All Forum Posts by: Arlen Chou

@Shane Pearlman wow, sorry to hear about the tree, but I am glad nobody got hurt. I live on the otherwise of the hill and a neighbor had a giant oak tree come down on their house. PG&E cleared enough of the tree to get power going, but the rest was up to my neighbor to clean up. I don't think eucalyptus has any value for firewood. I had been told that the oils in the tree are very flammable and potentially pop/explode when burned. I don't know this for a fact, but was told by another neighbor when he had one go down a few years ago. I would call in a crew and get it cleaned up to see the damage more clearly. Also, you don't want the liability of somebody getting hurt from the downed tree. 

Good luck!

• Start and complete renovation of the five doors I am currently under contract within 8 weeks of COE.
• Refi the recently purchased units
• Acquire another MF property in the Bay Area
• Do my first fix and flip!

Happy New Year to everybody and I wish everybody success in the new year!

Bruce Scannell I am not sure how much your plumber is quoting you but it is probably worth it to just change it out. We live in a very litigious time. The last thing I would want is somebody suing me because they got some chronic disease while living in my rental and they tried to pin it on the lead in the water... At this point you obviously could not cry ignorance about the potential health problem. You know the pipe is there and it can be inferred that you know of the potential health risks of leaving it there. Granted the probability of this is very low, but I believe the best lawsuit is the lawsuit that was avoided. I personally would bite the bullet and pay the few hundred bucks and eliminate the potential problem.

@Account Closed it looks like you have gotten a ton of good advice here.  Your issue is not in learning the business, if you are truly dedicated that knowledge will come in time.  I believe you see the real problem as getting the credit to make your first purchase. 

There is no getting around the fact that most people and business will not loan to you if you don't have a good track record.  This is the old chicken and the egg issue.  Banks will not loan to people who NEED money. They basically loan to people who already have money and can pay back the loan at a later point.  

Building up your credit by using a secured credit card, as @JT Spangler suggest is a great first step. Also as it has been suggested, increasing your earnings in a variable way is critical. Getting handyman or odd jobs that pay in cash help your pockets get fatter, but the banks will not take this into consideration unless you are getting "taxable" income. As suggested, pizza delivery is a great way to get more W2 income. Another way that I really espouse is to sign up with Uber AND Lyft and become an independent "taxi" service. You need to have a reasonable vehicle and a cell phone, but you get total freedom of when and how long you work. They handle all of the paperwork for you as an independent driver. All you have to do is answer your phone and drive people around. I have met many college students and nursing students who are putting themselves through school doing this. There is no reason an eager REI cannot do the same to fund a career. The other benefit of being a driver, either for a pizza place or as an independent taxi service is that you spend your time driving around neighborhoods. You are basically getting paid to recon your city for areas you might potentially purchase in.

After building up some credit and some cash reserves, I would recommend going to your parents for help.  I am not saying you should ask them to dip into their retirement fund for you.  But if they have good credit you might be able to have them co-sign on a loan for you.  You handle all of the payments, insurance, paperwork etc and they just sign the loan docs with you.  Of course this depends on your relationship with your parents, but I think you stated that you are living with them now, so I assume that they want to help you. Of course this puts them on the hook if you default...

Assuming you are able to buy a place, the next thing I would do is get as many roommates as possible and fill the house.  Your only 20 so suck it up and share space for a few years and build up more credit and cash. I know it sucks to have to share a room and/or a bathroom, but the sacrifice made in your early years will payoff when you are older. Even if you get a duplex and rent one unit out, get roommates for the side you are going to live in.  This adds income to your pocket that you can use to pay down the loan or invest toward your next purchase.

Back in my day, I did not have access to secured line credit cards or services like Uber/Lyft to work with.  If they had, I would have jumped all over those options.  However, asking the parents to co-sign and the roommates thing both worked well for me.

Good luck and make sure to let us know when you get your first place!

