All Forum Posts by: Tom Kn

The standard method appraisers use for determining construction costs (and feasibility) is to use Marshal Valuation Service cost manuals, adjust for the multipliers, add estimated development fees, site costs, sales commissions ect.

I'm in a similar boat. In my neck of the woods, bay area, it's nearly impossible to cash flow without significant down payments. I'm looking elsewhere and am researching cash-flowing properties out of state.

I'm 25 yrs old, have around a 100k to invest, and live in the Bay Area. I also am a commercial real estate appraiser so I have a good understanding of valuation of all sorts of commercial properties. I also am expecting a steady increase in salary as I become more experienced in my field, so far I've been appraising one year. I have good credit and plan to invest sometime next year, probably 6-12 months from now.

My question is: If you were in my situation, how would you get started? My market is so overpriced that duplexes and smaller multifamily properties sell at 3-5% capitalization rates and positive cash flow is not possible. I think it makes more sense to rent than buy in my market at the time being. I have family in Florida (central east coast) and would like to invest there. I could possibly have my father be a handyman and property manager while I'm 3,000 miles away.

I realize that there are many different options and paths to begin rei. I am considering buying an apartment building that cash flows and expanding from there. I would consider retail or office space as well. I would appreciate some ideas and input.

Thanks for the responses.

You make some great points Ryan. It seems my market is overpriced and it is very hard to get pos. cash flow. On the other hand, if I choose to buy a single-fam or condo I will be paying the mortage solo. Maybe renting is the best option in my overpriced market where rents have not kept up with values. I still am hoping to find a feasible deal with partial owner occupancy and renting the other units to help pay the mortgage. Why is it that investors are willing to buy negative cash flows? Appreciation, I guess.

I see a duplex with $2,200/mo. gross income with an asking price of $600,000. Is this a viable alternative to buying a $300,000 studio condo?

I'm 25 and entering the market as an investor and as a first time home buyer. In my market, positive cash flow on multi-family 1-4 units requires significant $ down. I'm considering buying a duplex, triplex or four-plex and live in one unit and rent the others. I'm still researching and crunching numbers. Does it ever make sense to buy a property with negative cash flow? I don't expect much appreciation over the next five years.

Hypothetical scenario:

Duplex-
price:$450,000
unit-1:$1,200 per month
unit-2:owner occupied
down:$90,000 (20%)
mortgage:~$370,000 5.75%, 30YRS, FIXED
Monthly Payments:$2,160
Monthly expenses:$573

Total mo. cost: $2,160-$1,200+573=$1,533

Principal and tax savings: $975

Net mo. cost: $558

Does this make sense to you guys?

Also, do you recommend starting out in duplexes as owner occupied?