Hey @Darren Redfearn, be weary of this one - it may sound good from the surface to get a reliable tenant in there for the long-term, but they're usually looking for a discount and perhaps wouldn't be strong enough on their own if they had the same variable as everyone else.

Contingency costs become even more costly.Check your local department of buildings to see what other project permits have been filed lately and where they are located in relation to where you're looking to develop.These are obviously all generalities and every project has it's own variables that sway the decision to develop based on asset class, size, location, etc., etc. 

HELOCs are more expensive and can have variable interest rates over long durations.Not doubting your friend but building a 2000 sqft home for 100k is pushing it.

@Gabriel Martinez  A HELOC/Line of Credit is a variable interest rate...which means your payment could become higher after a while.

John,What exactly are you looking for because UW guide lines for multi-family vary depending on variables.Primary home, Investment, Loan size, Number of units, FHA or VA for primary, Conv or Non/Qm for investment.The list can become extensive if certain variables are added like closing in an LLC, or Trust, Co-Borrowers, Gift funds etc.

Some were commercial with variable rates and calls. 2 were seller financed with older sellers that had drama in the family. 

Purchase cost escrow etc,hard money or loan origination fees/pointsproperty taxesclosing escrow, title/ any local taxesany realtor fees and then all the variable/controllable cost & taxes on your profits 

Second mortgage (fixed rate) or HELOC (variable rate)

While the Airbnb income is variable it is still considered when determining cash flow.

It 'might' work, however, as an owner finance play, where all the fun 'variables' of the deal get transferred to your buyer, but I never really investigated that or pursued that any further.