All Forum Posts by: Becca F.

Becca F. has started 28 posts and replied 941 times.

I know a few people who became gurus/mentors/coaches, not on a national level but one of them has ads on Instagram now. I was shocked that one particular investor friend is now trying to sell coaching courses.

One of them is also an agent and I asked for help for a friend who was looking for a property here. This guru/coach told me to contact the admin assistant for their coaching courses. This didn't sit well with me if I'm referring friends to S.F. Bay Area real estate agents to buy properties not to be sales pitched a course.

3 Votes

I agree. Some of the name calling and insults is probably going to leave a sour taste with a lot of people on here especially a new investor who's looking for help and empathy. If I've come across as arrogant or dismissive, I apologize. I try to share my experience so more California investors don't go through what I did.

I've learned a lot in the past 3 years. Before I would extol the greatness of real estate investing to my family or friends and to my California friends about buying out of state in cheaper markets for cash flow. On the latter part, I sure was wrong. I should have trusted my CA friends and agents advice instead of listening to people from OOS that I don't even know.

Since RE is a lot more work than stocks, it's fine that some people just don't want to invest in RE. If someone asks about my rentals I'll tell them but I don't push it on them anymore.

I'm reading some of these threads with my popcorn...who needs reality TV or a 2 hour movie lol 😂

4 Votes

Fair...James where are all your memes?

I needed a good laugh, dealing with contractors right now on California and Indiana properties 😭

0 Votes

Quote from @Dan H.:

Quote from @Becca F.:

Quote from @Mike D.:

Quote from @Becca F.:

Quote from @Mike D.:

Quote from @Becca F.:

This post generated over 100 comments...wow.. I agree with many of the comments about owning a higher quality asset in an appreciating market. I invest in the San Francisco Bay Area and Indianapolis metro area.

My appreciation and net worth from my California properties far surpasses my Indiana ones. For context my appreciating properties in CA and the Class A Indiana were acquired in 2013 or before. Class C Indy purchased in 2023.

I know a lot of multi-millionaires in the Bay Area who had middle class incomes (teacher, librarian, janitors, etc) who bought long ago (as in 2008 or going back to 1970s) with with just one or two rentals. This was when CA was more affordable and home prices weren't out of reach.

Example (not mine but someone I know):

- S.F. Bay Area home 3 bedroom, 2 bath 2100 sq ft (lower level living area brings it up to 2700 sq ft) purchased in 1960s for $68,000

- listed for sale in 2014 for $1.25 million, bidding war, sold for $1.71million.

- New owner renovates it, listed in in 2021 for $2.5million, bidding war sells for $3.078 million. Owner #2 made $1.368 million (minus commission and closing costs) in 7 years. That's a pretty good return to me.

I tried to read every single post but stopped on page 4. I didn't see anyone mention this but in California our property taxes go up a max of 2% a year (from Proposition 13 passed in 1978). Long time owners (primary home owners and investors) benefit from this but newer buyers pay high property taxes.

I had an Indy property management company do an analysis of my 3 homes. Class A could keep for appreciation, doubled in value but my property taxes go up significantly, 17% the last assessment (at this rate the property tax will surpass my California properties in a few years - not joking). For the Class C homes, he said I'm unlikely to get a good return unless I get a great tenant and they stay for a long time and the properties stabilize (repair calls reduce). The tenants will likely be lower income for a very long time. I sold one of the Class C and the other one is still rented. By the time the Class C appreciates enough I'll be over 100 years old.

If I was going to be cash flow negative from the start, I would have bought one higher quality asset instead of 2 Class C homes. To the OP, Mike D. meaning buying in Hamilton County suburbs (where my Class A) instead of east side of Indianapolis.

I think people who live in low cost markets do better investing there instead of investors who live 2000 miles away. I also think there are sub markets with lower cost markets and I recommended to CA investors to buy higher quality assets OOS not the cheapest house they can find.

Interesting insights and I am in a similar situation to you. I own property in California as well and choose to do most of my investing in the Midwest in spite of the higher (historical) appreciation and rent growth in CA. The reason comes down to return on equity. Many if not most of the people arguing against my ideas, some of them very, very loudly, don't use or understand this concept. Basically, you take all sources of gain (cashflow, appreciation, and principal paydown) divided by your equity in the property (at purchase it's your down payment, and later as appreciation takes place it's whatever the current value of the property is minus your loan balance) and that gives you a percentage showing your total return. I pretty much guarantee that that's higher in the Midwest UNLESS you put down a small down payment in CA and deal with huge negative cashflow. If I were writing my post again I would clearly define this concept at the start since many investors don't understand this and I was just assuming they all did.

