All Forum Posts by: Andrew Jones

House hacking is great, but one thing you must keep in mind is that you are living next to your tenant(s).  Their cooking, their TV shows, their romantic proclivities...you are going to hear, see and smell a lot of it.  You can't just evict someone because they eat curry every night, but you are under no obligation to renew their lease if you'd prefer a new neighbor.  You can always swap tenants and go to a longer lease if you move into a new property.  Just my two cents...

Before I throw in my two cents I want to recap my favorite take aways up to this point:

@Matthew Olszak said paying the rent early isn't a plus; paying rent on time is a bare minimum of the lease.

@Michaela G. brought up that your tenant pool depends on the quality of the property and neighborhood, but it sounds like it's a nice, single family area.

I just non-renewed a problem tenant that I inherited with the property.  It really isn't his fault he was a crappy tenant, it was mine and the previous landlord's.  He was never trained on how to be a good tenant and, by the time I got there, he was fairly convinced it was his place and nobody was going to tell him how many cats he could have (six...the answer was six).  If you are in a hot market do not renew this guy's lease.  If you think you'll miss multiple months AND you are confident you can re-train this tenant consider keeping him but making him sign an addendum on the month to month agreement.  For one have him get a renters insurance policy and name you as an additional insured.  This will give you $100k+ of liability coverage if he screws up again.

I'm with @Gordon Starr on this one.  People will always need housing, it's just a matter of where millennials are choosing to go.  Many of them are renting in urban areas...maybe this will change, but suburban McMansions are being shunned with this crowd but (anecdotal example coming) that's all I'm seeing be built here in Sacramento county.  Once the boomers move into care facilities (being built like gangbusters out here too) or die there will be a glut of zero lot line homes on the market.

When will this day come though?  My ham fisted guess is 2028.  Average age of death is currently 78.7 years and the baby boomers range from 1946-1964.  This group is (on average) grossly underfunded for long term care needs so I'm betting these homes will have a lot of deferred maintenance as the owner's retirement dollars are siphoned off to medical and paramedical services.  Cheery stuff huh?  Who knows though...maybe immigration will loosen up, birthrates spike from the boom we're seeing, any number of things could happen to keep values high.  Buy for cash flow and make sure there's something keeping the area hopping (a good college, multiple large employers, government agencies, etc) and the rest should work out. 

@David S. It really depends on what your budget is.  If sky is the limit I'd focus on downtown/midtown...really anything on the grid.  If you're on a budget I'd consider the old part of Elk Grove or Oak park (for our purposes Oak Park = Oakland...nice downtown, near the grid, but still a long way to go).

Not familiar with Costa Hawkins, but Sac Business Journal and other local publications interview county decision makers who, at least publicly, say rent control is not a likely option.  It could happen long term, but the issue isn't pricing as much as it is lack of housing.  There was a long period where no new affordable housing (at least not on a significant scale) has been built.  The mayor mentioned wanting to add 7,500 new affordable units over the next X years (keeps changing) and wants investor feedback on how to make that happen.  Infill projects are big right now.

@Anthony Gayden per my original statement: "To clarify...not that the area he invested in is garbage, but the investments he's proud of have objectively under performed, and when you're that far away sweat equity is off the table."  I am not wrapping up the entire midwest, but you need to know the area to make a smart purchase.  My friend did not.  I do not care enough to learn about the midwest to make a smart move out there...part of the appeal of real estate to me is the hands on control of the investment.  Out of state investing is less appealing to me personally than using the securities license I got and let collect dust (or better yet, buy another duplex here in Sacramento with an 8.76 cap rate).

@DG A. You don't have to move out of state to avoid rent control.  We don't have it here in Sacramento and our market rents have shot up 50%+ (property values too) in the last three years.  It's pretty "purple" here too so I don't know that we will see a change on rent control.  Granted I'd rather be lucky than good...the bay area exodus has really driven up the market here in the valley since we bought our first property.  Consider looking at under valued 5+ unit buildings in stockton or sacramento, fix what's making them under perform and bump up the rents.  There are a TON of incompetent "mom and pop" landlords out here and with a 5+ unit property the value of the building is directly related to rents (ie more rents = more equity to purchase the next property).  Plus, moving every two years must be a pain.

As far as getting your tenants on federal assistance this is a hard thing to do.  The wait lists are long, it's easy to fall off and just because you bump the rents doesn't mean they will qualify for assistance on their own merits.  It's a nice thought but impractical...you could always accept section 8 tenants coming in?  Oakland is gentrifying and rent control or liberal politics (like 'em or hate 'em) won't stop that trend...it's just a matter who's making the money.

