Investor 路 TN 路 Member since 2008 路 13 posts 路 3 votes
Hi BP Community,
I bought a duplex in 2009 in San Diego and have accumulated equity (on paper), but it has never cash flowed. I have since relocated to Georgia and I'm considering cashing out in San Diego to build a cash flow portfolio here. Business wise this seems to make sense.
Since I'm not living in the San Diego market, any advice or insight on making this type of move would be greatly appreciated.
@Jeff B. I refinance to remove money when I desire. I have one property (2 units) with such good rates that I cannot refinance without paying significantly worse interest rates but the rest of my properties are all at rates that are close to current rates. In addition I previously have looked at ELOC on my units and found there were a few places that do ELOC on investment properties (I did this research over a year ago but I suspect it is still true). So I take equity out of the properties as I desire. Normally I take cash out to purchase another property but recently I refinanced 7 units to take cash out just to have it ready for another property purchase (not yet identified).
So while I did not use a deposit slip my account currently has a lot of this vapor money that I can access for whatever I desire (I have been considering a Tesla with Ludicrous mode 馃榾).
@Account Closed I think your plan answers your question. I will add that few Properties cash flow in current San Diego market at 75% LTV 30 year (15 year is even harder to cash flow) especially after allocating for cap expense, maintenance, and vacancies. Multiplexes in select areas can cash flow regularly at 75% LTV (30 year) but not like other areas in the country. So Cal's great return on REI has been via appreciation and to a lesser degree rent appreciation.
Add difficulty of long distance management to your stated REI goals and I suggest you sell (even though I am pro on San Diego REI).
Dan Heuschele what you're saying makes perfect sense to me. I bought a property in Hawaii that isn't bringing in much cash flow, however, it has appreciated around 70-80k in the last 3 years. I'll take that any day over a property that's bringing in cash flow. You just have to look at the big picture sometimes.
Interesting, whereas my 6-units are cash flowing 49k each year. Guess I need to get my camera adjusted.
@J Beard That could be a good return (depending on amount invested). What numbers are you using for cap expense?
One thing to note about @Junior Mathews is I assume he was referring to a single unit. So on 6 units he would have made $420k to $480k in 3 years or $140k per year per unit (basically close to 3x your return). Of course neither of you indicated cost of property, cash put down (i.e. Initial investment), etc. I can state that in my example I have my full initial investment out of the property with significant equity remaining and it is about to cash flow using a cap expense of $500/month ($250 unit/month) and that is my worse performing property that I have owned greater than 3 years.
@Account Closed I would not try to advise you officially ( not enough info) but just some food for thought perhaps. I just got off the phone with my friend who has a triplex in Santa Monica. It is zoned for condos. He will likely do those condos and walk out with a million cashola plus one free and clear unit. It is all about exact location for San Diego as well. Since I don't know where that is IDK what the future has for this address. But if it is anything close to my friends, I am certainly not going to be the one to tell you to sell out now. Good luck!
@Matt R. I'm curious how hard it is in general to covert 2-8 unit type properties from multi family to condos, in Santa Monica or LA in general. In San Fran it's highly restricted, so yes, if you can make it happen its big $$$ bucks return. I suspect it's similar in Santa Monica, or else you wouldn't have that windfall. Any idea how it works there?
@Amit M. I have zero personal experience with it. I think if it is zoned for it then it is no problemo. For my friend, these are not unit conversions.... they are tear downs with new builds. Straight up conversions are probably much more difficult these days with parking requirements, guest parking etc....but apparently they still do those in a fairly quick fashion ( 12 months or less) if possible. I know of others in LA that are same as my friends in SM. They get the plans approved and away you go. There is a public hearing posted on the property for the neighbors to bring up concerns for LA still. From what I can tell it is all pretty cut and dry once zoned unless you are trying to go taller or wider or more units than what it was originally approved for.
So for existing buildings, you think some are in zoning for condos and some are not? In SF there is no distinction if it's apartments or condos, just unit count limit that is zoned.
Basically, I'm assuming that most apartment bldgs cannot be converted, because otherwise every apartment owner would want to do that- especially in places like Santa Monica. Even if you have to add parking, in SM the added cost may make sense. Less so for cheaper places.
Bottom line, I imagine it's very restricted in desireable locations, because many apartments would be converted, and limit rental availability. Especially politiclly liberal places like SF and SM want to retain "affordable rentals."
If anyone has more experience with this, chime in!
@Amit M. I am not totally sure. It might vary. For my Samo friend I think it was already zoned for condos. In SM I think if there is a certain number of units going in a percentage, 10%, must be set aside for affordable housing. West Hollywood I think is same. I don't know if LA has that but I don't think so on 25 units or less at least from what I have seen. LA seems to have started to favor land owners recently but this kind of ebbs and flows.