All Forum Posts by: Kevin Auyong

Ahh, I see it's a house hack. That's a good thing. You mentioned multiples so I thought you were buying rentals. What city are you buying in?

Are you allowed to make a  fourth bedroom in the basement? My rentals have basements but with either no windows or little tiny windows so basement bedrooms not a possibility. Not the say the tenants don't use them as man caves and hangout spots.

I am house hacking too, but on a more permanent basis. I bought a  5200 square-foot house with a walkout basement that I went out and that covers half my mortgage. It has a separate entrance on the side of the house  so I never even see the tenant. So far it's working out well. Keep us posted to see if you fixing up your owner occupied house increases the value . Good luck.

 You do realize that if you buy turnkey you will need to put down 20 percent  and will be paying top dollar for that property?You have to hope that it makes appraisal price.

You are assuming that in a few years it appreciated well because to refinance a few years down the road you can only pull out 70%ltv. Also interest rates will be higher in a few years.

Example you buy a turnkey for 100k, put down 20k, 80k loan plus costs.

Let's say it appreciated 8% per year. In two years it's worth 116k. Pulling a cash out refinance yields a 81k. Pay off the old loan and you have 1k left. 

To what use is that 1k? But wait, the refinance is going to cost you 3 to 5k for the loan fees meaning there really is no cash to be gotten out.

This assuming you even got 8 percent appreciation. Many turnkey properties are not in fast appreciation areas. Add to this if the market flattens you've gotten no gains at all, just you cash flow.

Not sure you've thought this all the way through.

Buying a rathole you have the opportunity to force equity quickly and not pray for appreciation.

Long story short, I had equity in Ca real estate, but not great cashflow. Pretty much had a failing business and needed a way to have an income as I pretty much couldn't get a job. Appreciation wasn't needed as much as a cash flow to live on. 

1031 exchanged into cheaper c class properties, several bank owned. Typical  deal was buy around 35 to45K, rehab 10 to 15 k all in about 50 to 60K. Value when done was about 75 to 100K. I really had a little over $850 into all of them, but cashed out refinanced a few so my own money into them dropped to $750K of my own money. Took the proceeds of the cash out refis to buy another-the usual brrrr thing.

I'm not a bright guy, just lucky. I just wanted cash flow over appreciation and had no idea those house would be worth more than I put into them until I asked to get a BPO on them. Since both cash out appraisals met the BPO I figured the rest were really close. I wasn't anticipating forced appreciation. I figured they would just appreciate slowly and that was fine as long as I got the income.

The cash flow is just over $100K a year net inc paying the 2 new cash out mortgages. That was the main objective, to get a cash flow to live on since I was basically unemployable. Moving to a cheaper area other than California that cash flow is  a good income for a single person.

@Alexander Felice how are you refinancing the cash outs so quickly? Many lenders want 6 to 12 months seasoning if doing cash out for ARV rather than just value put in.

what defines a rathole?

The person who mentioned that sometimes it is good to be a contrarian. Sometimes it is, sometimes it isn't.  Sometimes there's a reason not to be a contrarian. Like if most people say don't swim in pirahna infested water, the contrarian might say its ok, they're not very big.

That said everyone needs to find a way that works for them. A turnkey sounds good, but sometimes those turnkeys wind up with a lot of work or in bad areas when you unknowingly buy from someone who is not honest.

My numbers from not buying turnkey and doing forced equity was $750K, invested over 3 years, portfolio worth just under 1.4 million.

