Would love to hear a podcast about investing in San Francisco

[Arthur E.]

San Francisco is definitely a very unique market.  I'd love to hear the podcast have someone on that can speak about doing buy and hold in SF.  Does anyone else agree?

[Account Closed]

@Account Closed, why being so modest? I still have a lot to learn from the newbies as well as the veterans. Newbies may not think they have much to offer. What they may not realize is that sometimes their questions will trigger an idea to us.

Arthur, I invest in San Jose, not San Francisco. Just like anything in life, you're new at one point, but if you're willing to hone your skills, you will master it. Once you have mastered your trade, don't stop learning. As my dad normally preaches to us "Learn from your victory. proper from your failure." Don't be arrogant when you win. Don't give up when we fail. Every failure is a step closer to success. 

We human tend to take the path of least resistance. It's too easy to say our market is too expensive and take our money out of state. We want instant gratification. When we do that, we run into unexpected results that we weren't prepared to deal with. As Master always said "one often meets his destiny on the road he takes to avoid it."

You are living in one of the most lucrative and profitable markets without realizing it. If you're willing to spend the time and effort to figure it out, you will be rewarded beyond your imagination. As Albert Einstein once said "It's not that I'm smart. It's just that I stay with problems longer."

We are in the process of doing a cash-out refinance to pay-off our bridge loan on an acquisition we made this May.  Here is what our loan officer wrote to his underwriting manager. 

"If we apply the same underwriting that I applied to my loan sizer but use the rents that were in place at time of acquisition, the purchase was made at a 3.7% cap rate. This is well below the cap rates on the market indicators for 95112 which is generally the case when a building has significant upside. The lowest cap rate on the market indicators report is 4.04%. At the requested loan amount we’re raising the cap rate 130bps and still supporting the proposed refinance value of $1.335MM which supports the loan amount of $1MM at 75%. Further, if we applied market rents to the proposed value of $1.335MM the cap rate is 6.4%, even after adjusting taxes to appraised value, which is more than 80bps higher the highest cap rate on the market indicators for that zip."

As you can see, my partner and I bought this propert at a 3.7% cap rate and brought it to 5% within 3 months. As much as our loan officer believes it has a 6.4% cap rate once stabilized, his "estimated market rents" are still $300/month/unit below what the market will bear.  This means the actual cap rate is north of 6.4%. The reason we are doing a cash-out refi now instead of waiting for another 12 months to get even more cash-out after the next rent increase is because of the interest rate risk. A bird in hand is worth more than two in a bush wouldn't you agree?  :>)

I like to compare out investment strategy with hockey: "A good player goes where the puck is while a great player goes where the puck will be." We know what we want. We don't have to get paid now. However, we will get paid much much more in the very near future. Our force appreciation play will blow out of state cash-flow out of the water by a mile. 100% ROI within 2-3 years is quite easy to achieve with minimal efforts. That's why I have so much time to spend on BP. :>)

Best of luck.