You and I have talked before about the pros and cons of management-intensive high margin investments (duplexes/4plexes) versus homes with lower cash flow but which attract better quality, lower hassle tenants.

The vacancy issue with small commercial is a similar sort of “choose your poison” Catch-22. Cash flow is great but the vacancy is terrible.

But I have to say, as much as I don’t like vacancy, and as costly as it can be when it’s happening, it’s more tolerable to me than dealing with a succession of lousy tenants, evictions and maintenance headaches. I don’t have any of those issues with the small commercial, just the vacancy problem when it happens.

Steve

My small commercial building was vacant for six months and that hurt. But now that it is leased, it is on auto-pilot for 3-5 years, and it’s great.

The residential properties have less overall vacancy, but they turnover about once every 1.5 years, on average.

I think small residential may actually be less attractive of an investment when factoring in expensive leasing commissions, inevitable maintenance costs, and the fact that I need a property manager to deal with the headaches of a 24/7-lived property.

My current thinking is that mid-sized multifamily might be better than both of these options. You get economies of scale with management expenses, and the price per door is less than with duplexes.

The key is getting a low enough price to guarantee positive cash flow after all expenses. From what I see and hear – this cannot yet be accomplished in Austin at the current still-high prices. There haven’t been many distressed sales in this category, either, because more renters are in the marketplace.

I might be wrong, but 78704 or 78745 multifamily, if purchased at the right price, may be the best investment out there right now. That’s what I am looking for, anyway.