Skip Single-Family? Why You Don’t Need to Start Small

Henry Washington (0:00)

Most people will say, start small in real estate, buy a single family home or a duplex, learn the ropes and build your portfolio slowly as you gain confidence and capital. But, say your goal is to reach 16 units someday, and now there's a 16-unit building staring you right in the face. You've got the down payment money, so should you take it down for your very first deal, or should you start small? You could fast forward years of buying houses one by one, but one bad deal this size could totally wipe you out. I'm debating this question and a few others today with a special guest co-host. Is jumping right into a big investment property a smart way to accelerate your wealth building journey? Or is it a recipe for losing everything before you get started? And, spoiler alert, we actually disagree on the answer. So, if you're figuring out where to start your own investing career, stick around, we'll break down both sides and help you decide whether it's slow and steady, or going all in is right for you.

What's going on, everybody? I am Henry Washington, co-host of the BiggerPockets Podcast. Today, we're answering questions from the BiggerPockets Forums. I usually answer these questions with Dave, but he's out of the office today. But don't worry, I brought in a special guest. Now, you've probably heard Chauncey's full investor story. She was interviewed on episode 1256 back in March. But for anyone who missed that one, Chauncey, why don't you give the people a little introduction? Yes, yes, yes.

Chauncey Pham (1:34)

So Chauncey Pham started out as a realtor in the Dallas-Fort Worth Metroplex, quickly went to owning my own brokerage, and then progressed into becoming an investor. So I coined myself as the investor-friendly realtor, where I understand the investment side of things, as well as the retail real estate side of things.

Currently, I am working primarily as an operator of a turnkey flipping service, where I'm flipping houses for others. I've removed the financial exposure of the typical acquisition side of things, and I'm helping others achieve their financial goals through house flipping.

Henry Washington (2:11)

I love it. You're being a little modest, but let everybody know about how long you've been in this business.

Chauncey Pham (2:17)

I've been in the business for almost 11 years at this point. I've learned a little bit of this, a little bit of that, and right now, I'm using all of it and leveraging all of it to live this beautiful life.

Henry Washington (2:28)

If you can't tell already, Chauncey is a rock star. She has been doing real estate for quite some time, has been extremely successful, so I'm super excited to hear your perspective on some of these questions. Hopefully, I can get you a little riled up, get you going a little bit.

Chauncey Pham (2:43)

Yes, yes.

Henry Washington (2:44)

All right. Our first question is from Nikesh in Charlotte, and he asked, I've seen the general trend where investors invest in single-family homes and then they consolidate to multi-family eventually. I can possibly afford to buy a quadplex or even larger. I've seen some 16 unit properties for sale in my area in Charlotte and I have a down payment that I could use to buy potentially.

But I feel like I'm skipping ahead and taking a shortcut. Is it a terrible idea to go straight into a larger property, or should I start with single-family homes? Now, I definitely have a perspective on this, but I'm curious to know kind of what you think as an event. Have you done multi-family as a rentals?

Chauncey Pham (3:23)

Yeah, we have a small multi-family. I was an eight unit out in East Texas. I have an opinion on this, not necessarily probably as strong as yours. But I tend to think that this whole crawl before you walk, walk before you run mentality is group think in these forum settings, primarily from people that can't run first.

They can't run, like they can't sprint. So of course, they're going to tell you to crawl and to walk first. I think that if you have the opportunity, you have the funds and you understand the risk involved with the acquisition of a 16 unit, then if you got the resources and do it, you're able to do an acquisition of 16 doors in one shot, one inspection, get exposure to a commercial loan product, and really get yourself out there without having to go through 16 single-family homes just to build that many doors. So I personally think if you got it, do it.

Henry Washington (4:29)

My perspective is you can make money in real estate a million different ways. You don't have to start with a single. But I do believe if you're brand new, never done a deal, haven't spent a lot of time researching, don't have friends or family or business partners who are in the business, just coming in out of the cold and buying a 16 unit is risky. It's risky because a lot could go wrong. You can blow your budget. Like if you've never done a deal, it's sometimes best to take your bumps and bruises on a single-family home where you're not gonna lose your shirt. But I don't think you need to spend years buying single families and then start to transition. Like if you just want to do one single, learn the business, learn what you're good at, learn what you're not good at, and then you want to jump into a multi-family, I think that may be a safer take. Or try to find a partner or a mentor or someone who's going to help you get eyes on your deals, help you with decisions you've probably never had to make before, help you understand how to find the right tenants, how to manage that size of a renovation.