The second essential area of Criteria is property type. Are you looking for single-family homes or multifamily properties, urban or suburban, resort or ranch, new construction or resale, lots or land? Since we've focused on investing in residential real estate—properties people live in— let's take a closer look at the single-family and multifamily properties.

You can acquire houses, condos, and apartments individually or buy them in bunches by purchasing duplexes, triplexes, fourplexes, and even larger condo and apartment complexes. The conventional wisdom is that single-family homes offer the most reliable demand and appreciation while multifamily properties offer the best opportunities for cash flow. On the surface this plays out. In most markets, the majority of buyers want to own a home, and so this demand tends to keep prices moving upward over time. Also, by and large, the market for single-family homes is set by noninvestors. These individuals are buying a home, and emotional factors play into their willingness to buy at a certain price. Multifamily prop

11 Actually, I netted $690,000 if you count the $50,000 nonrefundable earnest money I made when another buyer made an offer and subsequently walked away when he couldn't arrange financing and close.

erties, in contrast, are bought and sold largely by investors, and this means that their prices are determined dispassionately by the value of the rents they represent.12

Howeverr rents appreci- "Multifamily is difficult for smaller ate over time at almost the investors to get into unless they have same pace as home apprecia- a lot of capital on hand. If you start tion.13 Thus, by default, both out with single-family houses, banks single-family and multifamily wiR incrementally grow with you into properties go up in price over multifamily. Plus, single-families involve a lot less risk.

time. The two tend to be Rische Beeson countercyclical. When hous- Millionaire Real Estate Investor

Lubbock, TX

ing is affordable, rents go down and vacancies go up; this means houses are appreciating in value while rental properties and rents decline. But when housing becomes less affordable, the opposite tends to be true: Vacancies go down, and rents rise. Neither option—single-family or multifamily—is intrinsically better than the other. They both offer strong benefits to an investor over time.

The decision to include single-family or multifamily properties in your Criteria ultimately depends on your goals. You can buy single-family homes for appreciation and relative stability—building your net worth—or you can emphasize multifamily properties that offer multiple streams of income—building your cash flow.

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