Transcript:
Hello Andrew Fidler, owner and broker of LaPlante Real Estate, coming to you today with a controversial topic: why I personally do not prefer apartments, multi-family properties, and especially why I don’t prefer them in any of our single-digit rental-grade neighborhoods.
Let me paraphrase for a second and characterize that. I have nothing against apartments. In 2009, my very first purchase was a six-unit. My second purchase after that was another six-unit. I have had small multi-families, less than twelve units, in my personal portfolio for the majority of my investing career.
However, as the value of multi-family has increased and as we’ve had more folks from BiggerPockets, for example, who have read a little bit of literature and entered the marketplace feeling that they want a multi-family property, the prices have gone up. I remember when it was less than $20,000 per unit — so $40,000 to $50,000 for a duplex. They’re now pushing $80,000 in the single-digit zip codes and $120,000 in the nicer double-digit zip codes here in Toledo.
To begin with, when you compare single-family properties to multi-family, the first thing you need to do is compare apples to apples. Anytime you’re using me as your agent, we’re looking at net cash flow. We’re attempting to look at the holding costs that are in a multi-family. Water — common in Toledo — which includes water, sewer, and trash, runs $80 to $120 a month per unit in overhead cost. That’s a pretty big chunk right there. Then you have mowing and snow removal to maintain the property, and that cuts into your base.
Additionally, you’re going to end up with an up-down duplex — incredibly common here in Toledo. The second-floor property is not going to be as attractive. It’s going to be harder for us to rent that property versus single-family homes where tenants start on the ground floor and control the second story and basement. That autonomy matters.
You’re typically dealing with one-bedroom and two-bedroom units. I would absolutely avoid one-bedroom apartments. The renter base for those is either elderly residents who are retired and stable, or individuals just leaving school and starting their first job — who are incredibly unstable from a residency standpoint. As those residents make more money or attach to a significant other, they move into a two-bedroom. As soon as they have a child or increase income, they’re moving into a single-family home where they control the yard and basement.
Culturally, in the United States we don’t live in apartments the way some European countries do. We don’t naturally think about shared walls, noise levels, or music volume. In Toledo, it’s common to have residents complain about new apartment dwellers, and then management has to educate them on how to coexist successfully.
Looking at Section 8, the housing authority owns and operates their own apartment complexes in Toledo. You’re in direct competition with them for vouchers. Single-family homes, however, are exclusively landlord-based. Typically, you have a single mother with one child — that immediately places them in a two-bedroom voucher. If they later have a boy and a girl, that becomes a three-bedroom voucher. That family is headed into one of my single-family homes and wants to plant roots.
When you’re scrolling Facebook, you’re not seeing people brag about their apartment unless it’s unique or historic. You see people showing off their house — the yard, the basement, the garage. That’s the “you made it” threshold in Toledo.
Over 50% of my personal portfolio is Section 8. It’s a double-edged sword, but the money spends and the residents are generally solid. I don’t have statistical evidence that Section 8 residents are harder on property. If anything, they’re accountable to the government and need to maintain their voucher.
In single-digit zip codes, instability is more common — job loss, car failure, relationship breakups. That increases turnover. One of my core investment principles is stability. I would argue — and can show statistically — that renting your property for 30% less and keeping the same resident for five years will outperform renting at 110% and turning the property every other year with renovation costs and 30–60 days vacancy between turnovers.
That’s why single-family homes in the city of Toledo — especially three bedrooms with a basement, gas forced-air furnace, fenced yard, and detached garage — are the bankable investment. That’s my baseline comparison when evaluating properties.
That’s not to say we won’t find opportunity in multi-family. But post-COVID, I’ve observed that sellers want a premium, rent rates aren’t overly competitive, and you’re competing with larger commercial multi-family operators who have on-site managers, offer incentives, and are willing to discount to fill units.
I find that single-family houses are a better long-term, more stable investment. That’s my opinion. We appreciate you investing here in the city of Toledo, Ohio, and your trust in LaPlante Real Estate. Thank you.