2 story 12-plex versus 3 story 16 plex? FLOOR PLANS?

[Casey Marley]

I am some what new to real estate investing. I currently have a 4-plex and a house I am renting out. I am wanting to expand my real estate in the near future and looking for my best options. Would you guys recommend investing into multiple smaller multi-family buildings (4, 8, or 12 plexes) or consolidating units into one 16-20plex building? My thoughts would be that I get better Cash return on purchased price if I were to purchase a single larger unit complex. Although buliding a 3 story complex would require sprinklers systems, multiple exits, and most likely more code regulations.

Also, does anyone have a good website that offers floor plans for 12-20 plexes?

[Paul Choi]

The cost of building these days is extremely expensive.  you have to look at what it costs for the hard and soft costs (plans/permits/engineering and materials/labor) plus the cost of the land.  It will probably be more expensive per square foot and per unit than buying existing.  China and India are gobbling up alot of construction materials, pushing prices up and with low unemployment, contractors are charging higher rates.  All ingredients for higher price per square foot when building new.

When deciding whether to buy an existing 4 unit, 12, 16, 20 or whatever, break it down to the unit level.  How much can the unit be bought for ($40k/unit, $90k/unit, etc.).  Figure out the average monthly rent for that unit, take out 35-40% in expenses, then subtract out debt and that's your cash flow.

Then calculate the total cash flow annually for that property and plug in your downpay cash in and initial rehab done if any and you will get your cash on cash roi.  This is simple watered down way to do it but at least it gives you a idea quickly on the profitability of the asset.