All Forum Posts by: Arlen Chou

@Joshua Elliott respectfully, I disagree with @Joseph Firmin. His strategy will work if you are an agent with your own license. However, in hot California markets, if you start throwing a ton of offers out without closing you will quickly create a reputation as a tire "kicker" and not a "closer". If REI is something that you want to get into as a profession, your reputation is as paramount as your access to cash. It will take years and many deals, but if you establish yourself as a "closer" you will find that more agents will come to you before properties hit the market. Also if you get into bidding situations on properties your reputation as a "closer" can often be the push that gets you across the line with a win.

Think about it... the markets are still hot, even during covid. It takes an agent the same amount of time to write up an offer for somebody who potentially will back of a deal vs somebody show is known as a "closer". Which customer do you think will get a larger share of mind and attention. Agents are inherently incentivized to close as fast and as often as they can, that is how they get their checks.

Get your sh*t together before you start making offers. Make sure you know what type of investor you will be: buy/hold, short term/flipper, SFR, MFR, MFC, etc. Get your finances all worked out. Know the neighborhoods you want to invest in. Interview multiple agents so you can find one that aligns with your thinking and strategy. Don't waste the seller's time, the agent's time, or your time on half-baked offers.

I personally think making an offer is the last step. Remember REI is a long game. Therefore, your reputation will either make things easier or harder for you in the future. Good luck to you!

@Emma Chen If you are doing this on the strength of your income alone(without partners) you will need a seriously high W2 income to get another loan. Even though SFR's are still going up in price, I seriously doubt that you have gained that much appreciation equity to make it worth the effort for you or the lenders. Even if you got in way under market and the property were to appraise substantially higher, it will take you at least a year of "seasoning" before your DTI comes back into alignment. Basically, you raised your debt level to buy the property, but banks will not use your rental income for the first year in calculating your DTI so your income will look low. There might be a bank that will pull that back to 6 months if you have a really good relationship but don't count on it. Maybe I am being too conservative, but I think you need to address the DTI issue before they will lend to you, even on a HELOC. Sorry to be throwing cold water on your flame. I do wish you the best of luck!

-Arlen

@Hayden H. congratulations on getting another win! I cannot believe that this is the same place, the work looks amazing!

@Jessica M. you are getting a lot of interesting advice, but I personally think there is not enough information in you post to formulate a viable strategy. 

If the overall goal is to increase cash flow, and you are open to "house hacking your primary" the obvious answer would be to have your mother move in with you and rent the other house out at market prices. I obviously don't know what your family dynamics are, but if you are open to "house hacking" that indicates you have room for your mother. She moves in, you get a little rent from her, her personal expense go down and you get a clean rental in the form of the other house. Maybe you don't want to live with mom, that is cool I totally understand. But buck it up for 1 year so you can have 1 year of income, from the rental, showing on bank statements. This will make it easier for your to get additional loans in the future.

I would be extremely hesitant to advise you to buy anything else with the little bit of financial information in your post. Is the $60k that you have ear marked for renovations everything you have or just what you think the renovation will require? Don't give out that number here in public, but if it is a majority of your liquid assets then you really should not consider a renovation. Are the renovations a habitability necessity or a "nice to have"? Where is your income level, are there 2 incomes in your family, are there kids, how old are the kids? There are so many factors that have a direct impact on a viable strategy. Please, don't go down a path too quickly based upon a quick forum post and a few generic answers from complete strangers, me included.

Being over or under leveraged is NOT a generic number. It must be specific to the person and the situation. I have seen too many people blindly use generic "rules" or percentages and dig themselves into holes they could not climb out from. I wish you the very best of luck in whatever path you chose.

@Jeannette Henderson I don't want to hijack @Account Closed thread so feel free to PM me if my brief answer does not point you in the right direction. The first thing I tell all new investors is to settle their mind and figure out who they are, so they can figure out what kind of real estate investor they should become. All real estate investing is not created equal. Some roads are very hands on in analysis, others hands on with tools, other very hands off with both, etc... Some people are better with investing locally, other invest far from home. Some people feel they have to make all the decisions, or at least have a "voice". Others are totally content with somebody else driving all aspects of the deal. The inherent problems with forums like this is that everybody is looking for specifics, but their questions are generic. Give me some details about who you are and what you want and I will try to give you a more detailed reply.

@Allan Pilapil it is really simple. To find somebody who will mentor you, you have to make friends with people who know more than you. As @Ori Skloot has pointed out there are a ton of people that reach out and want to gain a decade of knowledge over a cup of coffee. You have to differentiate yourself from all of those people. It takes time and dedication, like any relationship. If a "mentor" gives you everything they know over a cup of coffee, they probably don't know very much or they have an ulterior motive or they had nothing else to do and they wanted a cup of coffee. Remember a mentorship is a "relationship". How you create that relationship is really up to your personality.

