Analyzing Rental Payment Risk: 1 Bedroom Dominant vs 2 Bedroom Dominant Properties

For this example, we're going to look at the property from a perspective in a way that no one that I know of looks at them. Instead of looking at the property based on common metrics, we'll look at it based on the number of income earners of the tenant base.

Example of two comparable 150 units deals in close proximity.

Deal 1:

This property has a unit mix of 120 two bdr units and 30 one bdr units.

Deal 2:

This property has 120 two bdr units and 30 one bdr units.

Which deal would likely be more stable?

In my opinion, it would be deal 2. This is because in general, those two bedroom units will often have two income earners. If one person loses a job, etc. the rent for the unit can still be paid, even if the tenants have to struggle to do it temporarily.

If a one bedroom unit has only a single income earner and they lose their job, etc. they won't be able to pay rent at all.

Conclusion:

It would be my strong preference to buy deal 2 over deal 1. Even if the projected returns on deal 1 were better, deal 1 would have more rental payment risk from the tenants.