All Forum Posts by: Brian Kloft

More info and pictures needed to give an opinion. What are you doing with the property? Are you doing any other renovations? Lets see some pictures of larger areas from further away.

Increase the number of units you are looking at. Once you start getting around 4-5 units you start getting people looking at a cap rate for a purchase price. However even sometimes those don't make sense for various reasons. The best thing is to try and find your market where your competition is lower. In commercial terms, find those properties in the around a $1mil to just under it price point. Those are harder to get good financing so it keeps a lot of buyers out. 

I think partly you are looking at it wrong. First I would not be paying a property manager. you are living it in and house hacking. Second I look at house hacking as compared to buying a place and living in it by yourself. Thus for the calculations I would not include CapEx. yes you will have those expenditures but so will you on a place where it is just you. Now if there is some big expense that you know is coming up then you may want to factor it in. With just 3 units once you get it leased you should not have any vacancy for a while so I would pull that out. Then those numbers are what you are most likely to look at on average.

Also just in general only giving the house hacking numbers doesn't tell the whole tale. What would you be paying in costs for a house if you were to buy it and live in it by yourself? If in the house hack you are paying $1-2k per month after collecting rents but in a house by yourself you would be paying $4k/mth then that you could look at that as a successful house hack, but everyone has their own definition of what makes it successful. 

@AJ Wong ok being on a well makes sense as to the whole extra water storage. Thanks for the explanation. 

Non real estate books:

Q.B.Q. (Question behind the question)

The Go Giver

@AJ Wong please explain more your extra water storage. Is your property on city water? 

 Yes we do seem to agree on most of it. The streets and buildings do seem to have an effect on the cities, just based on my own observations. In the middle of the summer if you go out an hour or two after dark in the city it is one temp and you can feel the heat radiating off of the block walls and asphalt streets still. You go out in the desert 10 miles out of the city after dark and the temps drop much faster and further. Those mesquite trees and saguaros are not radiating heat back at you. Now how much of an affect does that have on the whole planet? Not sure. 

I am still keeping properties in Phoenix, I just don't want all of my eggs in one basket. I don't need the annual newbie news story of them trying to fry all of my eggs on the sidewalk. :))

@Bruce Woodruff The heat island effect isn't going away anytime soon. We would need to make drastic changes to all of the streets and buildings to make that happen and I don't see that happening for at least 50 years. Yes I assume it is going to keep getting hotter. For how long? I do not know and no one else really knows the answer either, but I am going to assume that it will continue for the next 20-50 years. For all we know it could continue for the next 200+ years. All I can go by is what has been happening and is happening. Until something shows me otherwise I need to hedge my bets based on that. If I am wrong and it starts getting cooler then everything I have done to diversify is still good. If it keeps getting hotter and problems arise then I am also good. I may be a little more skewed because we live in one of the hotter places here in Phoenix and that is where all of my investments use to be. I also wouldn't start buying properties in super cold areas assuming it is going to get warmer and make those areas temperate climates.  The environment is not the only factor I look at but it is one of the factors I look at. Oh and yes I agree that the hot to cold to hot to cold has been going on since the beginning of time. The problem is that no one knows when the hot cycle will end and we will shift back to the cold cycle. 

@AJ Wong I am right there with you. All of these people that are politicizing it. Regardless of what is causing it, there are still changes happening and you should plan for what is happening. My plans have been partially shaped by what is happening. 4 years ago all of my investments were in Phoenix AZ. We are hot here in the summer and it has been getting hotter. Our water supply is fine, but we have had warnings of it getting low before it got better plus there still are concerns about Colorado River water supplies getting low, which are a major part of our water supply. California has had major water restrictions imposed and electricity issues when it gets hot out. Plus having lived here for more than 50 years I can say that the summers are getting hotter. Some of it is a heat island effect which will not be going away. Will this increased heat over the next 20 years cause problems? I do not know but I don't want to be trying to sell when the bigger problems arise. I still will have properties here but it seemed wise to diversify with weather like we do with other factors. All of these people can say its a racket or blame the politicians but that is not going to change the fact that I am going to have to deal with it. So I can either get into politics (which I am not going to do), or I can mitigate my exposure. Over the last few years I have sold a number of my Phoenix AZ properties to buy properties on the Oregon Coast. When considering where to buy we looked at several things, government regulations (no to CA), environment, location, long term desirability for people to live and work there, and investment profitability. We looked at a few places. Reno, loved the government regulation and seems like Phoenix 50 years ago but is just a little bit cooler. Reno is still a place we want to look at for the future but the numbers were not as good as the Oregon Coast; and with it being a big city it will take us longer to learn the city and we have not spent any time there yet. Idaho, we liked some of it but we don't like places that get super cold and have to deal with those issues of heavy freezes and snow removal since we do not have any experience with those types of issues to even know what to look out for. Oregon, government regulations are more than we like, but not to the point that we can't deal with them, and they are not like CA. We don't do inland because it gets super cold and snowy there and now they are having hot summer days and most places are not set up to deal with it. (Although the heat could be an opportunity?) We settled on the coast like you did because it has a mild climate and unless the ocean catches on fire people are always going to want to go to the coast to vacation or live. It does have some issues such as they are having water supply problems in the summer, but coming from Phoenix that seems to be a relatively easy solution. They currently just rely on the river flow for their water and have no reservoirs to hold their excess winter water for the summer. 

When it comes to buying there I still mitigate my environmental exposure. I will not buy in any area that is a flood zone. I also do not like to buy in a tsunami zone, although if it is at the tail end of a tsunami zone I am fine with it. We also have concerns about wildfires since they just had one up there on the coast in the last few years. However their giant wildfires do not seem to be the same as the ones in AZ or CA. In AZ it seems like when there is one you can see multiple miles long stretches of forest that are burnt to the ground. When I drove by some areas on the coast there were affected there were areas that were burnt down but they were not as large in all directions. They seem to be large areas but not as big and they still have green forests on both sides. Thus this is not as big of a factor to me. 

The final factor for the Oregon Coast is that we like spending time there. So when I go up to work on one of our places I am going to a place that I enjoy and we want to start spending summers there. Now if I can just get my tenants to move out in the summer instead of the winter I would enjoy it even more. :)) 

Most commercial loans don't really care much about you and your credit. There are not any commercial pre approvals as it is based on the property and not you. They want to make sure that the property itself will pay for the loan. Typically they are going to look at what the property generates in net income and then want it to cover the loan plus something like 20% more. There might be some differences if you are looking at single tenant buildings. Keep in mind that sometimes even strong tenants go out of business or bankrupt. When you have a single tenant building if they go under and you no longer have rent coming in that you are going to have to cover the loan with your own income until a new tenant is found. Often finding a new tenant on those buildings will take a while and then they are going to want you to pay a significant amount of money to make the place the way they want it. (either in cash or in free rent) Single tenant NNN properties can be great as long as you have a tenant. There are lots of people that love them because typically the tenant takes care of everything and all you do is have your own insurance.