All Forum Posts by: Clay W.

I would like to find out a more specific definition / classification of what exactly constitutes a multi-family dwelling.

The terms dup-lex, trip-lex, quad-plex, 5-unit +, apartments, etc. seem to wear many different coats.

For example, I would see a building like this and when I search on the county's zoning map it would be defined along the lines of a "low-rise" apartment:

I see many small units combined into one single building with various access points.

However, I also see other locations / neighborhoods that are filled with only SFR's and straight-forward duplexes. I look at the zoning map and the lots for these properties will stipulate that they are classified as "single-family residences" *6-8 units per acre. *I don't know if this means that one could develop 6-8 units on a parcel that would other have a SFR on it*

Then, I have seen parcels in the same neighborhoods that were developed many years ago and they will have multiple single-level "cottage"-like 1 bd/1 ba rentals on one lot (*all detached). There might be six + units on one lot yet the parcel definition will say "single-family residence" as well.

So would these also be considered multi-family? Do multi-family units/ parcels / zones mean that units must be somehow attached?

~Clayton

Agreed, Will. Well noted.

-Clayton

This is very interesting and the type of info I was looking for. I've seen many different approaches to valuation in terms of time - (some look at an office building in terms of the next five years of cash-flow, or maybe 10 years, for example, etc. etc...)

So you're saying that for residential investments, investors like to envision the immediate 15-years of expenses/capex on average - as a basis?

Thanks, indeed, for the replies - (*this forum is sure a great medium...*)
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To recap and further clarify on the issue of trying to value a property that has a multitude of deficiencies (high current vacancy, repairs, etc.):

Let's assume that the subject property is, indeed, a multi-family apartment complex. And all else being equal, it is the "highest+best use" for the structure/property going into the future.

If we are performing due-diligence and trying to account for bringing the property "up-to-par," how would you approach items/issues that might be further down the road. For example, upon reviewing the property and adjusting for Will's example of the need to place 40% with new tenants, we find out that there will need to be new water heaters replaced in three years. Perhaps there also needs to be a new roof, but not for six or seven years down the road. The seller might tell you that every roof needs to be replaced "down the road" as do water heaters and given this, he doesn't see the need to offer a "discount" for future repairs/capex.

So, other than discounting the typical needs of stabilizing a property from the beginning and unless something significant (like a roof, etc.) needs to be repaired/replaced pretty much at the time of ownership change, how far into the future is necessary to calculate on a pro-forma and to evidence a seller about its significance?

Touching on this topic of a MFR that has less than 100% occupancy:

If one is trying to value a commercial / MFR property and there is a fraction of full-occupancy (71% in this example)... how does one go about valuing a purchase price? I know that the overall NOI has most to do with it, but let's say there was 0% occupancy (such as a small retail commercial building with no current tenant ... - would one then value the property simply based on its "replacement costs" + "land" ?

In this case with a MFR with 71% occupancy, what would be the way to come up with a value - (all else being equal?)

Hi everyone, I am new to this forum and so far it has provided me with a ton of great info. I wanted to touch on this post and also had a question:

I am thinking about "slowly" getting into real estate for investment purposes by starting small. My family has done very well with RE of the last decades, but we have never focused on what the current market (last few years) seems to be - i.e. trying to buy/flip/hold lower-end housing at fire-sale prices. We prefer to increase real value in properties and not to simply throw in the "granite slab" counters from HD to scalp a few grand from a flip.

Given the other articles posted here and the fact that so many of the properties these days are receiving tens of offers, would you all say that this is geared toward this particular market segment in general? In other words, if I chose to stay away from the lion-pit of <$200k properties and wanted to look more at 3/4 plexes in Northern Calif (Sacramento), do you think that the market may be a little less "crowded" and perhaps financing deals might be more accepted?

~Thanks