All Forum Posts by: Calvin Kwan

Hi everyone, Through some family connections, I found an off listing duplex in South Berkeley that will be delivered vacant COE - one unit is current occupied. He is willing to sell at 825k, but the property needs work. Both units are 4/2. If you guys know the area, this could be a steal. Market price is probably 3800-4200 per unit. I did an initial walk through of the vacant unit and on the surface, it definitely needs to be updated. Kitchen is a mess and bathrooms look like theyre from the 1920s. New floors are needed, plus a repaint and popcorn ceiling removal. It looks like there might be low to medium pest. I wasn't able to look at the foundation. Here's my dilemma. I submit my offer this week, but go on vacation mid October for 3 weeks. If I close in 30 days, do I leave my property to a GC for 3 weeks or do I wait until i return to start work? I know once we start digging into the rehab, there will probably be some big issues. It's my first rehab project, so I'm a bit hesitant to leave the rehab without my supervision. With the upcoming holidays around the corner, rentals will slow down so I'd like to get this rented asap. What would you guys do?

Hey Guys,

If a 3rd party inspection report is provided in the disclosure packet, would you still require an inspection contingency in your offer?

I'm trying to put in an attractive offer on a property, and I'm tempted to remove the inspection contingency, since a current one is already provided.

Thoughts?

Thanks,

Calvin

Hey Daniel,

Thanks for the response.  Tenants in non-conforming units are very grey.  I'm not sure if they can sue you for all the rent ever paid, as they did receive some 'benefit' of living there.  It's advised to inform these tenants that they are living in non-conforming units, so if anything happens, they can't nail you on fraud either.  I'm meeting w/ an attorney shortly to discuss the risks and whether it's worth the liability.

Regarding OMI, I won't be able to do anything until the moratorium.  I can wait if needed.  My only concern is that there are 4 separate rental agreements - one for each room.  I don't know how much more difficult is it to OMI a unit w/ multiple lease holders?  That's the questions that's up in the air...

Hey Guys,

There's a property in the Oakland that I am interested in, but it has as pretty unusual tenant situation. It's a duplex on record, but the previous owner put in 2 additional non-conforming units (so 4 units total).  One of the legal downstairs units is room-hacked, with 4 tenants living in the unit and separate rental agreements w/ the owner.  All said, there are 7 tenants living/rental agreements on this property, more than I'd like to manage.

Possible options with the property?

1)  Don't rock the boat and keep the property as is.  This is my least favorite option as I don't want to manage 7 tenants.  Some of the tenants are paying extremely low rent, and I don't see them moving on any time soon.  Maybe I can hire a PM to just manage all the tenants...

2)  OMI the downstairs unit.  Not sure if this is an option, but I'm curious of I can OMI the unit if there 4 separate rental agreements w/ the owner.  If possible, I would move-in and rennovate.  With time, hopefully I can hopefully rent it back out to a single lease-holder.  

3)  Completely forget this property.  It would be a lot of trouble to OMI the downstairs unit and I don't want to manage so many tenants.  Also, the issue with the non-conforming units is risky.

I'm a bit torn on this property because the cash flow is pretty good - especially with the non-conforming units bringing in close to market rate.  If I can find a favorable solution for the downstairs unit, I'd feel much more comfortable submitting an offer.  

What do you guys think?  I know I should consult and attorney, but I wanted to reach out to the community to get a first take.

Thanks,
Calvin

Thanks Jaysen.

The CF already accounts for 15% going into the expenses, so these are positive CF numbers.  These properties are in Oakland and I have a sizable down.

I have post the detailed numbers shortly!

Hey Guys,

I'm in the process of offering on 2 properties and need some second opinions.

Property A:

Duplex (currently used as a SFR)

Cap Rate:  5.71

CoC: 2.80%

Cash Flow:  382.29 (includes 15% of monthly rent for expenses)

Note:  AMAZING location!  I personally love this duplex and could live in one unit if needed.  The only issue is that the units are only 1/1, so high rents are hard to justify, though I had a few inquiries to a fake CL ad I posted for a day.  Affluent renters.  Place will appreciate as well since the neighborhood is mid gentrification.

Property B:

Triplex

Cap Rate:  6.72

CoC: 7.27%

Cash Flow:  993.02  (includes 15% of monthly rent for expenses)

Note:  Location is OK.  The property has a mix of 3/2 and 2/1s.  Occupants would be working class renters.  I personally have no interest of living here, but the math makes sense for an investment.  Appreciation is not as high in this area.

Personal Goal: I'm looking to buy/hold property and secure passive income. I'd like to create a large enough portfolio in the next 5-6 years to semi-retire and transition to REI full time.

What do you guys think?  Both properties are offered at the same price, but property A will definitely sell for more.  We reached out to the agent for property A, and there already 13 offers submitted.

