's no juice in the cash flow guys.

[B]

There's no juice. But seriously, James, I live in the Seattle area and I sympathize. My short answer to this question is don't. This does not sound like a good deal. I wouldn't do it if I were you. I, I don't know what else to say. I. You know, Henry and I actually recorded a show last week talking about house hacking. Popular topic five, ten years ago. There is almost no situation or no market. I would advise against house hacking. It was just a no brainer. Check the box. Go do it. But in the expensive, the truly expensive markets in the country right now, these are Seattle, California, New York, Austin, Miami. Like these kinds of markets, it does not make sense. I have literally done the math and it does not make sense to buy house hacks. I know BiggerPockets is partially responsible for this mindset where we've been telling people the house hack for 15 years and for still for 80% of the population. That is true. But if you're in one of these uber expensive markets, it doesn't make sense. You have two options in my opinion. You either do heavy value add strategy, which is what I have resorted to since moving to Seattle. This is why I started flipping houses for the first time. Because you absolutely can make money in Seattle doing that strategy or you have to invest out of state. This is why I do both. I invest out of state for cash flow and for long term rentals. I am trying my hand. I wouldn't say I'm a flipper yet, but I have. I'm dabbling in flipping a little bit because I do like, like I enjoy real estate. I want to be doing deals where I live. And so the only way that that makes sense for me right now is to do heavy value add in the form of flipping. I'm also starting to look at value add rental properties like buying stuff that really needs a lot of work and doing that. But house hacking here, it just doesn't work. It doesn't make sense right now here's.

[A]

The framework that I, that I kind of look at in terms of should you house hack or not? If you're looking at house hack deals, especially just consider a duplex. If you're living in a place where you're looking at a duplex and if you buy it, live in it, rent out the other unit and your remaining mortgage payment is still as much as it would cost you just to go rent a place by yourself. You should not house hack. It's not going to work.

[B]

Well, I wish rent here for a single, for a single bedroom was only 1400 bucks a month. It's probably more than that. But you can rent like a nice apartment in Seattle for two grand, 2,500 bucks a month, especially in the neighborhoods that this, that James is talking about. So it just, it's a lot of risk and a lot of work and a lot of capital frankly, that if you're going to go even in, you know, listed some neighborhoods here, we won't read them to you. But you know, you're still going to have to. If you're putting, you know, 20% down on these properties, over a hundred grand for sure. Like if it were me, I would rent and I would go find a duplex in a growing city in the Midwest and just bite the bullet. It's not that bad. I do it and everyone can figure it out. We put out a lot of resources on biggerpockets about how you can do this as well. I offer this freely on biggerpockets.com resources. I made a free calculator. It's a house hack rent or buy calculator. Go play around with it. It will confirm what I've said and anyone else who's thinking about these different options, just go play around with it. You will see that you're putting 80, $90,000 into this deal. Even if you put that in a bond, you're going to be making more money than this house hack deal. Like you should just think about the opportunity cost that you' giving up with this. I know we talk about house hacking all the time because it does make sense, but there are situations where it doesn't make sense. This is why no matter what you do, you have to just run the numbers and see for yourself if the math pencils out. And for most people in Seattle or LA or New York or Miami, it just doesn't pencil right now. And it's frustrating but there are other ways that you can win as an investor, so go focus on those.

[A]

Absolutely. You're right. It is our fault. We talk about house hacking all the time because it is the best blame us, but we're being honest with you about what situations it does work in, what situations it doesn't work. So if you want to learn more about house hacking, you can check out a couple of previous episodes that Dave and I did, number 1236 from a couple of weeks ago that was all about how to analyze these specific rent versus buy decisions that we talked about today. Or you can Check out episode 1182 where I talked about several ways you can add value to your house hacks and your rental properties to help you be more profitable.

[B]

And if you want to learn how to add value in Seattle specifically, we're literally doing a value ad conference in Seattle because this is such an important question. This is a question, James, that we hear all the time. And that's why James Danard, one of the best value add investors out there and who does it in Seattle, makes more money than Henry and I combined, is teaching us how to do this. So it's March 28th. You can get your [e-mail] Seattle. Henry and I will both be there. Henry will be teaching, I'll be in attendance learning and hope to see you guys there as well. I personally am going to go start enjoying the benefits of indoor heating and shed a couple layers. But thank you all so much for listening to this episode of the BiggerPockets podcast. We'll see you next time. Thank you all for listening to the BiggerPockets Real Estate Podcast. Make sure you get all our new episodes by subscribing on YouTube, Apple, Spotify, or any other podcast platform. Our new episodes come out Monday, Wednesday and Friday. I'm the host and executive producer of the show, Dave Meyer. The show is produced by Ian K. Copywriting is by Calico, content and editing is by Exodus Media. If you'd like to learn more about real estate investing or to sign up for our free newsletter, please visit www.biggerpockets.com. the content of this podcast is for informational purposes only. All host and participant opinions are their own. Investment in any asset, real estate included, involves risk, so use your best judgment and consult with qualified advisors before investing. You should only risk capital you can afford to lose. And remember, past performance is not indicative of future results. Biggerpockets LLC disclaims all liability for direct, indirect, consequential or other damages arising from a reliance on information presented in this podcast.