Some questions about podcast #4 with Frank Gallinelli

[Lucas Mills]

In this podcast, Frank says the following:

"People don’t buy a single family house or even a duplex for its ability to produce income. They buy it as a place to live and maybe they get some income besides. But people buy the larger properties, the five and greater, for their ability to produce income."

It seems to me that a popular strategy of BP members is "house hacking" or, buying a 2-4 multifamily property, living in one unit, and renting the others. To me, this seems like an obvious choice to make if you are currently paying rent (why not move out and get your tenants to pay rent for you?). Additionally, I know that people work from there, continuing to buy and rent multifamily properties with great success. So, I was wondering what forum members think of this statement by Frank, or perhaps I'm misinterpreting it?

Furthermore, Frank said this:

"In forty years of dealing with real estate investors and ten years of dealing with grad students who are learning this sort of thing I think I find the one issue they have the hardest time wrapping their head around is the notion that a property, if it’s a true income producing property, its value is based on its income stream, not on comparable sales."

How do I determine the income stream of a property?

[Frank Gallinelli]

from the horse's mouth...

@Lucas Mills

Q1: I should have opted for clarity instead of sound bite. What I meant is that one will usually buy a 2-4 family property at a price that is based on comparable sales (similar to single family) rather than being based on the value of the income stream (specifically, the NOI).

Q2: I've also spent those same 40 years writing and teaching about that topic. If I get too specific (and rhapsodic) here about that and about my CV, I'll probably end up breaking forum rules against self-promotion. But feel free to contact me directly if you're so inclined.

Best,

Frank