Cost Model
Back to Home. See also Decision Calculator, 6 Percent Cap Test, Investment Analysis, Amir's Initial Renovation Budget, Rent Comps.
Purpose
This note keeps the cost assumptions aligned with the calculator. Numbers are working diligence ranges, not bids. The main rule is simple: judge the deal on total basis, not purchase price alone.
total basis = purchase price + closing costs + renovation/furnishings + building/startup reserves
Purchase price and tax frame
Current decision range: $2.0M to $3.495M.
Purchase price
Price / unit
Price / building SF
Rough annual taxes at 1.25%
Monthly taxes at 1.25%
$2,000,000
$250,000
~$346
$25,000
$2,083
$2,250,000
$281,250
~$389
$28,125
$2,344
$2,500,000
$312,500
~$432
$31,250
$2,604
$2,750,000
$343,750
~$475
$34,375
$2,865
$3,000,000
$375,000
~$518
$37,500
$3,125
$3,250,000
$406,250
~$562
$40,625
$3,385
$3,495,000
$436,875
~$604
$43,688
$3,641
Exact assessment and tax treatment must be verified. Closing costs, lender fees, inspections, title/escrow, counsel, and accounting are separate from the tax line.
Budget strategies
These match the calculator categories. The point is to separate a real family execution edge from wishful underbudgeting.
Strategy
Total budget
What it assumes
Amir's $250k work-budget question
$250k
Answers Amir's question only; not a full recommended budget because it excludes furnishings, startup/carry, legal, systems reserve, and exterior/common-area work unless those are somehow already covered
Barebones owner-sourced / DIY add-ons
~$320k
Very tight owner-sourced path: light unit work plus limited furnishings, exterior, diligence, systems reserve, startup, and contingency
Owner-sourced fuller budget
~$465k
More complete version of the family-sourcing/DIY idea; lower than market-rate professional execution, but not the lowest-cost case
Lean professional + smart sourcing
~$735k
Most work hired out, but with active sourcing and bid discipline
Standard market-rate repositioning
~$1.14M
Normal professional pricing for units, furnishings, common areas, systems reserve, and contingency
Premium / safe / everything hired out
~$1.73M
Higher finish, larger systems reserve, more professionalized execution
Editable line items live in Decision Calculator.
Current budget categories
Category
Why it needs its own line
Unit refresh / renovation
Paint, floors, kitchens, baths, fixtures, doors, hardware, windows/window treatments
Furniture, housewares, decor
Beds, mattresses, sofas, tables, TVs, linens, kitchenware, small appliances, art
Exterior, landscaping, planters, curb appeal
A sourced/DIY advantage may be real here, but it still needs a budget
Legal, RSO counsel, inspections, permits
Must not be squeezed to make the model work
Building systems reserve
Roof, plumbing, electrical, HVAC, drainage, sewer, seismic/fire/life-safety
Startup, utilities, insurance, carry
Vacancy, launch period, insurance, utility setup, first turns, initial supplies
Contingency
Required because hidden multifamily costs are likely
Initial renovation floor
The initial renovation budget suggests a narrow cosmetic floor of roughly $15k–$22k per unit, or $120k–$176k for 8 units. That is useful for understanding a light-refresh path, but it isn't a full underwriting budget.
Missing or likely undercounted items include:
- Furniture and housewares.
- Common areas and exterior.
- Building systems.
- Permit-required work.
- Legal/RSO counsel.
- Insurance and utility setup.
- Carry cost during vacancy/renovation.
- Contingency.
Total basis examples
Assuming 2% closing/acquisition cost:
Purchase price
Amir $250k question
Barebones owner-sourced
Owner-sourced fuller
Lean professional
Standard
Premium
$2,000,000
~$2.29M
~$2.36M
~$2.51M
~$2.78M
~$3.18M
~$3.77M
$2,500,000
~$2.80M
~$2.87M
~$3.02M
~$3.29M
~$3.69M
~$4.28M
$3,000,000
~$3.31M
~$3.38M
~$3.53M
~$3.80M
~$4.20M
~$4.79M
$3,495,000
~$3.81M
~$3.88M
~$4.03M
~$4.30M
~$4.70M
~$5.29M
This is why the acquisition price can't be evaluated alone. A listed-price purchase with standard costs can behave like a $4.7M deal before financing.
Recurring operating-cost checklist
Property tax
Confirm current tax bill and reassessed estimate
Insurance
Get quote before waiving contingencies
Water/sewer/trash
Request trailing 12 months; decide owner-paid vs tenant-paid policy
Electric/gas
Confirm metering; furnished product may need owner-paid utility caps
Internet
Price building-wide or per-unit service
Repairs/maintenance
Model higher wear than annual leases
Furniture/housewares reserve
Create a per-unit replacement schedule
Cleaning/turnover
Monthly turns require quality control
Management/admin
Price actual operator time or third-party management
Vacancy
Model gaps between monthly occupants
Legal/compliance
RSO notices, lease updates, LAHD/SCEP, disputes
Rough annual expense framework
For early underwriting, stress-test each rent scenario with:
- Vacancy: 8%–12% of gross rent.
- Management/admin: 8%–10% of gross rent, even if self-managed.
- Repairs/maintenance: 5%–8% of gross rent.
- CapEx/furniture reserve: 5%–8% of gross rent.
- Insurance placeholder: $35k–$60k/year until quoted.
- Utilities/internet placeholder: $44k–$84k/year if included.
- Cleaning/turnover/supplies placeholder: $12k–$25k/year.
- Legal/accounting/compliance placeholder: $8k–$20k/year.
Contractor bid structure to request
Ask contractors to separate:
- Per-unit cosmetic scope.
- Kitchen/bath scope.
- Flooring/paint/doors/hardware/window treatments.
- Electrical/plumbing/HVAC must-do work.
- Roof/drainage/sewer/fire/life-safety issues.
- Common areas and exterior.
- Laundry/mail/trash/access/security.
- Permit-required work vs non-permit work.
- Contingency and schedule.
- Unit-by-unit phasing and carry cost.
Don't accept one blended number without scope detail.