All Forum Posts by: Alan Grobmeier

@Hector Valles  Welcome.  I am a Cali Native (San Diego) that moved to AZ in 2010.  Best thing I ever could have done.  Prices in Cali are high and that does not take into the account that Cali is very tenant friendly.  AZ, IMHO, is the way to go.  Much lower entry point and properties still cashflow (but not as well as they did a couple of years ago).

If you want to stay in Cali with your investment, you may want to look for newer properties in Apple Valley, Victorville, Hesperia, or even Bakersfield and Porterville.  They would be close enough for you to self manage (if that is what you want to do) and give you a decent price entry point that doesn't break the bank.

Another possible option is partnering with someone on a long term buy and hold. Usually needs to be a family member that has capital or credit to assist. They need to bring SOMETHING to the table other than a 'heartbeat'. LOL. If not a family member, form a LLC that has a well written 'exit strategy', timeframe of the investment, and possible contingencies.

I owned a property in Bakersfield that I got via divorce.  It was an 'albatross' on day 1, but I ended up making $120k about 6 years later.  After all, they are not making more land in Cali, but they are making more people!  LOL.  

PM me if you want to talk more about your situation.

Kind Regards,

AG

@George Lods.  I am going to give you a model that contradicts Greg S.  

I own nothing but SFRs.  I partnered on a 4plex.  Great experience, but will never do it again.  Although there are more doors, you can have more issues.  And they usually involve tenants.  It usually takes 2.5 out of 4 occupied to break even.  Tenants, depending on the quality of 4plex you own, can come and go.  You can go a significant amount of the year with an average of 3 out of 4 doors filled.  Although you are making money, you are not making the money you envisioned for the hassles.

My business model relies on consistency. I buy SFR that are A or A- properties in good school districts. I do open houses where I have had up to 25 applications for a property. I choose my tenants, my tenants don't choose me.

The initial cap rates I get are a 'non-sexy' 4-6%, which most on BP would criticize. However, time is my ally and the cap rates usually go up quite quickly. I have a number of CAP rates in the low double digits (10-11%+) now and the values have appreciated as well. My AVERAGE stay is 3 years. I have had one tenant for 9 years. I only lose them if they transfer out of town OR buy their own place.

My former 4plex partner now has 22 MFH 'doors'.  He does all the work himself, works his butt off AND has all the hassles I mentioned above.  It really comes down to how much time do YOU want to work on the business.

The model I created was when I was an employee of Cisco Systems.  I was flying around the country and sometimes around the world for my 8-5 job/career.  I wanted to expand my real estate holdings, but needed to create scaleable systems that would allow me to do most things remotely OR have the tenant take care of problems that may arise.  It is my belief that I could have up to 30 properties doing ALL the management work myself, and not be impacted significantly on my personal time.  

My systems that I have created take about 15 minutes a MONTH to do my business.  To be honest, I spend more time on excel spreadsheets for my CPA.  ;-)

I have recently retired from the rat race, but I am still a rat.  LOL.

Now you have both sides of the story.  It will really depend on what type of business you want and how involved you want to be in it.

Kind Regards,

AG

IMHO the late fees are not large enough AND the PM is taking too large of a percentage for doing 'the work' (that they are not doing).  I would probably keep the tenants, change the contract AND increase the deposit to the state maximum allowed by law.  

As one of the posters above stated, serve them with a pay or quit after 5 days where the TENANT is charged for the 'privilidge' of being served.  Change the late fees to per day, if your state allows.  I would make them hurt for screwing you for the last year.

You are PROBABLY having to pay the PM for them to post a pay or quit notice.  Maybe $50.  I would make THAT FEE chargeable to the tenant (if allowed by law).  If you want to get really creative, charge $100 for the $50 pay or quit fee you have to pay.  The idea of a late fee is for it to be as punishing as possible.  

My rents are due on the 1st and late on the 3rd.  I don't even wait until the 5th for it to be late.  My tenants have a late fee and then a daily late fee.  I've had ONE late on 9 properties in the last 3 years.  And I was told about that one PRIOR to the first of the month where we negotiated the situation.

Real Estate is about systems and what you need to have it work for you.  Otherwise it becomes a headache and nightmare.

If you create the scenario you want, the tenants will either straighten up or leave.  I get having to pay a months rent to the PM to get a new tenant.  But I would tell the PM that if this situation is NOT changed to your satisfaction, they are fired on ALL 4 properties. 

You need to give EVERYONE an incentive to 'fly right'.  

AG

FWIW: I own properties in Chandler, Gilbert, Ahwatukee, and East Mesa. My average tenant stays with me 3-5 years. I've had one for 9 years! My houses are all in good school districts. I run open houses where I can get up to 20 applicants in 2 hours. To get the same type property in Scottsdale, my ROI would be 'California-like'. l have looked a number of times in Scottsdale and I feel I get more 'bang for my buck' by not buying in Scottsdale. Scottsdale is home to the $30k a year 'millionaires'. And is way more transient than the areas which I do business. AG

I have A and A- SFRs in good neighborhoods with good schools.  My average tenant stays 3-5 years.  I've had one for 8 years.  Holding those 'forever', 30 years plus.  AG

If he is not willing to see you be successful in an owc, RUN.  It only works when both sides 'win'.  And it looks to me like you are losing.  AG

Agree with Jeff. ^^^^^^^^^  if you think losing a months rent is bad, try getting sued by a tenant that actually has a case.  Btw, never happened to me.  Lol.  The judge will throw the book at you as a 'lesson' to you and others.  Lawyer up!  AG

Or you can go by this axiom:  you are paying more than anyone else is willing to pay.  My reasoning:  if someone was willing to pay more than you, they would own it.  ;-). AG

I THINK the only time you are exposed to UBIT is if your Ira is exposed to some type of debt instrument (i.e. Mortgage). Otherwise you are good to go. Your personal LLC would file as a 50% owner on schedule e, you self directed would have to report valuation of assets. Contact a good CPA, but is how I understand it. Although I have no direct experience in UBIT. AG

Get the match.  Put it all in cash to preserve and protect your return. When you leave, transfer the money to a self directed Ira.  Then buy real estate, gold, notes or whatever you think you can get a good return.  Read 401kaos.com.  If you don't, you will get screwed one way or another.  AG