All Forum Posts by: Becca F.

@Christopher Morris

Really great thread. I tried to read most of the comments.

I think a lot of it also depends when someone bought. I know 4 people who are living off their real estate cash flow.  One bought in California in the late 1990s to early 2000s. She and her husband quit W2 jobs around age 40 with 4 properties (doors) and stock dividends. The other one is not in California, quit W2 at age 37 scaled from 2014 to 2021 with 5 duplexes, quit W2 during COVID, lives a frugal lifestyle and benefitted from the huge increase in property values and low interest rates. Both self manage their properties. 

More recently the other 2 people (in their early to mid 30s) have $400,000+ W2 tech incomes, scaled from 2015 to 2022, turned real estate into a business. I think 90% of the CA investors I talk to are tech workers now. They took a lot of risks that I wouldn't be comfortable taking. The other California investors with more moderate incomes bought years ago and have built wealth from 30+ years of appreciation and small mortgages and their rental income supplements their pension or Social Security and retirement accounts. 

I have a small portfolio (Class A in Bay Area and Indianapolis metro area) with significant equity and thought I could achieve more cash flow by buying Class C properties in Indiana 2023... nope. If we are strictly talking about cash flow, I'm cash flowing more from my HYSA and index funds - my net income is $71 a month on this SFH. My only dilemma is how long I should hold onto a Class C for appreciation.

I'm working my W2 job and looking at RE as part of my overall portfolio to retire. I also live in a VHCOL living area and if I lived in another country with very low costs I could possibly live off my cash flow, not happening in the USA for me. 

 I would consider keeping it if you can weather the -$700 a month. Do you have enough cash reserves for the negative cash flow for a couple of years? 

If it's a new construction, hopefully you wouldn't have too many capital expenses or repairs. I have sold in California, took the cash and moved out of state (to Indiana) and highly regretted it - I didn't have a real estate investor mindset then. I came back to the Bay Area to sky high prices.  My perspective is that I'm very pro-California appreciation and I'm willing to take some negative cash flow for a while (if someone can afford it).

You mentioned that you may move back in the next 3.5 years. This would make me pause and not be so quick to sell it. 

I never really noticed reverse trolling. Most of the posts are read and respond to are from people looking to buy their first investment property, usually California investors. I notice more of the spam or sales pitches in response to them.

By the way, I'm starting my cat tree flipping business. My business partner is orange and white and likes to chase mice - she ran the numbers and the ARVs are solid.  Who wants to join?  Hahaha :) 

 I completely agree with this. I hadn't read the Baltimore story before...wow.

Hi Sathiya, some thoughts: 

- attend in person meet ups in the Boston area to talk to other investors who buy locally and out of state to get their feedback and maybe consider looking within a 2 to 3 hour drive. 

- cash flow is difficult now with long term rentals even if you pick markets that have lower purchase prices than Boston. The cash flow on paper is often much different than reality. I've talked to lots of California and a few NYC investors that have lost money (including myself) who bought inexpensive properties in the Midwest mostly and a few in the South (Class C is volatile). 

- some strategies I've seen California investors use to lessen negative cash flow: house hacking, mid-term rentals (people temporarily displaced from home renovation or insurance reasons like fire), rent by the room, Short Term Rentals. 

- The ultimate house hack, live in the small ADU unit and rent out the two levels of the main house on AirBnb in San Francisco (I would have thought STRs are oversaturated in S.F. but it worked for them and they stay fully booked). The down side is that STRs are more work, need to furnish it, pay for utilities and WiFI but in the right market (vacationers and business travelers) it could work.

- If I were looking at cash flow as a really important important metric, I'd consider starting a business. I prioritize appreciation, tax benefits (rental property expenses, depreciation), ability to use leverage, and passing on generational wealth with real estate. 

I've had several "deal killers" who gave me numbers and walked a few OOS properties for me. I thought that since I did a local renovation that I'd be ready to do a BRRRR or flip in Indianapolis... nope. I was going to attempt my first flip and decided I didn't have the risk tolerance. I was given realistic numbers for ARVs, renovation costs, median rents, etc. Outside of my one renovation, I didn't know that much about construction - I've learned a lot in the last 2 years.