I hear what the out of state crowd is saying, but (caution - incoming anecdotal evidence) my buddy has bought other people's midwest fix and flips with no chance for forced appreciation (in fact the building depreciates over time as housing values remain flat factoring inflation), Lower Cap rate and greater risk than I experienced house hacking.  I'd argue that as more jobs become automated areas that depend on blue collar paychecks will only get worse for property values, rents, vacancy, vandalism, etc.  You live in one of the most profitable states in the country with far and away the largest GDP and one of the highest housing costs (behind HI and NY) with white collar educated professionals able and willing to pay rent.  For reference they can't build housing at $750k a door fast enough to keep up with demand!  My buddy buying in the midwest has seen returns, but he would have been better off in the stock market (granted it's been a great few years).  To clarify...not that the area he invested in is garbage, but the investments he's proud of have objectively under performed, and when you're that far away sweat equity is off the table.  Now if you're investing to be hands off that changes things a bit, but you seem to be doing owner occupied units so I'm betting you are putting in some elbow grease.  

I'm always looking for new strategies/philosophies on investing, but I would venture to guess most of the people bagging on CA real estate have never owned any.

We were impressed by El Dorado homes in El Dorado.  The buildings ranged from cheapo single wides to custom looking, vaulted ceiling double and triple wides.  They do everything too...permitting, transport, finishing, etc, but I believe you're paying a premium for this.  It may be comparable to build on site price wise.

We're going to check a trendier place later this week and I'll let you know how it goes.  They build using shipping containers.  This may be better suited for a trendy millennial focused apartment complex than my mother in law unit though.

http://www.taynr.com/

I'll keep reporting back as I learn more.  I'd like to buy a plot out by Clio to drop a couple of small cabins on to open up a couple's counseling retreat (my wife is a psychologist) and being able to drop lots of buildings quickly may be handy.

This goes against my beliefs, but we're going to spend money on real estate that is not for profit.  My mother is moving in with us and we're looking to buy or build a small 700-1000 sq ft home for her.  She travels a lot so this would just be a quite place to pack and unpack her suitcase between adventures.  We have a half acre on a corner lot and we're planning on demolishing the old horse stable (the parcel used to be much larger) and running plumbing, electrical, etc.  I have two questions for anyone who may have done something like this before:

First is should we build from the ground up on site or buy a modular?  We have young kids so we'd prefer not to have long term construction going on in our back yard, but this is for my mother so we need to do it right.  Modulars we've seen are actually much nicer than I would have guessed, but what should we be looking for in a builder and how much should this cost?  I want a nice fit and finish for the unit (granite, 2 bed, 1 or 2 baths with laundry).  We're in the Sacramento CA area if anyone is familiar with cost to build out here.  We'd also be interested in referrals for prefab homes and/or builders.

Second is what we should expect to spend getting the pad ready.  I can rent some equipment and demolish the old building myself, but what should we expect to spend getting a concrete pad poured, wiring and plumbing run the 100 ft or so from the main house, etc?  I've never built/purchased a new structure before so any advice would be appreciated.

I just went through this in California and I found what @Colleen F. said to be on the money.  I actually run a pet friendly rental and love it.  I require renters insurance naming me as additional insured, additional deposit, pet rent and the animal's paperwork to ensure responsible owners and reduce the risk to me.  After we (new tenant and I) agreed on the pet terms and I accepted their application she turned around and gave me ESA paperwork.  Goodbye pet rent and deposit...oh well.  I'll jack up the rent to compensate at the end of the year.

I had an issue like this with the neighbor’s property. I wrote their landlord about the tenant’s bad behavior. I sent copies of four police reports and statements from other neighbors though. Without witnesses or documentation there is not much you can do...the neighbor just may be crazy.

Hello everybody! I wanted to wrap this thread up by telling you guys how things worked out. I gave the tenant 60 day notice. He left without a fight, but the property was pretty rough after a decade without being cleaned. I spent $7k on new appliances, carpeting and paint and a month of my labor flipping the place. It looks great now and we just signed a year lease for $1550 a month. The extra $400 per month will pay off the renovations within a year and a half. The landlord next door has ignored my offers to purchase, but their problem tenant has cleaned up their act since mine got notice. The biggest victory is that we now have an enforceable lease and a security deposit.