If I were evaluating Class A vs Class C I would figure out the amount I need to put down to cashflow and then run an ROE calculation on both. Nothing wrong with Class A as long as you understand the difference in return and make a tradeoff you like. Its ROE will be much lower, but less volatile, less maintenance calls, less annoyance.

Yes, the outskirts of Indy such as Hamilton County give truly amazing ROE due to even better cashflow and lower property taxes than Indy and for some reason are neglected by investors.

Thanks for the feedback!

Mike, I didn't know you had property in CA. Do you mind sharing what counties your Indianapolis properties are in?

I did consider other cities and states but it would have taken months of research and I knew Indy best:

Tennessee: Nashville and suburbs Brentwood and Franklin (have visited before) - possibly, Memphis - no (was sent numbers by a turnkey company)

Detroit, St. Louis, parts of Ohio - no (optimistic numbers sent by turnkey company)

In the turnkey companies ads/sites they say "passive investing" LOL...if OOS investing is passive, I'm the Queen of England

I'm going to address the "grow your net worth twice as fast". Based on the Indy PM analysis, how would my net worth be growing by buying Class C properties on the east or west sides of Indy, if I'm -$300 to -$500 most months? Just as I thought it was stabilizing and received two months of full rent (minus PM fee), I get another repair notification the other day with a $385 repair. I really appreciate this Indy PM's honesty - he could have said, "hey just switch to my PM and I'll make it all better." It's possible I bought a lemon of a house but I'm not going to take anymore chances and buy 5 or 10 more of these types of properties.

I know this is a RE forum, but my net worth has grown more in the last 2 to 3 years from the S&P500 than this east side Indy home. I log into my retirement accounts and brokerage account and have more "cash flow" from these than 3 years of Indy rentals (the Class A and C combined). Yes I'm paying taxes on all this interest income and dividends but I have far less stress. I have a large amount of passive losses on these rentals which can only be unlocked by selling since I'm not a Real Estate Professional and can't offset my W2 income with these losses.

I'm going to try one more time with Nevada. If this doesn't work, I'll just add value to CA properties, raise rents and maybe keep the Class A Indy one and call it a day and invest in index funds, a few REITs, etc. The stress is probably taking years off my life and current happiness level.

Hmm, let's see. First off, I would never invest in class A if you're looking for cashflow, or at all. Class C small multifamily properties are the real meat and potatoes. I'm not here advertising for anybody to buy any real estate investment. It's hard to invest profitably at all right now with interest rates where they are. That said, I am currently in the process of growing my portfolio, so obviously I think it's worth it. These are my suggestions: a) pay the loan down until you can cashflow, b) audit your PM's maintenance expenses, consider dealing with other vendors, c) invest in small multifamily, d) be conscious of property taxes and consider investing outside the city of Indianapolis, where they are high.

I am currently getting around 15% returns on my stuff in Indy, including stuff that's paid down more than it needs to be, and it can be tightened up more to get closer to 20% while still cashflowing. If you are focused on cashflow, note that your total return will always be lower, and I myself accept this to have some cashflow. Total returns are always higher when you use enough leverage to barely cashflow. I wonder if you have calculated ALL your returns including principal paydown and appreciation.

Hope this helps.

I've talked to the PM and the Maintenance Coordinator multiple times and audited the financials. I feel that the repair requests are reasonable - again, if I were local, I'd go there and possibly do some of the repairs myself. I'm paying for a PM since there's no way I'm self managing Class C with this many issues and I'm paying for convenience. They're going to have trip charges built in the repairs invoices.

How are you getting 15% returns? Is this cash on cash or IRR? When did you buy these properties? Over the last 10 to 15 years or more recently?

On the Class A IndyI bought it in 2013 and did a cash out refinance during COVID (to help pay for renovations on my CA rental). On this cash out refi mortgage, my rental property calculator says I'm 1.35% cash on cash return at Year 4 (refi done in 2021), not including the cash I pulled out of it. On the IRR it's much higher over 45% so not sure if this number is correct. Another CA investor briefly calculated my return as about cash on cash return as 8%, if I use my original purchase price. I have about 45% equity on this home with the cash out refi loan now.

