Jordan,
I've lived in Richmond for a couple years but I grew up in neighboring El Cerrito. The cost for the exam is $95 plus $300 for licensing. You also have to get fingerprinted too which is a separate cost entirely.
To answer your other questions. Yes, an apartment building would be considered a multifamily property. I don't know what numbers Brandon was using in his blog post, but every market is different and it may be difficult to do what he was talking about in the bay area, or California for that matter.
Next, a "cap rate" (short for capitalization rate) is a term used to describe the rate of return an investor can expect from an income property. It is the amount of income you earn from a property divided by the value. So let's say you find a 6 unit apartment building in Antioch, and you buy it for 500,000. It makes 50,000 per year in gross rents.
Let's say in a typical year, after you deduct your property taxes, management fees, insurance, vacancies, repairs, maintenance, utilities, etc. from your gross you end up with 35K. That is your Net Operating Income, or NOI. Now divide your NOI by the price: 35000/500000 and you get a 7% capitalization rate. Not bad for the bay area.
Now 35,000 a year may seem good to you but we haven't even taken out mortgage expenses yet. You had to put 30% down and ended up getting a 350,000 loan on it. Let's say it is a 30 year commercial loan at 6.5%. That's $2,122 a month you owe to the bank.
So, you are bringing in 2,916 per month and you owe 2,122 a month, so that leaves you with $794 cash flow per month after mortgage expense. This is also a typical year, what about the years when it needs a new roof? What about the year you have to hire a lawyer to evict a difficult tenant who trashed the place? Some years you might make more some years you might make less. A lot of investors use a 50% rule, where they assume over time 50% of your gross income will go to expenses. This is often true, but not always.
So, how does $794 a month sound after you pay your debt off? Before you answer, remember….the bay area offers opportunities of increased rents, appreciation, and high occupancy. People often double and triple their money here just because values go up like crazy. Now other states, especially in the midwest and some parts of the south you can buy houses out there for 40K and rent them out for 800 per month. Wow talk about cash flow! Cap rates of 10,15, 20 percent are common in some areas. But wait, properties in these areas have their share of downsides: A 40K property might not go up in value much in the next 10 years, whereas in California a property you bought could double or more. The repair costs can eat you alive out of state. Also, the distance can be a problem for some. You have to find people on the ground you can trust, and you have to know the area. Lots of people have been burned.
Whether you buy property in California and make money more in appreciation and increasing rents, or you buy out of state and make more buying cheap and cash flowing well, often times you come out even in the end. Everyone has their own strategy, ask yourself what's most important to you about a property. Is it good tenants? Location? Cash flow? Don't focus on one thing too much, but analyze your wants and needs. Once you realize what your goals are it will be easier to find your niche.