-Arlen

@Seth Mosley  they way @J Scott described the way to evaluate the neighborhoods is the correct method and as he stated can be a little grey/different based upon the experience and feelings of the person evaluation the neighborhood.  However, in my market I use a slightly modified method of when I am looking at an area on the "First Pass".  It might not be exactly politically correct and many here might not agree, but I look at the cars parked in the neighborhood to determine the "class" of the asset.  I have found: 

class A properties have lots of newer European cars

class B properties have lots of new Japanese/Korean cars

class C properties have lots of trucks

class D properties have lots of POS vehicles.

I adjust +/- based upon the mix of the different levels and ages of cars in the neighborhood.

I am not saying that the car makes the person, but it is a pretty simple matrix when doing a first evaluation of a property.  I go into further detail, like schools, walking scores, etc once I get more interested in a specific neighborhood.  

I want to clarify that my above definitions DO NOT work everywhere.  The type of vehicles that people GENERALLY drive in different regions are different.  As an example, I am sure you would find that my matrix does not exactly fit for Dallas Texas or even within my own target region, like San Francisco. In SF it is high density and many people prefer to walk or take mass transit, but can still a general type of vehicle clustering in these markets.  

In the Greater SF Bay Area it does work for me.  My point being, if you adjust the "ride matrix" for your region, I think it will give you a good starting point for figuring out the neighborhoods.

Regards,

Arlen

@Paul Taing welcome to BP and the Bay Area REI market. I have only been on BP for less then a year, but the people and resources I have found here have been key to achieving my 2014 goal of getting into contract on a local deal. Because of meeting and talking to guys like @Johnson H., @Account Closed and @J. Martin I was motivated to pound the streets and find a nice deal in the BA that I believe will be a good addition to my portfolio. I am certain that there is still money to be made in the BA if you put your mind and effort into it, and by joining BP you have made the first positive step!

Congratulations on making the first step, hope to see you around at one of the upcoming meet ups.

-Arlen

Yasmin Swaggerty welcome to BP and to the Bay Area market. There are many chances for meet ups and getting to know your local members. Hopefully you and your husband will have a chance to come out to some in the new year! Have a happy and safe holiday season. -Arlen

@Jonathan Buehler your decision really depends on if you think you can find something else to invest in. Since it is your primary residence you get to keep all of the capital gains tax free! This is a huge benefit of "house hacking". If you are confident that you can find something else, I would personally sell the property and invest in a duplex or some other small multifamily property. The tax free cash will far out benefit the little cash flow you will be receiving by holding the town house. Also by selling the town house you get yourself away from the potential downsides of a HOA!

Good luck on which every direction you choose!

-Arlen

@Rome Xu welcome to the REI world. I look at REI much like stock investing. You have decide if you want to be a trader or investor, meaning flipper or whole seller vs buy and hold investor. Trying to "time the market" in stocks is nearly impossible except for the elite few with tons of data and analysis on their side. Most pedestrians can only hope to get lucky trying to time the market. I believe that it is also true with REI. Trying to "time the RE market" is almost as difficult. You can see much more general "trends" that might give you some guidance, but the reality is that there are huge variables that can shift a trend graph fairly quickly. Again, for those people with much more focus and data resources then I will have much better chances of predicting a "bottom or top" of RE or any other industry curve.

For me I INVEST in both stocks and RE, I do not TRADE, which to me means that I am in it for a long period of time until there is a good reason to get out.  Therefore, I don't look for the "bottom or top" of a market.  I do what stock investors call "dollar cost averaging".  More to the point, it is important to get into the game and continue to buy what you believe is a good investment and sell when it makes sense to your stratgy.  Over an extended period of time your winners and looser will give you an average investment cost/return on investment.  

This is basically the strategy in baseball of swinging for singles and doubles, vs. batters who only swing for the fence.  I don't think that a person should follow one strategy over the other because other people say one is better then the other.  You should follow the strategy that best fits your strengths.

Good luck on which ever strategy you decide on!

-Arlen

@Jessica Skupien my agent says the same thing. However, I like to go a little low and get a wider pool of tenants. I have found that I can find more stable tenants this way. Also, if they know it is a good property for a reasonable price, they will usually stay longer with less hassle then a tenant that I am maxing out. Tenant turn over is a real bummer in my book. Anyway, good luck on your start into the REI world!

-Arlen