All Forum Posts by: Bill Baldwin

Thanks all for the feedback.  My goals are to build up a manageable portfolio over the next 10 years which would allow me to cash flow enough to stop working to pursue other projects and interests (startups, etc.)  So with that in mind agree that having the cash on hand is probably the better move and provides more options moving forward - I just saw the amount I could save on monthly interest payments and got excited, however you can't look at investments in just that manner.

My situation is a bit of a unique one as I live in Japan and am speaking with local banks in the greater Boston area (where I'm from and often back to visit) for a building in California - thus the low LTV offers. Going to speak to a couple more co-op banks tomorrow and see if I can get someone to pick up the entire remaining loan amount; otherwise 5% amortized over 15 for an investment property isn't terrible financing. The place is a 6 unit and with current financing cash flowing positive when full, break even if 1 unit vacant.

Refinancing question for the BP community.

I currently have roughly $197k remaining on a seller finance loan for a recently purchased $300k property in Bakersfield, CA, at 5% amortized over 15 years (but I need to pay off the remaining principal balance at the 8 year mark).  I've been speaking to a local bank in the Boston area (where I'm originally from) and they've agreed to loan me $100k at 3.07% over 10 years for a refinance.

My question is, do people think it's worth a refinance to a much lower rate if I have to put down roughly $97k?  Have to consider this payment is in addition to my initial down payment when I purchased a few months back, and would eat up most of my available cash at the moment.  Pros would be higher cash flow, paying off the loan quicker, and significantly lower monthly interest payments; cons would be less capital to spend on possible future projects in the short term.  There are obviously a lot of other factors in play here, but taking the above scenario in a vacuum, and given the current market and financing options, etc., I'd be interested to hear people's opinions.

@Matthew Pinkston welcome to Japan!  I've been living here for 11 years working as a programmer myself and own 3 Japan properties, and am actively looking to expand.  A lot of the questions you posted here I or my group of real estate investor friends in Tokyo have gone through myself, for example hidden costs, issues with evictions, how property management companies in Japan make their money, etc. and would be happy to share what I've learned and also a lot of good contacts in the business I've met over the years.

I live in downtown Tokyo, happy to meet up sometime either here or there (I'm down in Yokohama often on the weekends) and share information and experiences - fire me a private message if you're interested.

Also, I'm guessing that the seminar in Roppongi was with Pacific Asset Management?

The background of the Bakersfield purchase is as follows.  In Japan there's an old law that you can depreciate the entire cost of a wooden building older than 27 years old over the 48 months following purchase.  This was an incentive by the Japanese government to get people to purchase older wooden properties, as in Japan there's a stigma that a used wooden building is essentially worthless.  However the law doesn't specify that the bulding actually has to be in Japan, and unlike in the US where the majority of a property's appraised value is in the building, in Japan the majority of the value is in the land and not the building, and so to maximize tax savings some people look to buy wooden structures in the US.  I got in touch with an agent in LA to take advantage of this tax loophole, and he helped identify properties which matched what I was looking for.  Also with the yen having declined recently, I was looking to land a USD based asset.  Bakersfield provided a more solid cap rate than other locations in CA, understanding that the capital appreciation probably won't be as high.  Also the area wasn't totally foreign to me as a friend of mine went to Cal State Bakersfield and was able to provide some info on the city.  Lastly the owner offered seller financing, and I was having some issues getting a loan with a US bank because I have been living abroad and have absolutely no credit history (something I'm looking to fix as I have recently picked up a couple US credit cards which I'm using a little and paying off each month from Japan).

The building is in East Bakersfield and was on market.

The Japan move was a simple one - financing there is insanely easy, and at very low rates.  There are a couple of banks which will give you zero down loans in amounts up to 25-30x your annual pre-tax salary, and if you're willing to put money down you can get significantly lower rates (as I detailed in my initial post).  I choose my locations very carefully, and having lived here the past 11 years feel I'm in a good place to make that call.  Also the consistency of renters and lack of any tenant problems whatsoever made it an easy call.  Also if you compare the cap rates to those you'll get in neighboring China (Hong Kong/Shanghai) and Singapore, you're looking at rental returns of 2-3x with less problems in Japan.

Hey @Ewa Reza thanks for the post!  Property prices in Japan have really been going up the past couple of years, especially in the Tokyo area, however capital appreciation is still a very foreign thing here.

The positives about the Japan market are solid cashflow, safe and stable tenants (evictions, etc. are just not a concern here as every renter needs guarantor individual or company which covers them when they don't pay rent, and rent is due before the start of each month), insanely cheap bank financing on very large investments, and a standard 5% fee for all property managers - who handle 100% of everything and mail you only to inform you if someone is moving in or out, there's a necessary or suggested repair, or with your detailed monthly report.  Also the depreciation laws for tax savings have a couple of major loopholes which can save you a large amount on income tax.

The negatives are close to zero capital appreciation, a declining population due to the lowest birthrate globally (currently dropping 250,000-300,000 people a year), floating rate on most all bank loans (although it's a near certainty these won't be going up anytime soon as its been said if interest rates in Japan hit 2.5% the government would currently go bankrupt), and the highest debt to GDP ratio of any country in the world putting a dampening on future economic outlook.

For net yields you're looking at 3-6% in and around Tokyo, 6-8% in the other major cities, and closer to 8-10% outside of that, although there are always lots of exceptions.  For investment property purchases, there are a couple of banks which will loan at between 2.775%-4.5% with zero down, and most major banks will loan at 1.5-2.0% with 10-20% down, but you need to either be a Japanese national or foreigner with permanent residency status in order to qualify.  However the catch on both of these financing options is that you need to be a resident of Japan with income in Japan in order to qualify, so for those outside Japan the only options are to either purchase in cash, find outside financing, or link up with someone with said qualifications in Japan and either purchase through them or have them set up a company in Japan to purchase through (I know a couple here who was done that).

Hope you found this of some use and happy to help if you have any other questions!

Hey all.  After listening to the BP podcasts for the past couple of months, I finally decided to hop on the site.  My profile summary pretty much sums up my current experience and goals, so I'll post it again here.  Looking forward to making some connections out there so we can start helping each other out!

I first jumped into real estate in the summer of 2013 when I purchased a fully leveraged 20-unit rental property in northern Japan. At the time I had absolutely no idea what I was doing but it seemed like a good investment and I was intrigued by the possible tax savings, and so I decided to take the chance. An American originally from Boston but currently living in Tokyo, I have since purchased 2 other fully leveraged buildings in the greater Tokyo area (a couple of 8 unit) and most recently a 6 unit in Bakersfield California.

Before my first purchase I had absolutely no experience in or knowledge of real estate, and each deal I do I feel like there's more I don't know than I do, however the amount I've learned just by the experiences I've had since I began has been incredible. My strategy from the beginning has been networking and finding people with experience, offering to take them out for a coffee or a beer, and listening to their experience while grilling them with as many questions as possible.

My goals in joining biggerpockets are to continue to learn from those with more experience than me while making better connections in the local markets that I have interest in (Bakersfield, greater Boston, Japan) while sharing my experiences and advice with those newer to real estate who may be interested in the areas I have experience.