All Forum Posts by: Becca F.

Dan, thanks for the feedback. I agree about California appreciation. That's why I didn't sell the SFH in the Bay Area (owned free and clear with low property taxes until I took out the equity line to do the renovations) but buying more properties now, it would be a huge stretch financially for me with high prices, taxes and interest rate.

So you think buying in a CA coastal city and breaking even or even being in a negative cash flow could be a financially smart decision? I'm looking at the Midwest with cash flow of $200 to $300 a month maybe $400 if I'm lucky from what I've heard from other Midwest investors. Midwest appreciation has historically been slow but properties are affordable - I bought a SFH 10 years ago for a low price and and getting decent rental income from great tenants.

@Gulliver R.

Thanks for bringing the topic of LLCs up. I also heard about doing a Wyoming based LLC. None of my investor friends who own 1 to 4 properties in the Bay Area have LLCs, which surprised me. The only person I know with LLCs owns 11 properties in the Midwest. As far as anonymity I looked up one of my friend's properties and it was recorded by the county with his name on it, not the LLC. That doesn't very anonymous to me if his name is linked to the property address. I purchased additional umbrella insurance beyond the rental dwelling insurance. It's fairly inexpensive.

@Jason Marino I'll also look into the Delaware Statutory Trust and consult and real estate attorney.

@Davis Pemstein

I kept the SFH in the Bay Area (owned free and clear with low property taxes), took out an equity line for renovations, and am renting it for market rate now. I sought advice from numerous people and over 80% said keep it. There's absolutely no way I'd ever get another house like that in the Bay Area if I had sold it. I sold another Bay Area property and am on hold with purchasing anything now, just researching areas and seeing what my financing options are.

I plan on leveraging more equity out of that house and buying out-of-state, mostly likely Midwest, but considering Florida (Panhandle area) and Tennessee. I have a SFH rental in Indiana which cash flows nicely, not great but I bought it for less than the price of a high end Tesla at a low interest rate so it was a good purchase for me.

When you said you're thinking of renting, are you moving out of state?

@Mindy Ma I'm an investor in San Francisco Bay Area. I have rentals here that I acquired before 2010 so I'm cash flowing but I'm highly unlikely to buy anymore in California. I just sold a property here because I was going to be -$300 a month best case scenario (rent minus my monthly payment (P&I, property taxes, HOA) not considering tenant management or vacancy issues. I had local investors saying I should hold onto it because of Bay Area appreciation but I don't want to be at a loss each month hoping that it'll get better. I decided to cut my losses. Running short $1000 to $1500 month is a bit steep. I hope all goes well for you.

@Allan C. You make a great point. I've never heard that it's a financially sound decision to buy a property being in a negative cash flow hoping it'll appreciate enough and rents going up enough. 

@Wes Wong

Welcome to the BP Community! I can't speak to Phoenix or Atlanta. I'm a California investor looking for out-of-state properties. I have a SFH rental in the Indianapolis metro area (suburb) and it's cash flowing, not as much as it used to because my property taxes increased significantly. I have Class A properties in the San Francisco Bay Area and in Indiana so haven't had any tenant management issues so far, a bit afraid to look into Class C properties. My property manager owns duplexes and an apartment building in Indianapolis but he bought them before all the prices went up the last 3 years. He's doing very well with cash flow.

Your budget is much higher than mine at $600,000. I'm also looking at other areas of Indianapolis and other states. I really like SFHs but I don't know if I'd cash flow more with multi-family but price points are higher and SFH is easier to manage for me (self managing one right in California now). I'm mostly likely going to do DSCR loan if I can't qualify with conventional loan. These higher prices and interest rates have me on pause since I don't want to make a bad purchase. Good luck!