Would love a second opinion on this!

Calvin

Also, here's a rent control cheat sheet from Bornstein.  Applies to SF, but may be similar to Oakland.

https://www.dropbox.com/s/p9l0v0xrrv6m3ln/SF-Rent-Control-Co-branded-Jan12-2014.pdf?dl=0

Keep us updated, Daniel!  I'm sure tons of folks are interested in what you discover.

Hey @J. Martin!

Turns out I won't be able to make it to the meetup tonight - my 9-5 is looking like a 9-8 :(  Anyway, I shot you a note about your Chestnut property.  Would love to learn more about it!  Let me know if you have some time to chat.   Thanks!

Originally posted by @J. Martin:

@Perry Z. ,

"Wow, J, how did you guys stumble upon this?"

haha I didn't STUMBLE across it!! I NETWORKED into it!!! I go to lots of meetups and tell people if they ever have a wholesale deal in Oakland, something they can't flip, problems with tenants, etc to give me a call. Eventually, one of those people called me (another BP member and meetup attendee). I took a quick peak. Gave him a non-refundable check for $20K wholesale fee, and bought it shortly thereafter. Not too shabby, eh..? Just took more than all of the purchase price and rehab money back out with a cash-out loan 18 months later.. Wish every deal was like that!! But had a lot of issues with it (probate deal, below-market rents, deferred maintenance..). So it fit my model for getting a great deal but not some folks' criteria..

I think this just goes back to the comments from @Wes Brand above..
"No "house hacking" outside of SF proper. No personal sweat-equity rehab projects... ...it's been there for 45 days so there's probably something wrong with it). Do I need to spend hours a day walking around Oakland in the hopes of stumbling across a good deal? It feels like there should be a better way..."

I wish I were rich and beautiful, with no work required, but here I am stuck in reality with the rest of you suckers!!! lol  @Arlen Chou , can I forward your long email about the value of hard work to Wes, on the comments above..? lol Wes, at least go check out some meetups. Mine is on Thursday. @Johnson H. 's tomorrow. Look on meetup.com. There are tons!!!

@Calvin Kwan and @Luke Mccandless , you guys know much about West Oakland? Tell me what price you think would make sense on this. This ~2500 sq ft Victorian duplex on ~5,000 sq ft lot, adjacent to Steelworks lofts, has more than 3br/2ba in each unit, some extra space, nice size backyard, and a quick walk to Emeryville shopping centers and some new development. Can probably rent for about $3k/unit, for a total of $72K in gross rents on an investment basis. But would have to do owner-occ as discussed above to get to market rents..

Still could probably pay the note with just one unit remodeled and live in a beautiful Victorian apt in a gentrifying neighborhood close to SF, for almost free. Or house-hack your unit too for $800-$1k/mo/bedroom, and cover everything and have some extra pocket change. (Oh yeah, and get a 3% sellers' credit to cover the downpayment so you barely have to put a few dollars down hehe) Or turn them into condos and sell them for $500K+/apiece.

http://www.zillow.com/homedetails/3039-Chestnut-St-Oakland-CA-94608/24740050_zpid/

The Zillow estimate of $900K is wrong. But what do you think this property is worth? Knowing that you could get to $72K in gross rents in just over a year, with some remodeling..? What would you pay for it if you could do it with an FHA loan and the seller were to fix issues before loan closing to make it pass the FHA inspection/appraisal..? Some owners are a little more flexible with their buyers than others, when they are not in a hurry  ;)  Let's hear it!!! (Ignore the purchase price from 2014 lol, and look at the opportunity ahead!!!)

@Jonny C. ,
"Great knowledge. Thanks again !"

Appreciate it Jonny. Always happy to share ;)

 Wow, tons of info here!  

@J. Martin:

I'll be at the meetup on Thursday, so would love to learn more about this W. Oakland property.  I've been looking at property in West/North and Berkeley every weekend, so this deal may be up my alley.  We can chat on Thurs.  I'm open to house hacking for the year, but would love your guidance.  I've been pre-approved for a convention loan, but I'm not sure it would apply for something like this.  Again, I'm a newbie so I'd just love to pick your brain on how to make this work.

I'm also in the same situation as Wes.  I live in a RC 1bdr in SF for significantly less than market.  I have made several investments with my savings (in restaurants), but definitely want to diversify my portfolio.  I'd love to ride out this RC in SF as long as I can, so I can continue to save/invest.  I'm wondering if I could Owner Occ. the unit, fix it up, AirBnB it, while still living in SF.  Would that be violating the OCC terms legally, or just in spirit?

Anyway, excited to meet everyone on Thursday!  It's also my first meetup, so I'm looking forward to this.