All Forum Posts by: Bonnie Low

@Jon Schwartz and @Brandon Pelfrey - northern Californian here. And yes, I would love to move out of California but am staying here for now because of family. My motivators for moving are that we have a lot of drug/transient/crime issues here, we seem to be a mecca for summer wildfires and even when the forests aren't burning it's too damn hot in the summers. A couple of thoughts: CA is huge and by population, I'm sure there are more Californians moving to other states than there are folks from any other states. However, there are also a very large number of Californians moving within California right now. The major population centers are crowded and very, very expensive so they're seeking less expensive markets and there are plenty of those in rural CA, like where I live. You can basically buy a nice 3 or 4 bedroom home with all the amenities here with the cash from the equity out of the home you've owned in the Bay Area for 5 years. And with COVID, which if nothing else has served as a proof of concept that most office jobs can be done remotely, even more people are motivated to get out of the crowded, expensive, traffic clogged cities. So it's driving up prices and reducing availability within CA as well. Secondly, I always find it surprising (and a bit disheartening) that people are so territorial about the state they live in. This is, after all, the United States of America and as an American, we each have the right and freedom to move about the cabin, so to speak. I have personally had people from Montana and Idaho say 'we don't want more Californians moving here.' (not bagging on either state, that's just where I've experienced it) Well, guess what, this land IS my land as well as your land so people can and will move. And, lastly, while we may want to find our gold mine market that no one else is investing in when we're buying, we sure don't mind when those out of area buyers discover our market and drive up home prices so our appreciation keeps rising. There is good and bad in all situations, but the movement about the country seems like it will only accelerate in the future as markets ebb and flow for one reason or another and we become a more mobile economy.

I'm going to offer a different perspective here. As a buyer, I actually appreciate wholesalers for identifying off market deals so I don't have to. I've been very fortunate that none of the ones we have worked with are obnoxious. They're typically young, very new, know they have a lot to learn, and are very polite. I would never, ever rely or even take into account the ARV a wholesaler might pitch. It's my responsibility to know the market I'm buying in, the ARV and the rehab costs. Most wholesalers I've encountered know nothing about rehab costs and are actually very interested in learning about what we're looking for when we analyze a property. So their analysis of the ARV is irrelevant to me. If the number they can get a house under contract for works with my numbers, I don't mind paying them a small percentage for bringing me the deal - that, too, has to work with my overall numbers for the deal. Now, I realize that is all from a buyer's perspective. I haven't had the experience of having a wholesaler approach us about buying a property we own.

Interesting question @Jim Gurtner. I understand the concept the book is talking about (I have to admit it's been a few years since I read it), and as a principle for evaluating your options, it has merit. ROI is one metric of money management, but it may not be the most important one depending on your circumstance at any given time. The thing about flipping (and we are flippers) is that it's a lot like having a W2 job. Once you stop doing it, you stop getting paid. You're also taxed heavily on the sale unless you're 1031'ing it into another property. Lastly, flipping is a one-and-done experience. You sell it, profit, then move on to the next one. This is why we prefer to BRRRR whenever possible. We're at the stage of our investing career where we need to be building to passive income so we can prepare for retirement so that means acquiring properties to hold on to (granted we could invest in notes or whatever but for us, owning property is our choice of retirement strategy). So we evaluate properties on their cash flow AND appreciation post-improvement to decide if it makes sense to hold on to them rather than to sell. When we go to purchase, we are almost always looking for something to BRRRR and consider fix-and-flip as an alternate exit strategy. If you flip it, you'll have cash to put into your next property and hopefully your cash pool grows every time. But if you BRRRR it right, you'll pull out the cash you invested, gain the cash flow, have someone else pay down your mortgage, benefit from appreciation over time, save on taxes, AND have an asset you can tap again in the future if you want or need to.

Yes, use your current properties as leverage, though I understand the desire to hang onto something with a lot of equity for safekeeping. That being said, your equity position doesn't have to be 100%. You could take out a HELOC on one or more of the paid off properties. The beauty of a HELOC is that you only pay on it when you are actually using it so it's there when you need it and costs you nothing when you're not using it. You could also 1031 exchange one or more of the paid off properties into something bigger as others have recommended. You are fortunate to be in the position you're in because you have lots of options. As long as you keeping moving forward you're growing. Some people only consider "scaling" to be big leaps and bounds, but real estate investing is a long game and that constant forward movement eventually equals scale.

Fortunately for you the cash flow still works out so this is just a temporary bump in the road. But, yes, you absolutely have been poorly represented by your Realtor and attorney. It's hard to say if it was intentional or just negligent, but just like you are responsible to do your due diligence, so are they, and they need to be working FOR you. Sounds like they were primarily working for themselves. Since good deals are challenging to find, you might go forward with this one and just take your lumps. But since you have written communications from your Realtor stating the tenant was month to month and the attorney didn't follow up on their end either, I would try to use that as leverage to get them to reduce their fees or commission to make up for your lost rental income if not in whole then at least partially. It's, at the very least, worth a conversation with them. You never know until you ask. If they're willing to work with you on this you might be able to salvage the relationship, but I'd probably find a better team to represent you next time. 

If you have no money, you'll need to partner with someone who does because flips absolutely require money. You might find a partner who wants to loan you the funds in exchange for partial ownership of the property with him/her. Or they might want to fund it if you find the deal and provide the sweat equity. Check out Brandon Turner's book on investing with no and low money down. There are some great ideas in there. 

I think people expect to hit a home run the first time and when they don't, they either feel they failed or get gun shy about trying again. In reality, it's difficult to get it exactly right the first time. But that doesn't mean it's a failure, it's jut not as good a deal as it might have been. Investing is like any other skill, you have to practice it. Mitigate risk as much as possible when you get started, but keep pushing through even when the returns aren't exactly what you expected.

Mortgage rates are already so low, even if you just have good but not great credit. It's hard to imagine that your rate could be so much lower with that rate buy down that it would pencil. How many months do you have to own the mortgage to earn back the $50k? And what else could you do with that $50k during that same time frame to actually be earning money on it instead? Most people are trying to stay as liquid as possible right now to see what the market is going to do so you might want to hang onto that cash and you're still likely to have a good interest rate if not from that lender than from another. 

Have you been to the property yourself and paid for a third party inspection? Getting your own eyes on it and that of someone qualified that you trust is the best way to know what you're working with. The BP calculators are great for making sure you aren't missing any line items. It should be easy to verify market rents and actual rents. Don't settle for the seller stated rents. Ask to see the rent rolls to verify. Asking to see maintenance records will also help you verify if there's deferred maintenance that the seller is trying to get out of. Finally, the seller might just be tired of being a landlord, looking to get out from under the property and whatever debt they owe on it or maybe they're spooked by the eviction moratorium and their tenants have stopped paying rent. It could just also be a good deal. I hope that's the case!

I think I'd start by talking to the County building department or assessor's office to see where the property line actually is. Is the garage actually on her property or is the property boundary drawn incorrectly and is actually on his? It's not uncommon for fences and other property lines to be out of alignment with the official record. This happened to our own property so when we rebuilt our fences, we had it surveyed and put up the new fence in the right spot to avoid any property line disputes later down the road when we sell. I'd also want to know if either she has the right to sell you the property if he "owns" a building on it or, more likely, if he has any legal claim to the structure if it really is built on her property. It sounds like more of a handshake agreement and that could really trip you up later if you try to sell it or even refinance it. It doesn't mean the deal can't be done, but if it was me I'd want to take the additional steps to make sure it an properly convey to me.