I'm actually in the exact same boat as I'm looking at 5+ units in the Bay Area and still in the early stages.Regarding it being too simple - I think this perspective is a great one on the forced appreciation model within a seller's market: Trust that there are others who are trying to do exactly what you are, and that gets factored into people bidding up the purchase price and the compressed cap rates.

Realize cap expense items are very costly.  

With a condo, you will have little cap ex, and other maintenance issues, as that will often be covered by an HOA. 

Previous owner paid some of utilities for tenants up to a cap so they definitely ran it up.

This would reduce his taxes and give him a steady income to live off for the rest of his life.Time to pull out your thinking cap and see if there's a win-win for all parties.

As investors we want a house with low cap ex, maintenance issues so our return is good over the years.  

What kind of cap rates are you seeing in the multifamily space?

The downside here being the unit is on a busy two-way road, close to two major junctions where commuters regularly drive through on their way to manhattan.Assuming the most conservative rental numbers and the worst-case capex expenses, I'd be at a 5% cap rate and a negative cash flow of around $ - 500/month at this price.

The reason for the sale was prices had peaked, but the main reason was the net yield (cap rate) was lower than what I could get in financial markets.

DSCR usually caps at 65%, but other sources might be able to do more.