In my post “I Know You Have Questions”, I asked the readers of my site to send me questions or topics that they are just dying to ask or are confronted with often. John Gall asked: “If you could purchase only one property would you choose a 4 bedroom and skip 3 bedrooms or consider all looking for the best deal with the best cash flow or overall appreciation potential?” Actually John, I have two answers to that question:

My process always starts off with figuring out what neighborhood area I (or my customer) want to buy in and then what type of

property. With that information, I go onto the MLS and export anywhere from 40 to 400 properties into a spreadsheet (see and click at right) that I have designed to sort and filter the properties. The best property investments based upon both cash on cash return (appreciation potential) and cash flow sort to the top.

If I am wearing my financial hat only:
Once I have identified the top financial performers, then I review the MLS listings and pictures to quickly determine if this may be a property we want to see. If we see it and the condition, cash flow, and location are decent relative to the price, we buy it. We never talk about bedroom count.

Conversely, if I put my landlord hat on only:
I am mostly looking at the investment property features. In fact, I don’t own anything with 4 bedrooms and I prefer 1-2 bedroom units. I do have many 3 bedroom apartments and for whatever reason, those seem to be my biggest management nightmares. Without saying anything about the type of renters in the 3 bedrooms, it just seems like those units require more phone management time and more maintenance time. I have met some landlords that own 4 and 5 bedroom units and they agree that those size units take the most abuse (as you may have 4-10 people living in one apartment-legally).

Unfortunately, if you owned a 1-1 bedroom duplex or a 1-2 building it is not going to make as much (if any) cash flow compared to a 3-3 bedroom. I understand that, so most of my duplexes are 2-3 or even 3-3. In the Twin Cities, you are typically going to find 2-2, 2-3, or 3-3 bedroom buildings. If you go to Southern Minnesota, to somewhere like Hastings or Red Wing, you will only find 1-2 bedroom investment properties. Additionally, with rents anywhere from $900-$1100 for a 3 bedroom apartment in Minneapolis, those units are my biggest concerns when rent comes due and when leasing.

At the end of the day, it is really a matter of personal preference. While analyzing the numbers is critical to your success, if you are not comfortable with the property or area, you should not buy it.