The fine folks at Dupre+Scott are demystifying vacancy rates this past week. My takeaway from the info they’ve been sharing lately? Smaller units are a better investment than larger one (aka, for multifamily go 1-bedroom, not 3-bedroom). Of course, I’m sometimes accused of oversimplifying things. Check out the video (always entertaining):
Patagonia Vs. Apartments from Dupre + Scott Apartment Advisors on Vimeo.
Check out the article that goes with the video at the Dupre + Scott blog http://www.duprescott.com/productsservices/articleinfo.cfm?ArticleId=613
Sir:
Your conclusion about Studio vs 3 Bdroom is missing the maintenance costs to come up with a NET income. Having been in the business for over 35 years, I can tell you that studio turn-over is much higher than in 2 Bdrm units. As a result the administrative and maintenance costs are higher and so: YES your story is over simplified.
H Straub
STRAUB PROPERTIES
Hi Henrik,
You make a great point. I suspect there is a ‘sweet spot’ where the profits and expenses result in the highest net income. I’d venture a guess that somewhere in the 1-2 bedroom range is that spot, so that turnover is lower while taking advantage of the higher PSF rents of the smaller units. That probably explains why we tend to see so many more 2 bedroom units than 3 bedroom units.