@Bryce Jamison

Congratulations on your first property and lease! My leases in California and Indiana for single family homes both state that tenant is responsible for plumbing damages unless caused by defective plumbing parts or tree roots invading sewer lines. As far as plumbing damage if the plumber determines it was the tenant putting paper towels etc in the toilet or chicken bones in the garbage disposal, the tenant pays for the damage. Tenant notifies landlord of any damage or repairs needed. I also state: no smoking inside the house, late fees for rent ($50 per month), $45 fee for insufficient funds, lease automatically renews for 60 days at 125% of the rent unless landlord or tenant gives notice to terminate the agreement, overnight guests limited to 5 consecutive days, no nails and scotch tape on the walls to hang items on the wall and use of Command hooks/tape for damage free hanging, no antennas and satellite dishes shall be erected, tenants responsible for landscraping (mowing the lawn), snow removal in driveways and walkway to front door, and cleaning dryer vent. 

Tenant pays all utilities (water, electricity) and it's in their name. I have to pay for the sewer/trash/recycling fees I added this fee onto the base rent - the city would not let me transfer it the tenant's name. The names of the occupants are stated on the lease and one month's security deposit. My property manager wrote up the lease since he's an experienced landlord in Indiana. I'm pretty flexible with my tenants - if they wanted a dog, I would charge additional pet rent ($35 a month for each small dog cat, $45 for each large dog). I did not do a refundable pet deposit - some people do both a deposit and pet rent or just one. The pet rent nets me more money than a $200 refundable pet deposit. Also sometimes it's difficult to determine if the tenant or pet caused the damage so any damage is covered by the security deposit. I had this happen with the first tenant, she asked if she could adopt a pet - the dog was fine but she nailed things on the walls. She patched the holes in the walls up but I charged her painting the entire wall and repairing deep gouge in the wall. Indiana is landlord friendly so tenants are very reasonable. 

For my SFH rental in California (San Francisco, a tenant friendly city), I also state: late charge of $25 and $20 per day (not to exceed $200 per month), no candles, no fragrance plug-ins, no illegal drug use, no smoking and no vaping of any products inside the house (I'm okay with weed use in the back yard or outside since marijuana is legal here), tenant mops up standing water, oil spills in driveway, etc. Landlord is not responsible for ants, fleas, etc. My security deposit is $500 for current tenant with roommate situation. I personally know the tenant so I'm charging a little less. This tenant is the Master Tenant. The Master Tenant collects security deposits and rent payments from the other tenants and they split the total utilities and internet among themselves - there's no way to individually meter each person's electricity/gas and water use. I currently pay for trash/recycling/compost fees. The Master Tenant Addendum is in place because SFHs aren't under rent control (so far). If it's determined to be a multi-unit, for example, people that have ADUs in the backyard or a lower level rented out as a studio, the property could be subject to rent control depending on the city. I also charge a garage use fee $100 per garage (two car garage) so the roommates (or any additional cars) have to park on the street.

If I were renting to a single tenant (a couple or family), my security deposit would be more than $500. The rents here are very high so charging them one month's rent for security deposit would be asking someone to come up with over $10,000 first months rent (about $5600) and security deposit at one time is excessive to me. I'd probably do $1000 or $2000 security deposit for a couple/family.  I just started renting this house so I wrote this lease with a template my investor friend used in consultation with her attorneys. I'm self-managing this property right now. 

Sorry for the long response. I hope this helps.

@Rosario Aiello

I'm in California and have properties in the Bay Area and Indiana. I'd vote for Midwest for affordability and cash flow although I think the appreciation is much slower in Indiana (Indianapolis metro area). From 2013 to 2019-2020 my Indiana house increased in market value from $140,000 to about-$250,000 (based on the all the realtors calling me with buyers lined up during the sellers market). So that's about a 78% increase in 6 to 7 years. It's in a nice suburb with a great school district. I'm going to guess that a California property went up in value much more in 7 years. I have great tenants but my property manager is very cautious on increasing rents as to not scare tenants away. I'm keeping the house since there's no state where I could buy an upgraded house for $140,000 now with a low interest rate. It's also landlord friendly. My personal view is that there isn't a lot of job opportunities in Indiana and the salaries are low. One of the major employers, Eli Lilly announced that they won't be expanding there for political reasons. If there are other Indiana investors that have found good deals or are cash flowing a lot, I'd like to hear from them.

