All Forum Posts by: Abhay K.

Raman, welcome to BP. Meet other investors in this are by attending one of the REI meetups in the area organized by @J.M. or @Johnson.H

edit:Tried fixing mention @

Look for lenders who do 5-10 loan conventional 30y fix loans with 25% down, 30% for 2-4plex. e.g. here flagstar, citi bank and local community banks offer these. They require 6m reserves.

Lots of good responses above. Remember unfamiliarity == risk. This society makes it too easy to invest in stocks.(auto subscribed 401k, employer match etc, myIRA). Think why?

Start attending local RE meetups, as you get familiar you will automatically adjust your stock:RE ratio. Don't force it. You learn lot about "common sense" stock investing and 'high risk' in RE in general press. Read something different. In my case, I built more  equity since I bought  my home 8yr ago than I did by maxing out my and my wife's 401k over last 15 years and investing in broad based index funds! Ouch! I can tap this equity, try tapping your stock portfolio and see what you can buy with it? (more stocks at margin, with margin call risk).

There are two good advice I received,

1.diversify your assets - dont put all your eggs in one basket

2.Put your all eggs in one basket and watch that basket! 

I follow both ;).  I have concluded Warren Buffet's advice on not investing unless you are willing to bet big is dead on. People in second camp often put 10% of net-worth into one investment because they have gained confidence, control over risk. 

Welcome to BP. I am also a newbie into MF arena.

You need to provide a lot more information.

What is the NOI? (rent - expenses ) ignoring mortgage costs.

expenses captured are accurate?

taxes are adjusted to new buyer and not prop13 rates for 20+y ownership.

suggested rents are competitive with rents in the market ?

what is the cap rate for equivalent MF ? price = NOI/cap

what is the potential to improve rents? at what cost of rehab or other?

rent control?

You have to take proforma data from agent and adjust it to your expenses and rents to see if it makes sense for you.

hope this helps.

i'll be there. Look forward to see everyone.

@David McKeever  local perspective on stockton?

Welcome David. It is good to see you here on BP. There are quite  a few stockton investors looking for meetups. Maybe you will start one :)

You can set keyword for 'stockton' for getting alerts about conversations about stockton.

@gary This is a good exercise. Get estimates think about all that could go wrong, get insurance where risk can be insured away. Remember Knowledge is big Insurance and it will increase your risk appetite! Research these topics on BP, meet people. I found it easier to take risks once I could clearly understand it better. 

   Nobody can answer your personal risk tolerance nor judge it. If house prices crash, will you be able to sleep at night with 20% down 30% down 50% down negative equity? These are scenarios you can evaluate and go with your gut instinct. Good Luck.

@Gary

To improve COC return (net income/cash deployed), keep minimal cash into the deal.

Remember if your leverage is 4x (you put 25% down), when property appreciates by 10%, your return on cash due to appreciation is 40%. Based on your cashflow needs, you may want to maximize leverage or maximize cashflow or choose a golden mean path :) where you target say 250/m cashflow and choose loan amount to meet that. Basically this has to do with your risk profile, your personal time value for money - do you need cashflow now? are you confident about appreciation? do you have reserves if market goes south for a few years?

Exit strategies refer to what do you do if planned outcome is not achieved. This is somewhat like a stop loss order in stocks.

e.g.

if area deteriorates I will ...

if units remain vacant beyond .... then I will...

etc.

Let us clarify some confusion about CA first.

-property tax rates are low 1.2-1.5%. Your 1mil property will be taxed at higher tax in texas (2.6-3.3%) and elsewhere.

-prop13 keeps property tax rate growth at 2%/yr while properties appreciate at 6+%. In other states each year your taxes go up if property appreciates while rents may not grow as much.

This means, if you buy and hold long term your property taxes will stay low even as appreciation allows you to cash out refi and get access to your capital. 

Look at return on equity (ROE) metric when you have predominant growth from appreciation and not cashflow. principal paydown itself will be around 1k/m and that will reduce ROE. when this happens below a threshold you refi to cashout. 

I think this could be a good investment. Are schools improving in this area? What are your exit strategies ? 

Get a CPA to evaluate how your depreciation, insurance costs will be calculated in this case since you occupy a fraction of duplex. Keep separate expense record for rental unit.

Come down to @johnson's meetup in san jose on 17th to meet local investors.  http://www.biggerpockets.com/forums/521/topics/206...

Good Luck.