I've acted as a "deal warning person" to many new California and a few NYC investors who I've talked to in person, Zoom, and phone calls who want to buy the Midwest or South because the price points are lower.  My advice to them is you really need to know construction and walk properties (not just look at videos and photos), know the area, have an unbiased local investor do a walk through (if you can't fly there in person), and how to read inspection reports and get a sewer line scope. 

I hope that they listened to what I said - one recent person who is house hacking decided to look within a 2 hour driving distance instead of buying over a 1000 miles away. 

I just did this exercise - I liked ranking them so I could look at the big picture. I dislike the door count as a metric also. My RE journey over 2 years ago was to acquire lots of doors and I've completely changed my strategy. I actually sold a Class C a few months ago - I saw the writing on the wall after one Class C, very likely no capital gains after all my passive losses. No more inexpensive Class C properties OOS for me. 

I had a couple of people suggest to me to sell my appreciating Bay Area SFH so I could acquire more "doors" and theoretically "cash flow" more with OOS properties. Going into the unknown and buying multiple SFHs/duplexes or an apartment complex OOS and my property taxes will skyrocket (property tax is reasonable thanks to Proposition 13 in CA). Raising the rent and value add on my higher quality properties will get me more net rental income than continuing to buy.

Happy New Year!

I agree with the above comments. I hope you or someone is at least keeping an eye on your properties for break ins, squatters, roof leaks, temperature control, frozen pipes (if in cold climate), if you have a basement and sump pump goes out leading to water damage etc.

I just talked to two investors in California that have let their properties sit vacant (no mortgages so paying property taxes and insurance). Cities in the San Francisco Bay Area are charging vacancy taxes because they're seeing people with a lot of capital just buy up properties to hold onto for appreciation and not renting them out. And then if you get a squatter in a pro-tenant law city, it'll be a long process to get them out. Real estate isn't the same as buying an index fund where you buy it and forget about it for years. 

Are there specific reasons you don't want to rent them out (e.g. bad previous experience with a tenant)? 

I have gone on MeetUp.com and Facebook. I just went on MeetUp typed in "real estate meetups" and there were several for the LA area. Facebook groups may have in person meetups or Zoom video meet ups. A few of them seem somewhat spammy to me (e.g. people constantly posting about properties they're selling at a discount) and not much helpful advice. 

If you have difficulties finding local meet ups, DM me and I can reach out to my network with my SoCal investor friends. 

@Denise Lang

I'm not sure what part of California you're located but I invest in the Bay Area and Indianapolis metro area. I've had mixed results with Indianapolis. It's referenced in one of @Nicholas L.'s posts

So far I haven't had any issues with my tenants here and my properties are located in a very pro-tenant law city. There are nightmare stories but most of the CA investors that I know haven't had major issues. Otherwise they'd all sell and invest OOS or get out of RE entirely and many of them have been investors for 20+ years. One of the disadvantages is if I add an ADU to my single family rental, it's considered a 2 unit and under rent control so I decided not to do that considering all the construction costs. This rule differs from city to city. Vetting the tenants and following local laws is extremely important.

If you don't own a primary residence, would you consider house hacking (buy a single family and rent out the rooms or a duplex and live in one side/rent the other? If you're in the Bay Area, Sacramento and the Central Valley are all within a 2 to 2.5 hour drive and price points are much lower. 

When you mentioned that you don't have a lot of money to start with, I'd recommend focusing on increasing your current income and decreasing expenses. I'd suggest attending local meet ups so you can talk to people who invest in CA and OOS. Some of these investors might let you walk some of their projects. Knowing about construction, how to pick a good inspector and read inspection reports will save you a lot of headache/money -  it's difficult to invest in RE just by doing things online.

Feel free to DM me if you have further questions. Happy Holidays!

Great question. I'm looking into possibly doing a 1031 or reverse 1031, have kind of identified potential markets. 

What are fees associated with the Qualified Intermediary holding onto this money? Does it outweigh paying the capital gains tax? Do capital gains offset passive losses that the investor has, so someone really isn't paying a high capital gains tax as they thought?