My California properties are cash flowing much more what my Indiana house does. I acquired these properties before 2010 so I'm not paying the high prices or property taxes of someone buying in the last 5 years. I won't be buying in California now and definitely not the Bay Area. Paying over $650,000 for a house that needs rehab is really steep with 20% down with mortgage payments at 7% to 8% interest will be more than current rents. All my properties are Class A maybe class B for my multi-unit and so far have had no tenant management issues in the Bay Area or Indiana (so far). As far as the Bay Area, someone paying $3000 to $5000 rent is unlikely to put holes in my walls or someone with a rent controlled $1500 apartment would be stupid to do things to get evicted (these are tenants living there for 20 years or more).  Most of my Bay Area investor friends have very specific things in their leases and have had an attorney review the leases. I've had investors suggest buying Class C in Antioch or Stockton would cash flow as much as Class A in the Midwest. I would rather pay a little more and have fewer solid Class A or B properties than buy 20 cheap properties and deal with tenant management issues. I've also had suggestions about doing short term (AirBnb) or mid-term rentals (business professionals and travel nurses) - I really have to think about this. 

I'm in also in the same situation - researching markets so I don't make a purchase I regret. I'm also looking in different states: Ohio, maybe Colorado, Tennessee, Georgia and Florida panhandle area. Someone mentioned above you can cash flow in any rental market if you're smart. Hope this helps!

I did a brief search of SFH prices for Brentwood and current rents (Trulia). The lowest priced home is $599,000 for 3 bedroom 2 bedroom. Most of them are in the $600,000 range. Rents are $2950 to $3200. Mortgage payment on a $680,000 house will be more than the rent and I'm putting 20% to 25% down for investment property. I don't see I could cash flow with interest rates being 7% now. I can't wait for something to appreciate in 5 to 10 years while being -$1000 or more every month. Then I'm leaving my children this huge mortgage with a non-cashing flowing house if I die.

I spoke with my lender and she said unless I'm buying multi-family it doesn't look good for SFH rents especially in California because prices and interest rates are high. There's no way I can buy a multi-family for $400,000, maybe a nice duplex in Indiana? I talked to an investor in Florida near the Panhandle (near 30A and Navarre Beach, Freeport and West Panama City Beach) who said I could buy a house for $425,000 to $450,000 with rents $2300 to $2500 (long term rentals) or $3500 to 4000 (furnished short-term or mid-term rentals) or a $250,000 house needing cosmetic renovations ($1330 mortgage payment with $1900 rent). His opinion is that Florida is a combination of California and Texas and I'd have better appreciation than Indiana. Those long term rents for the $400,000 houses don't look like I'd get a good return with current mortgage payments. My strength isn't in running the rental property analysis calculators. Now I'm thinking to not buy any rentals and buy some stocks or index funds, where I could easily escape if I need liquid assets. I'm so confused.

d the rents are currently $2950 to $3200.

@Amit M.

Thanks for the feedback. I'm a bit apprehensive about Antioch and Stockton. So far I have great core properties (in Bay Area and Indiana) and great tenants and definitely don't want to deal with crime and tenant management issues. The price points are still high to me. I looked at a few houses in the East Bay but were over $650,000 and needing work. 

A turn key property in the Midwest is do-able for me in the low $200,000 to $300,000 range (haven't done any rental calculator analysis yet, just searches and talking to my Indianapolis area realtor). I'm afraid of buying something that needs a lot of work but $100,000 to $150,000 is a low price range. I don't want to rush into a purchase but the interest rates keep going up. I haven't hit my number yet and my goal is to retire early/quit my full time job - I don't want to work at this stressful job for more than 3 to 5 years. 

Thank you so much for explaining LLCs! Most of my small time investor friends in California (owning 1 to 4 properties, meaning a multi-unit building counting as one) don't have LLCs. They said the paperwork and taxes for an LLC would be complicated. The only person I know with LLCs has 11 properties. I was so confused about the process to get a registered agent in another state (Wyoming?) to have anonymity. Then I would need to change my estate documents (trust and will). I have 3 properties. I had a few people suggest I get an LLC and I would need to get a different LLC for each property - my lender said a few years ago that I would need to refinance the mortgage to an LLC. I've heard there are ways around that to change the recording on the deed without having to refinance the mortgage or triggering the due on sale clause. I purchased additional umbrella insurance beyond the rental dwelling insurance policies.