All Forum Posts by: Alvin Uy

Oh no...  Not this "cashflow vs appreciation" topic again... LOL!  This is synonymous to investing in OOS "low-cost but high cash-flowing market VS high-cost high-appreciating market" investing.  Plenty of threads on BP covering this topic like this one...

https://www.biggerpockets.com/...

I have a six-figure W2 income with 797 Fico... but DTI is now my biggest enemy when it comes to conventional loans... even with only 7 properties in California.

That said, I just closed on a new house using a Hard Money Loan (HML) to keep DTI on my personal low and debt off-books. Found a lender with 8%, zero points on up to 90%LTV. I'm planning to refi onto conventional loan after minor cosmetic rehab or rented.

Higher rate when using HML, but I see the advantage of using it to keep my DTI at bay (especially on smaller projects). Often HML additionally offer 100% Rehab loans on top of acquisition. Also another advantage with using HML is that one can buy undervalued distressed properties (that conventional banks won't lend on) ...and can close faster.

 Hmm....  Interesting concept/tip with the plus $100 on lease agreement.  So do you collect the full amount (including $100) and then credit the tenants $100 each month?   And what happens you still need to show your tax return because the numbers won't add up on the rental income schedule reported?

I've been doing something similar for years.  But i do it the other way around --The Primary house is under my personal name, my biz is the renter.   I have a dedicated office space at home, which I am renting out to my biz.  The rent amount is equivalent to my total monthly mortgage.  My internet bill and phone bill and other biz related expenses are also being paid by my biz.   Its a good write-off for my biz.   

I do have to report it as an additional income on my yearly tax returns, but I believe the rent isn't taxed as ordinary income (added bonus). This is fine because also helps me lower my DTI when applying for more loans for additional property acquisition.

@Mike Barry nope!  USBank only does HELOCs for primary and second homes not rental properties.  

Try EastWestBank...I have a non-owner HELOC with them (up to 65%LTV) and they don't require full-doc. I'm also looking at Wells Fargo's non-owner HELOCS...They have a 1&3 yr fixed-rate promotion but has amortized principal payment (not interest only) and requires full-doc. Im looking into Bank of the West tomorrow.

Cali is definitely a unique market... and definitely has even more unique markets within.  There's no doubt about that.  And Yes, higher barrier of entry for sure. There's always a trade off just like when you invest OOS.  I think that's where most local CA investors get discouraged and simply give up.   Its always going to seem expensive.  It was expensive then 10 years ago, its expensive now... but guess what, its gonna be even more expensive 10yrs from now.       

I just hate seeing new CA investors getting shortsighted and completely disregard Cali as an option.  True wealth building RE investment is a long game.  You need to understand the market, its market cycles... and what type of investment to consider during your entry points and what gains you will have the next few years (...and not just how much its costing you up front)... and where your exits might be (if you desire to exit).  Happy Hunting!
 

Exactly what Im planning to do in Los Angeles... except Im buying distressed teardown houses on lots zoned for MFs.  With prices so high... And Rent Control, its better to have vacant units so I don't have to inherit tenants that I can't evict with out "just cause".     Bonus for me in Los Angeles, is that "new construction" is exempt from rent control for the next 15yrs.   Im in "progress" on building a ground-up duplex now as a practice run.

I think you forgot to mention a couple of very very important thing:

–––> The Financial Bandwidth (or Access to funds) to close fast!

I'm closing on a 4day escrow at 8% zero points... 80/100% rehab. I get this same rate up to 90% LTV.

EXACTLY!!!!!   

Let me follow this up with another example based on one of my rentals in Los Angeles. I have a 4/2 SFR in Eagle Rock, Los Angeles that I purchased in 2013. It was distressed so I got a good deal. I rehabbed it after purchase with quality finishings and material as if it were a flip so I can rent at top market rate... and get good quality A/B tenants. It might have been slightly negative the first year or two... but that was ok since my equity was there. 3yrs ago it rented for $2,900/mo... then raised it 4% to $3016/mo the following year...Last year it was $3136/mo. Went vacant during early summer this year. In most markets, this is when landlords freak out... For my wife and I, we were jumping for joy. Reason is... market rent in this area is now at $4k+/mo for this neighborhood. Supply and demand is real!! We put it back up on the rental market after just some deep cleaning, paint refresh... and listed it back up at $4100/mo just to see what happens. We received more than 10 calls the first day... and got 4 solid applications within 3days (mind you, these are A/B applicants who were voluntarily providing bank statements to show proof of funds). In hindsight, I think I should have listed it higher. LOL!! At any case... That's almost a $1000K/mo rent increase in a year!!! All the while, my property value jumped up due to appreciation! By the way because of appreciation, I decided to get a refi because my LTV went down less than 30%. My Rate and Term Refi for low LTV on "non-owner occupied" was 3.75% at par rate. Its a no brainer move. This has additionally increased my cashflow even more... plus now I am available to tap on built-up equity (HELOC) to do some serious damage and play with the big boys.

By the way, for those of you that worry about property management... if you have the right strategies in place and buy at the right areas, it's not that difficult. I get minimal calls from my SFR tenants... maybe 1 or 2 minor calls a year. My rent collection is managed with Cozy. I have on lease contract agreement that they "must" have it set up as autopay through cozy and I do not accept partial payments, $50 late charge, other various stipulations to make my life easier.

Now, tell me... Can you get this kind of ROI in only 6yrs in these so called "cash-flowing" markets OOS with 1 unit?? I only have 5 rental units right now... and Im practically able to retire now very comfortably if I chose to.

My point is... Learn your market!   Figure out what works.  Figure out what kind of investor you are... and which property type works best that matches your investment style.  There's always a way!!!   Bigger Pockets is an awesome resource for knowledge... but as @Will Barnard mentioned earlier, know your source of information and make sure you are getting sound advise.