All Forum Posts by: Alex Mina

@Alex Mina @Dan H. Alex, I will be very happy when you can report back to this thread on BP that you found a property as Dan describes. if you can find that, you will be a very lucky man. By the way, my house cost $550K when I bought it 3 years ago and my property tax is $11000. The rate in CA is 2%.

The main issue I have with the properties in our San Diego area is the performance. Assuming you would find someone who would pay you the rent on the less broken down half of the duplex to cover your carrying cost so you can save your own rent and use it to renovate, everybody in the area would do it. The reality is that you can typically get about 50-60% of the rent you would need, and the more broken the property the more likely you will end up with the worst possible tenants.

I like the idea of getting started locally. I only caution that you could lose your shirt because you have to make an assumption on top of assumption on top of assumption on top of assumption to make things work. If you find that pink unicorn I applaud you.

In case it does not emerge and you rather look for passive income and becoming an investor I am happy to help. I don't recommend learning how to renovate horrible properties while living in it and hoping the tenant never misses a rent payment in the middle of the worst economic and unemployment crisis.

That's the beauty of real estate and becoming an Ideal Wealth Grower. You decide what your BHAG (Big Hairy Audacious Goal) is and then you go after it. dan and I are here to help you and there are more very knowledgable people on BP who can also provide amazing information.

I created my OOS portfolio of single-family residences that pay $7500/month of passive income while living in San Diego and am always happy to share what I learned and how I did it. 

@Alex Mina

I’d try to stay in your own state first if you can. Go read how OOS investing works for other first timers, it doesn’t. I’d find someone who is investing in San Diego and learn the process before OOS investing. You’ll thank yourself later.

I recommend newbies start local but I do understand that the cost of entry into San Diego market is not cheap. This can be overcome via a house hack. Owner occupied can get 95% LTV loans. $35k at 95% LTV could likely get a $600k to invest in a property but you want some reserves so $500k to invest in a property. $35k can be enough if going the house hacking route.

If you accomplish the text book BRRRR (not easy), after the refinance you have a property worth well over the $500k purchase and value add costs and $0 into it. I did indicate that the text book BRRRR is a challenge, but would it be terrible if you have $30k into a property worth $550k where you added $50k of sweat value? You return at this point would be $50k on a $30k investment. Not bad!

I indicated the text book BRRRR is challenging to do local. How challenging do you think it is to do a text book BRRRR OOS? I would think a lot more difficult (we have had OOS property but did not attempt an OOS BRRRR, but we have had to rebuild twice OOS after hurricanes and that was not easy).

We have built our RE holdings largely via San Diego BRRRR. We know it can work. By the way, we typically do not get all of our investment extracted unless we got an assist with market appreciation (which we have gotten multiple times, about half of our RE has had all of our investment extracted). Do not forecast being able to extract all of your investment, it is very challenging to do this in San Diego.

San Diego BRRRR "facts":

• The refi appraisals are conservative.  Expect at least 5% below value if the appraisal was for a sale with associated offer. 
  
  It is very tough to extract all of the investment. Many things contribute to this but high on the list is conservative appraisal, not high cash out LTV, the competition for good candidate BRRRR properties is high so getting it with a lot of meat with respect to ARV is a challenge, labor costs are not cheap, etc.

• 
  the cash flow does not improve after the value add and refinance. We have found that the rent increase percent is very close to the loan increase percent with similar LTV. However, if you are going from real high owner occupied LTV to cash out refi LTV you may see a slight increase to cash flow but it will be due to the lower LTV.

My “facts” are not all obvious and there may be some exceptions, but in general they are very likely.

Good luck

Hey @Alex Mina and welcome to BP and real estate investing :) I'm fairly new myself, and don't have much knowledge to share, but I'd like to follow this thread so I can see who else chimes in on this. Are you only looking into out of state investments or are you open to local deals? It's been something I've been going back and forth about myself. I'm in San Diego and would love to invest locally to be more involved in the deal, but not sure if I'm up to bet 600K+ on my first deal, rather than something out of state for a fraction of the cost, lol.