All Forum Posts by: Jason Porto

Currently I'm analyzing numerous potential multi-family properties (duplex, triplex, 4-plex) and want to make sure I'm estimating my expenses correctly. The only reason I'm looking at multi-family is so I can house-hack and live in one of the units, which means that I will have one fewer unit to collect rent from. Since most of the expense estimates are derived as a percentage of the monthly income, I'm curious how others handle this. Do you A) consider the potential monthly rent that would be collected should all units be rented, or B) cut yourself out of the equation and only count on actual rent that you will be receiving from the other units? Am I overestimating in the first scenario, or underestimating in the second? Personally, the first scenario makes more sense to me since I am still living there are making use of the space which will cause things to degrade or break and need upkeep and repair. But, let me know your thoughts.

Kyle, That's an interesting take that I hadn't thought of before but really good to know. Out of curiosity, where is property and what is your occupancy rate?

I'm analyzing a property two different ways to understand the differences between renting out a property to a long-term tenant as opposed to renting it out on a short-term basis on AirBnb. I'm particularly interested in variable expenses such as maintenance and CapEx. Let's say I can rent it out for $1,500 per month for a long term tenant vs pulling in $3,000 per month on AirBnb. In this scenario, if I set aside 10% of the rental income for maintenance, and 10% for CapEx, I will be saving twice as much for each if I go the AirBnb route as I would for the long-term rental route. But, it's the same house right? Will I really be spending twice as much on maintenance and CapEx just because I'm renting it out on AirBnb? It makes sense that the vacancy and management fees will differ, but I'm less sure that maintenance and CapEx will. Does anybody have experience with this? Do houses rented on AirBnb have more maintenance and CapEx costs than one with a long-term tenant?

Olaseni, Thanks for your response. Just to clarify, you are assuming that you as the tenant would be paying $0 in rent and be living for free right? But, what if the numbers don't work out and you are OK putting $500 into unit per month? After all, if I'm currently paying $1700 per month for my apartment, I have that amount as a buffer and could pay that monthly as "rent" and feel good. If I try to live for free in my market then there's no way the deal works out, at least no deal that I've analyzed. If the deal doesn't cash flow if I try to live for free, is a willingness to pony up some money at the end of the month and consider it a "rent" payment a fools errand? 

When analyzing a multi-plex for an owner-occupied situation, how do people account for your (the owner) slice of the rental income? Do you:

A) Consider yourself a "renter" for the purposes of the monthly rental income and include a reasonable amount of rent for your unit. While you wouldn't assume this "rent" as an expense for the purposes of the analysis, you would still assume that you are paying this rent at the end of the month. This doesn't mean that you live for free, but the smaller you can make this portion the better, as long as the numbers still work.  

B) Include $0 for yourself because living for free is a nice perk if you can make it work. The trouble I'm finding is that this never works because leaving one full unit empty rent-wise just isn't feasible.

C) Exclude yourself from the rental income, but then account for it at the end and assume that you will make up any negative cash flow as your portion of the rent. For example, I live in an apartment and pay about $1700/month. If my multi-plex analysis has a negative cash flow of $1700 or less then it seems like this would be a good deal for me because I can easily cover that overage.

D) Something else altogether.

Let me know your thoughts and how you approach analyzing multi-plex deals, Also let me know if any of these options have fatal flaws or if they just need to be tweaked a tad. Thanks.

Structural Engineer. Seeing as how so many people have the guts to jump into a rehab with very little knowledge of construction, I'm hoping I can put my background to good use once I find a good property. And the nerdiness with numbers never hurts when analyzing deals.

Brian,

When you say that Oakland is a good market for multi-family properties, do you mean 4 units and under or 5 and greater? I've been looking around for a du/tri/quad-plex and just can't seem to get the numbers to pencil out. The vast majority of the time they come out with negative cash flow which seems to be a non-starter to me. It seems like there should be some bump when I include myself as a tenant, but that essentially takes one of the income streams and I never seem to get much benefit from the multi-family over a single family. Are there are areas of Oakland with a higher proportion of these properties where I should be looking?