All Forum Posts by: Becca F.

Amazing job! You're one of the few investors I've heard of who did well with buying tenants in place. 

Wow not getting your EMD back... I was contacted by a New Western rep on BP about 2 years ago, not for Colorado but for Nashville properties. She didn't call herself a wholesaler but a disposition agent and said, "We're a different kind of real estate agent"...no thanks.

 I hadn't read a few of these before... wow.  I'm still on the email list for one of turnkey company in Memphis and another turnkey company in Michigan who also charges for access to their system - they were heavily criticized by another investor for shoddy work on their flips and BRRRRs. If someone searches the Guru forums, it should be apparent. 

Agree on investing within 2 hour drive or househack  and if you looking out of state, spend a lot of time meeting your team in person and getting to know the area. Being 2000 miles away puts an investor at risk of being taken advantage of by dishonest people  (agents, contractors, tenants, etc) - definitely need to audit any statements by Property Management companies and ask lots of questions. I just talked to a CA investor whose PM won't give her the invoices for the repairs to her own property... that sounds unethical to me. 

@Amir Twig

I agree with the previous comments that $10k isn't enough. I'd put it into High Yield Savings Account and look to increase income by getting a raise/promotion with W2 job, side hustle and reduce expenses.

If there are other cash reserves, I'd buy a few REITs. If it's just the $10k stick with HYSA

 Where did you find 10 houses out of state in 2023/2024? Are you buying these off market or work with an agent? Did they all need major renovation? Do you self manage them? 

I've been buying on market (the Indianapolis purchases in 2023) - I wouldn't call those good deals, purchase price maybe but so many repair issues. I'm looking on Zillow/MLS in the western states for higher quality asset so I know I'm paying retail price.

I would upvote this 20 times. I have talked to so many California investors (mostly in the Bay Area but a few in LA) that are paying high rent in CA but buying inexpensive properties in the Midwest and South. There are looking at numbers an OOS agent or turnkey company gave them on a spreadsheet  "close to 1% cash flow" - always verify and look at who's trying to benefit from selling you something. 

As we've seen on the forums mostly. CA have lost so much money from buying cheap properties in far away locations. Get ready to spend some money on tenant issues, repairs, vandalism, getting taken advantage of people (dishonest contractors and property managers) while you're 2000 miles away. 

I'm -$300 to -$500 on month (Class C home in Indianapolis) most months for 2 years now, on what was supposed to cash flow on paper and let's not forget about the stolen AC unit and attempted break in. I'm unsure of how long to keep this home and have to sort of predict how much it will appreciate in the future. Just talked to another CA investor whose PM won't show her the invoices for the repairs on her rental in the Midwest. 

Quality over quantity. I'd take 4 solid appreciating properties in CA in nice to okay areas over 20 cheap properties  (all the capital expenses, roofs, HVACs to replace) in a far away state. 

 The rate is low for people who have owned for decades or in 2008 but true, for newer homeowners and investors it's not. CA state median property tax of 1.21%  For San Francisco it's 1.178% (rounded up all those decimals), San Jose 1.46%. Not sure what other states' property tax rates are and how they re-assess values or how often (I just know Nevada and Arizona rates are on lower side, Texas higher). 

Ex: Home A long time owner is paying $2000 a year with an assessed value of $110,000. There was a"like in kind renovation" with permits pulled, replaced old plumbing, electrical, new cabinets, floors, etc, no added bedrooms or bathrooms, no ADU. This renovation could conceivably cause the assessed value to go up but not go up 10 times, up to the Assessor's office. Appraised value of $1.7 million post-renovation. Home B recently purchased in 2024 is paying $24,000 on assessed value of $2 million (to be fair their renovations are higher end) since the value re-sets upon purchase/closing. Homes are comparable square footage and the same model.

House C sold in 2018 (a little smaller than the other two but on same street) for $1.8 million property taxes are $21,000. Previous owner was paying $11,000 property tax on assessed value of $977,000. There appeared to be some significant renovation done in 2013 causing a 22% increase in assessed value and another increase in 2007 (assessed value went from $291,000 to $830,000 so 187% increase from 2006 to 2007). I'm not sure how the Great Financial Crisis of 2008 affected assessed values since home values dropped significantly if someone bought during the 2007 to 2009 time frame. 