On the Class C I'm not paying down an extra $1 towards the mortage on this sinking ship. I'm not trying to be flippant but I could set up a stand at a Farmer's Market and bake cookies and sell them and cash flow more than this house. For cash flow I'm looking at starting a business, which is a lot of work with a W2 job.

With Nevada, my intention is to leave an appreciating asset to my kids and if they want to move into the home later or continue renting it out or leave CA and move into as my primary when I retire - lots of moving parts so my plan may not work after I look in Vegas. If I cash flow or break even I'd be ok, I'm increasing my net worth property wise but liquid cash wise, no.

Are you self managing your Indy rentals? How are you getting 15% to possibly 20% returns? If you pay cash and don't use leverage, you're locking up more of your money. Someone please explain this to me - my brain hurts from thinking about this.

He discusses an allocation of about $200/month sustaining maintenance/cap ex and I believe he self manages based on his role with the maintenance. 15% would not be good considering PM alone in his market would be charging at least 10% all inclusive (placing tenant, tenant renewals, inspections, managing maintenance, dealing with tenants including collecting payments and dealing with late and delinquent payments, etc.)

I also believe he maybe including the appreciation. I hope it is not including the appreciation for his sake.

I suspect you know this, but IRR is superior to COC on measuring the overall quality of an investment.

Have you calculated IRR on your CA property? I have one property that I have not done the calcs in real long time but the worse I have done calcs on is in the 70% to 80% per year. This is using to date actuals since purchase plus projections to the various exit times. this is better than my sustains projections which makes sense as I allocate pm in my projection but is not in my LTR actuals because we self manage the LTRs and because a lot of the large cap ex items have ever been replaced.

S&P has lifetime near 10% return. Investing in RE as owner (not including as LP, REIT, etc) should produce returns far greater than this because it requires significant more effort even with the use of a pm. If you are self managing, the value of the effort should be subtracted off the return because your time is precious and deserves to be compensated. I would highly recommend self managing property if the projected return is not significantly above 25%/year (6% to 12% is PM value, near 10% is S&P historical).

Inexperienced RE investors under estimate expenses, the value of the effssciated with self managing, and the effort involved with being the asset manager even with the use of a pm. They think 20% self managed is a good return; it is not.

best wishes

Based on the comments from the OP, it seems like he's including appreciation in his 15% return. Are you using 25%/year with IRR as the return, meaning it's better to self manage if it's lower than 25%?

I have 2 CA properties (one SFH, one multi-unit). I haven't done an IRR calc on them but the financials from the PM on multi-unit, my return is really good. I self manage the SFH.

I find the calculations with S&P500 and rentals to be challenging because it's not an apples to apples comparison. I don't get tax write offs on my index funds or stocks. It could very well be that my return on the Indy Class A is more than than 8% - it's doubled in value and I pulled out a cash out refi during COVID.

For Class C which I would never buy anywhere even in CA, being -$300 to -$500 is terrible for Midwest. If it was going to double or triple in value in 5 years, might be worth it but when I ran the rental property calculator out 20 years using 3% appreciation and 3% rent increase, using $3000 for annual maintenance (took -$300/month and multiplied by 10 months), could be more. My beginning IRR is negative then slowly increases to 0.7% at Year 10, 2.5% at Year 20. it's worse than I thought.

I just talked to an Indy agent and investor who confirmed that it's better to buy a higher quality asset. I've been on BP since 2022 but I had heard cash flow was pushed from 2008 to 2018ish. Look like some people are still operating in that mindset.

2 Votes

$1800 seems inexpensive to me. I talked to 5 CPAs and all of the quotes I received were higher $2000 to $3900 for the filing and I have fewer properties than you (5 properties, which became four now). One of them gave me a lower quote but he said he would start charging by the hour if he spent over a certain amount of time - pass on that.

I have separate P&Ls for each property. Is there a reason your CPA wants 7 properties on one P&L statement?

There were higher fees for tax strategy/planning sessions. If you feel like you're getting good service for what you're paying, then that fee seems more than reasonable. Does this CPA work with RE investors?

I've been doing my own taxes for 5 years on TurboTax Premium but now the sale with the capital loss is sort of complicating things. I'm fairly educated on tax strategy - listening to podcasts and watching videos. This is just my opinion but I feel like using TurboTax for me is better than picking a random CPA (e.g. H&R Block or whoever is charging $500 to $1000 that doesn't know RE investing)