In my case, I read hundreds if not thousands of posts on topics that I find interesting. I found people who frequently commented with insight and obvious knowledge and I tried to lend what little knowledge I had to the discussion. Over time, I felt I had enough of a superficial digital relationship that I would directly reach out to them to meet up. By the time I had asked, the person could easily vet me based upon my digital contributions and they knew I was not there just to suck them dry over a $3 cup of coffee. That is how I started to make BP friends and my friends became my mentors. 

Sorry I don't have an fast and easy answer.

@Account Closed welcome to BP. First rule of public forums, not just BP but all forums, "don't tell people how much money you have". There are a ton a sharks trolling the forums looking for money, so be careful. 

Real estate is basically a 3 legged table: time to work, money to invest and knowledge to contribute. Many will say that a deal to share is a forth leg, but I feel the deal is found in the "time" or "knowledge segments. 

What you should ask yourself is not where or how to find a partner, but if you will be a good partner. If you can honestly say to yourself that you will be a good partner, people will find you and you will be able to figure out who are the honest players and who are the sharks. BP is a great place to find people. Read other people's posts, and post thoughtful comments. It takes time to create a "name" for yourself, but I promise you that if you do it right you will find people to deals with and people will also find you.

Just remember the first rule, and don't be to eager to let it out of your hands. I wish you the best of luck on your journey.

@Arya Feroz what has worked for me was to slow down and to focus on the "macro goal" and get away from the "micro goals"... The biggest frustration that people run into is the people can't find a strategy that reaches their "quicker scalability" goals. But the follow on question should be, "quicker compared to what"? We live in a world where everything is based upon immediate gratification. But the reality of success is that it built upon years of hard work especially in real estate. 

You will read a ton of posts about people who are successful with a single deal here or there, but few people post up about the deals that went to sh*t. What you and your sister need to do is find a strategy/business niche that fits your personality and personal goals. Don't force your strategy to fit other people's successes. I have made a ton of money with the strategy of buy & hold using sweat equity to drive value up. But I like to work with my hands and tearing out drywall or laying flooring is fun/therapeutic for me. A weekend getting dirty is not work for me, it is fun. If that doesn't sound like fun for you then the sweat equity play is probably not for you. I know that my personality will not allow me to be hands off with a team in another state. I would want meetings and reports all the time... they would hate me! So I invest in other people's deals, I don't partner.

My point is that if you are hopping considering markets and asking strangers for strategies, you might want to slow your roll and figure out what kind of investor you are first and then seek out specific individuals that are doing things that mirror your interests. 

I hope I don't come across as condescending, that is not my intent. I have just seen too many burnout and disappear from BP because they went down a road based upon potential ROI without considering their personality fit to that particular strategy. I wish you the best of luck!

-Arlen

@David Santos take if from an old guy like me, do not sell your property. The hardest part of getting into an appreciation market like the Bay Area is getting your first property. The second hardest thing is fighting the temptation to sell because you see opportunities in other places. As @Ori Skloot has pointed out the lenders will come back around. @Will Fraser has given you some good advice. Basically, live WAY below your means and save as much as you can. This is not a sexy strategy, but it works. At 24, you are just at the starting line of your earning life. Be patient and live like a monk and you will build on your current success. The fact that you were able to raise rents in a rent-controlled market like Oakland is an amazing accomplishment.

You feel stuck because you expect things to move faster. The reality is that you are already WAY ahead of the curve. Stack "paper" as fast as you can, keep learning your market and be patient.

Good luck to you!

-Arlen

@Sid Naik the title of your post and your situation are not in alignment. Bay Area rents are not collapsing across all asset classes. It is getting soft in higher end assets. 

I am one of the examples that @Johnson H. references. I have been able to strategically increase rents in Mountain View, North Oakland and soon Fruitvale. Fruitvale will see the most upside on a percentage basis. As these lower paying tenants move out on their own, I am able to reposition the units and see a substantial upside. Therefore, I expect to see much better NOI and overall valuation in 2021.

Much of the news and hype is centered around people who got into REI very recently and bought a higher class asset and had not anticipated a down swing. They were overly focused on getting into the market and did not build in a down turn into their modeling. There are a ton of guys on BP who have been stacking paper since before COVID in anticipation of a correction. There might be a very small window to grab some distressed deals. But I believe the amount of money on the sidelines will lift prices up very quickly and we won't see a 25% fall this year.