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Lina Reeves
Lina Reeves

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The Per-Unit Economics That Make Multifamily Beat SFR Every Time

#realestate #investing #finance #tutorial

Expense Comparison: Fourplex vs 4 SFR

The core advantage of small multifamily (2-4 units) over single-family is that fixed costs do not scale linearly with units.

FIXED COSTS (per property, not per unit):
  Property tax bill:     1 regardless of units
  Insurance policy:      1 regardless of units
  Roof replacement:      1 regardless of units
  Management contract:   1 regardless of units
  Lawn care:             1 regardless of units
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Cost comparison: fourplex vs 4 SFR 

                        Fourplex      4 x SFR       Difference
Purchase Price          $240,000      $240,000       same
Monthly Rent (4 x $850) $3,400        $3,400         same
Property Tax            $200/mo       $340/mo        -$140
Insurance               $200/mo       $500/mo        -$300
Management (9%)         $306/mo       $308/mo        -$2
Maintenance             $160/mo       $240/mo        -$80
CapEx                   $100/mo       $200/mo        -$100
Mortgage (7%, 25% down) $1,198/mo     $1,196/mo      -$2
Total Expenses          $2,164/mo     $2,784/mo      -$620
Cash Flow               +$896/mo      +$456/mo       +$440
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The fourplex produces $440/month more cash flow on identical investment and rent.

Why each expense category differs 

Property Tax:
  Fourplex: 1 parcel assessed at $240K
  4 SFR: 4 parcels x base assessment fees = 15-40% higher total

Insurance:
  Fourplex: 1 policy, $2,400/yr
  4 SFR: 4 policies, $1,500/yr each = $6,000/yr (2.5x more)

Maintenance:
  Fourplex: 1 roof, 1 foundation, 1 lot
  4 SFR: 4 roofs, 4 foundations, 4 lots
  Roof: $12K (fourplex) vs 4 x $8K = $32K (SFR)
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The DSCR advantage 

Fourplex DSCR:
  Rent: $3,400 / PITIA: $1,598 = 2.13

One vacancy (25% of units) still produces DSCR 1.60
One SFR vacancy (100% of units) produces DSCR 0.00
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The vacancy risk profile is the hidden advantage. A fourplex with one vacancy loses 25% of income. A SFR with one vacancy loses 100%.

When SFR beats multifamily 

SFR wins when:
  1. Appreciation market (SFR appreciates faster)
  2. Exit to owner-occupant (larger buyer pool)
  3. No multifamily inventory available
  4. Tenant quality priority
  5. Management simplicity (1 tenant vs 4)
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For cash flow at current 7% rates, multifamily wins. For total return in high-appreciation markets, SFR may win over 10+ years.

For multifamily analysis with per-unit expense breakdown, there is a free multifamily calculator at ArvCalc.

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