I understand that you do need to know a little more than the average layperson, but it can be very lucrative. If the market drops 50%, I still have what I spent into it. For turnkey since it usually is market price, if it drops 50%, well you just lost 50%

@Andrew Jones

Well I'm not sure If I am the one considered bagging on Ca real estate- I don't see anyone else here doing it so it must be me. I would say that the person claiming people bagging on Ca real estate , that is me, have  actually have owned Ca real estate. Probably more than a lot of posters here, I can tell you I  played the appreciation game and it's a long slow process usually. Not to mention unless you have a big window to hold, you may get to experience it going down in value

I owned 2 houses in Pleasanton years ago. Paid $600K each and put down $200K. They ran a negative $10K minimum cash flow each year. Rent covered mortgage, but taxes, insurance, maintanence, vacancy An owner would cover. I did sell them, but had I held them just taking a rough guess it took 14 years for them to each hit $925K. Great appreciation, but for several years they went down in value. So over 14 years each one went up $325K. There's the appreciation play. A terrific gain , 23K a year, but you had to wait 14 years for it to happen. But wait, let's take off the yearly loss. Up until a few years ago when rents took off and you can break even, you would still lose 10K a year or more for 11 years for a total of $110K negative. Now your appreciation is down to $205K. That's still a good chunk, but kind of a hairy ride for a bit waiting for appreciation.

Now if you bought those  3 years ago when I started buying out of state for cash flow you could have paid $750 to 800K and made 125K to $175K appreciation, but you still would have run a small negative cash flow over 3 years probably say  about 20 to 25k for the 3 years.

So all in all in the hottest appreciation market in the last 3 years you'd make a net of $150K or so with that California real estate putting down about $250K down payment.

In my case the last 3 years with my out of state property I got from $250K  a total of  $135K of forced appreciation and  rental income of 105k. 

That's California appreciation $150k vs out of state $245K from a $250K investement. The difference will be higher if I leverage out of state like the Ca property is leveraged. Right now doing the BRRRR thing I am pulling out all my money I put in plus some extra on the cash out refi, still flowing positive, and still have a 30% equity position on the property

I'm not saying Ca isn't a good bet. It is for most people. If they can wait for a long period. The last few years have been out of the norm. Someone buying today may not see the appreciation over the next 3 years matching the last.

I'm just saying I've owned both so I can tell you pros and cons and pretty much invalidate what the guy who is saying that people posting here never owned Ca real estate.

I won't say what state I'm in, but will say it's in the Midwest there are a lot of states in the Midwest and south thathave this opportunity. Just do you research and homework and actually invest time and money into flying to those areas.

I'm in Georgia now but except for my principal residence own no real estate here. It's not that there aren't opportunities here, it's just that my out of state properties have a manager so I basically am retired. If I buy here I will be tempted to self mange which means I am on call again.

I mostly bought foreclosures at a discount. Once repairs and rehab done the value goes up to market value. For example, let's say you buy a house for 35k, put 15k into getting it rent ready. You are into it for 50 k. Appraised values in the hood run about 75k so in a month you've made 25k. I 1031 exchanged the California property to 6 out of state homes. The cash flow from those 6 well exceeded the one California house.

Now you could do the brrrrr thing or whatever they call it. On two of my houses I cash out refinanced them and they still flow positive albeit only a few hundred a month, but I got out all my money invested in those houses and a few thousand extra on top. Then took the proceeds to buy two more rentals cash.

Oh btw I hit the $107K a year cash flow in three years, not 10 to 20 years

My understanding is the wait list for sec 8 is a very long time. If you want to save all those tenants in a triplex you probably will have to  pony up the difference yourself rather than dumping them as burden to the taxpayers. You yourself are taking on just a tiny fraction of that sec 8 tax burden since everyone else is paying for it too. 

Don't kid yourself you are doing the noble thing. You are profiting off of raising rents and handing the expense of doing so over to the taxpayers of Ca. The difference is you don't have to look them in the eyes.

If you are truly going to do the right thing as you say you might well be paying the difference for 2 tenants and every 2 years for 3  tenants after that . If each tenant has an 8 year wait good luck on supporting them all. It might be years before they can even get on a wait list.

Not sure how you got your numbers, but I sold A bay area rental a few years ago. 

In 2 years time it went up $90K and would have collected  $45,600 in rent for a total of $135,600 profit. 

I bought out of state and those properties went up $172K and collected over $76K in rent

for a total of $248,000 profit.

I'd say my out of state kicked the California return's butt.

Just an FYI, Union bank does do HELOC on rentals, but only Ca, Wa, and Or.