An analysis of investment property size and number

There are numerous differences regarding the ownership and management of many small properties vs. a few large properties (e.g., 10 single-family and 5 duplexes or one 20-unit building) that one should consider. Some of the important differences between ownership and management are summarized in the table below. Pros and cons are generalities and do not apply to all properties or all the time

Many Small		Few Large
Pro	Con	Pro	Con
More affordable per property - can build inventory over time	More travel for inspections and maintenance	Less travel for inspections and maintenance	Higher priced per property - requires more cash to start
Easier to finance	Greater variety of repair parts, fixtures, appliances, etc.	More commonality of parts, fixtures, appliances, etc.	Harder to finance
Allows diversification of type and location	May required multiple documentation formats	Common documentation	Puts your "eggs in fewer baskets"
x	Higher operating costs per unit, including insurance	Lower operating costs per unit, including insurance	x
x	More bookkeeping & income tax return preparation	Simpler bookkeeping & income tax return prep	x
x	Higher cost for outside management	Lower cost for outside management	x
xx	Many states do not allow a tenant of one property to be involved in management of another	Possible help from a "resident manager"	x

Although the above table indicates that a few large properties would always be preferable to many small properties, such is not necessarily the case. Specific pros of smaller properties could, under certain circumstances, be more important than the cons. For example, diversification could be the primary consideration if one were concerned about the future economic future of the area. More importantly, a beginning investor will not usually be able to start with large properties.

For detailed discussions of the above differences and others, click here to go to RHOL Member Webs.

Many Small vs. Few Large

What type of investment property do you want to own?

Many Small

Few Large