I walked all 3 homes and know the owners of House A and C (but not the previous owners of House C back in 2013 and 2006). Yes it's unfair that owner A is paying significantly less property taxes than owners B and C but that's from Prop. 13 and the assessed value increase goes up max 2% a year if there are no significant renovations done causing a re-assessment. 

I will start a Prop 13 and Prop 19 thread in the Tax, SDIRA & Cost Seg forum, gathering my information and sources. 

I agree on the medium term rentals (MTRs). I know quite a few people doing MTRs in California to traveling business people, people displaced for insurance reasons (with all our wildfires as one example).

Depending on the market but it's more a California strategy, building an ADU (either attached to the main house or separate structure) and renting it out either long term or MTR or STR (AirBnb). Or conversely, the owner lives in the small ADU and rents out the main house - need to research local rental laws in CA but I would think in a more landlord friendly state and no rent control this could work well.

NNN leases but this is more of an experienced investor strategy where you rent commercial space to a tenant and they pay the property taxes, insurance and maintenance costs. There are also N and NN leases. Examples: fast food, coffee places, medical office buildings. No residential RE hassles dealing with tenants and repairs but requires more capital (up to 35% down, according to CA investor I know doing this in the Midwest and South.

EDIT: to my recent comment

Prop 19 has confused many people. If there is a parent child transfer and the child moves into the parent's primary residence:

"Prop. 19 now only allow heirs to keep the family’s old property tax basis if they reside in the home (don’t rent it out) and if the property has gained less than $1 million in assessed value." (in the link above)

Previous to Prop 19: adult children could inherit the property tax basis of the primary residence and rental properties (which could all be low if owned for decades). Now rental properties or any second homes (vacation homes or vacant properties) will be reassessed at market value. 

So basically children are stuck in difficult place:  all the adult kids move into the parent's primary residence OR take the step up basis and sell and own no California property (especially on a rental/second home) or keep the properties and pay the massive property tax on the new assessed value. 

This is separate issue from the Section 121 capital gains $250k/$500k exclusion of IRS tax code. I was going to create a separate post about Prop. 19 but wasn't sure what forum to post it in

Really interesting discussion. I didn't know the $250,000/$500,000 capital gains exclusion has remain unchanged since 1997. 

More specific to California, as far as older people (boomers) moving out of their homes so younger people can move in, I don't think that's the major reason, capital gains tax (of people I've talked to so obviously I don't know millions of people in CA). Ex: Someone bought a home in the Bay Area for $50,000 in 1970 and now it's worth $2 million. Many of them that I know  don't want to leave a familiar area that they've lived in for 40 to 50+ years and move out of state or elsewhere in CA. These were middle class people when they bought. I haven't talked to any older person in a rush to move to Arizona, Florida etc out of the Bay Area although there probably are many of them. 

Despite all the "California has high state income taxes, high cost living etc" if you have a paid off property, low property taxes, a retired person with low expenses, a decent pension, retirement savings and a little Social Security can live a comfortable life here. Our health care is rated B. 

https://medicareguide.com/best-states-for-elderly-healthcare...

For the people buying homes currently it's mostly high income earners especially tech people paying $1.5 to $3 million for SFH and they will bid up on a desirable home especially on the Peninsula/Silicon Valley. Those price ranges are much too high for anyone with a lower salary such as retail workers, teachers, etc. We have state programs and private programs (they get part of your equity though) to help first time home buyers.

Separate from the capital gains tax issue is CA's low property taxes from Prop. 18. Before heirs could inherit the parent's property tax basis on the parent's primary home and for additional properties they're exempted the first $1million value of the home. (Ex: House A market value is $2 million but child is paying $2000 property tax based on parent's $110,000 assessed value but market value is $1.8 million). And recent Prop. 19 passed in 2020. This did away with that unless the child moves into the parent's primary home but it allows seniors (or severely disabled or a natural disaster victim) to transfer their low property tax basis to buy a new home elsewhere in CA. I didn't vote for Prop 19 - there have been efforts to repeal it. Now I have to do some maneuvering of my estate so my kids aren't hit with a massive property tax increase when I die. 

https://abioproperties.com/market-news-trends/californias-pr....

There's unfairness everywhere depending on who you talk to. We can't make everyone happy. 

What are people's thoughts about raising the capital gains exemption to $500,000/$1 million?