All Forum Posts by: Adam King

Hi again @Julia Harmon,

You should also consider the merging of strategies as well. There are no inherently wrong answers. Finding the strategy and plan that works best for you and your situation is the key, and though it may take some time, once you figure out exactly what will work for you, the right deal will present itself.

Hi @Julia Harmon,

My name is Adam King, I am a local Realtor and Investor here in San Diego. It seems like most of your questions have been answered, but I will do my best to provide you with more information.

1) STR is a great strategy to go after, especially when you consider the option to self manage and use bonus depreciation to offset W-2 income. This can transform even a barely profitable STR into an asset with a 10-20% rate of return in year 1.

2) Building an ADU is my preferred form of value add, for the purposes of Cash Flow. This will vary though, depending on the neighborhood. When it comes to financing it may be more nuanced than traditional construction or purchase financing, but it can work out.

3) Buying more LTR rentals is not going to be the quickest way to replace your W-2, but when done correctly will be the least risky. From a short term perspective, San Diego is not a good choice, as significant cash flow is not likely. When looking at it long term though, San Diego is an amazing choice. We have seen a historical annualized rate of return of ~5.75%, and rental increases since 2018 have annualized at ~6.9%. San Diego is also a very safe city to be a land lord with some of the lowest eviction rates in the country.

I hope you find this helpful. If you have any other questions, I would be more than happy to answer them!

HI @Sarah Fisher

Welcome to the BP forums!

Land investing can have some amazing upsides, but there are a few drawbacks:

- Financing on raw land is more difficult, and typically requires a larger down-payment and higher rates when compared to purchasing a home with a conventional mortgage.

- There is a lot more homework to do to ensure that the property will fulfill all of the needs you are looking for.

- San Diego specifically has very low inventory on raw land, and many owners aren't realistic about their current value.

The question that I ask, is what is your reason for purchasing land?

- Is the intent to hold it for a long period of time to let it increase in value?

- Are you intending to build on it? This can be very lucrative, but requires a lot of forethought and planning to make it work well.

- Is this going to be for agricultural purposes, using a USDA loan? If this is the reason you can get very favorable rates and terms. This is a great option if you plan on buying a piece of land zoned agricultural.

I hope that the information provided was helpful. If you have any specific questions, I am here to answer them for you.

I had a similar experience earlier this year, and the BP team was able to get it removed from my profile pretty quickly. 

Here is how mine went:

- Posted anonymous

- Misspelled my name

- Mentioned services that I don't even offer

Reach out to them and it should be cleared up very quickly!

Hi @Miguel Alvarez

I am sorry that you are stuck in this situation. Everyone here seems to have great insight/advice, I will see what I can do to help as well.

At $7,500, assume that your mortgage doesn't change, and you are able to maximize rental growth, you are still ~4 years from the break even point, from a cash flow perspective.

There are a few ways to reduce costs along the way: Renegotiate your homeowners insurance to ensure that you are getting the best rate, if you are covering utilities I would look into Solar and any form of water rebate, and if you are not self managing you should start as this can be your largest savings.

We are likely still a few years away from interest rates being low enough to make a refinance worth it. If you can hold out, a refinance + regular increases should make it so you are cash flow positive.

If you are okay with that, and have an internal rate of return that you are happy with, then mitigating losses and staying the course may be your best bet.

With the current state of the STR market, unless you are in a high demand zone, I wouldn't necessarily recommend it. San Diego has seen a decline in STR occupancy, which is forcing down rental rates.

For expanding, that is my typical recommendation as far as owning rentals. I have a few clients adding on right now. A 2unit, an 8 unit, and a 3 unit. All across the city.

If you need a recommendation for adding in ADU's quickly and cost effectively, I would be happy to make that connection. Ive used the same person for my personal residence, my mothers residence, and he has helped out many of my clients.

Hi @Trevor Brouelette,

I can certainly appreciate your attempt to underwrite these deals, but they are very different strategies, each with their own benefits and drawbacks. You will likely need to use 2 seperate excel models and use a metric that is easily comparable(relative cash flow, IRR, net cost).

Traditional Buy and Hold: Typically requires 20-25% down, and will come with a slightly higher interest rate .75-1.5% over prime. In multifamily in San Diego this represents a massive cost, likely $200-500k for the majority of the county when talking about 4 units. The large down payment though can lead to increase access to cash flow, and a lower monthly payment despite the higher cost up front.

House Hacking: Can require as little as 3.5% down though I do recommend 5% as it avoids the means testing required by the FHA loan. When using this method account for the rent that you would be paying, even if the property covers a portion of that amount. When using a lower down-payment, appreciation and loan paydown are accelerated in relation to your initial equity, this greatly increases your IRR.

PML is not likely to loan to you, if your intent is to house hack. The way around that would be to pay rent to an entity that you control and then pass that through to the PML. Though PML is likely not going to pencil out as their rates are significantly higher than a traditional Commercial loan, and even higher still than a federally backed conventional loan.

I have helped many clients, and myself, through both traditional investment purchases and house hack purchases. I would be more than happy to help answer any questions for you!

Hi @Tyler Mowbrey

I am going to operate under the assumption that your home is currently listed by a realtor. As a Realtor myself, that means I can only give general advice.

Make sure you are comparing your home to actual comps: 

- Keep the size to +/- 15%

- 4 bedrooms and under, go with the exact amount of bedrooms and bathrooms

- When possible limit it to similar sized lots

- Only compare to homes with similar finishes

Our average days on market has been fairly high all year. The past 12 months it has been 34 days, which is ~40% higher than the previous 12 months.

If you are using a realtor, at this point I would sit them down for a serious conversation asking what they have been doing to properly market the property. This comes in many forms here are the most common examples: Open houses, social media outreach, attending the neighborhood caravan to pitch the home to all serious agents, using reverse prospecting  to reach out to all agents who have clients looking for a home like yours.

TLDR; make sure that the comps used are accurate, homes are sitting longer than normal this year, make sure that your agent is doing their best.

I am confident that your home will sell!

Hi @Sudhi Avula,

I have helped multiple buyers this year purchase STR here in San Diego. I agree with Dan that it is not easy to make it work, I have helped my clients make it work with differing strategies.

To make sure that it would make sense for you to buy here:

Reasons to buy:

- Strong year round demand, with amazing weather relative to the rest of the country, we rarely see a substantial slow down.

- Relatively high overall income potential, factored with long term appreciation can lead to a very sold IRR (internal rate of return)

- Permit requirements = Clearly defined set of rules to operate within, leveling the playing field for all owners.

Now for the reasons not to buy:

- High entry cost, this barrier is untenable for many as the down payment can be $200k or more.

- High operating costs, if you are not an owner operator expect to pay upwards of 25% in management fees

- Permit requirements, if you fail to operate within the defined rule set, you risk losing your permit and therefor losing your profitability.

I hope that you found this helpful.

Reach out to me if you want more information!

I highly recommend @Ryan Hall

(619)-799-8152

[email protected]

Amazing work and a great communicator

 Hi @Juan Esteban sola

This is a great place to start your journey.

If I were to start all over again, here is the advice I would give myself:

Narrow down your strategy to a few that you will think works, read books, listen to podcasts, and reach out to local investors currently working in your desired  field. 

With so many strategies out there it can be overwhelming, but a few good places to start are House hacking, and PML with flippers that you may know.

Finding a mentor to work with can also be a great avenue to take. I was fortunate enough to work for my dad who flipped homes for decades, and as a realtor I have had a few great mentors.

If you have any questions I am always here to help!