All Forum Posts by: Candyce Chen

Hello @Angela A., 

If your ROE is low, then you might have a high equity in the condo. Here is a list of my suggestions:

1) 1031 exchange your current condo & buy one or two small multi family (2-4 units) properties that have a better cash flow. You might need to invest out of state. You can also 1031 exchange to a distressed property in San Diego and renovate it. This forced appreciation with a heavy value-add should be great with a long term buy & hold play.

2) Cash out refi & purchase a vacation home via a 2nd home loan. There are some markets/small town in California still cash flow with short term rentals essentially if you can self manage and/or can do an owner occupied hosted rental.

3) Stay put & sell the condo in the future to get a duplex that you can do a live in flip and house hacking one unit. If you are 55 + and sell a property, you can transfer your current low property tax to a new purchased house. Check Ou prop 60/90. This only works for primary residence house, so you might need to move into your rental first. Please check with a CPA first on this strategy. 

https://www.boe.ca.gov/proptaxes/prop60-90_55over.htm

Before selling the condo, maybe you can also try different strategies such furnished long term/mid term rentals or rent by rooms. This might improve your NOI and slightly raise your ROE while you try to decide.

Hope those ideas help. Happy investing! 

Hi Becca,

I am also an investor from SF bay area. I invest, rehab, and manage my own properties out of state, so I can totally understand your frustration. 

Instead of SFH and LTR, I start to shift to 2-4 units multi family properties and rent each unit out as MTR. The cash flow from MTR is definitely much better than LTR excluding the headache from dealing with trouble tenants. You can also try furnished LTR which might produce higher cash flow than a non-furnished ones especially for SFH in Class A area. You can always check out rent from the furnished finder to see if there are MTR demand in Indianapolis area. Maybe you will be able to use the positive cash flow to balance out the negative cash flow SFH that you rent out to your family in the City.

Beside REI, you can also diversify your investment in some index funds...and others. W2 jobs offer 401K and employer's match, HSA, paid vacation, paid sick hours, low cost health insurance, cellphone bills, dry clean, employee meal, discount on things and much more. Unless you are able to cover those bills by yourself, it might be better to find another job if your current job costs you so much stress IMO.

Happy investing & best luck on your next move! 

Hi Christopher,

Welcome to BP! I am also an investor from SF bay area and invest in out of state properties. 

If Cash Flow is your goal, then Columbus, OH might help you get there faster, especially if you purchase 2-4 units small multi family property and rent it as mid-term rental. However it's getting harder to find a good one nowadays. You might want to stick with A or B+ neighborhoods which have better tenants. Even if you get a super cash flow properties in C~D neighborhood, you might end up spending more to fix up after each tenant's turnover. 

If appreciation is your goal, then I will choose other cities in CA than Mount Shasta, CA. You might only be able to make $30k-$40K a year from a 3 bedrooms SFH Airbnb there, but this amount will not cover the mortgage after you deduct 50% cost for a short term rental. You might want to check out STR regulation below for Mount Shasta, CA first.

https://www.codepublishing.com/CA/MtShasta/#!/MtShasta05/MtS...

https://www.mtshastaca.gov/finance/page/short-term-rentals-t...

I will suggest picking a market that you might want to visit (for STR) or a market that will cash flow if you don't plan to visit if it is your first out of state property.

Good luck & happy investing! 

@Joseph Villasenor, you are welcome. Best luck on your next deal! 

Hi Joseph,I used a free standard lease from the apartment.com that is designed for my state. (It’s more general and cover the basic) Then I added a house rules document that was provided from a local management company and approved by a legal. (More specific for my properties) I also added a furnished item list as a reference for my tenants and included a move in/out checklist for the walkthrough. 

I only used furnished finder to get leads and communicate with potential MTR renters, then I ran background checks, collected payments, e-signing leases via the apartment.com free version platform. 

Hope this helps. Good luck on your 1st FF listing. It’s exciting! 

Hi @Asher, I will suggest to check out data from the furnished finder and search data directly for traveling nurses rental units and demand in Pittsfield MA. There is small demand for mid-term rental, but probably not as strong as bigger cities. STR/Airbnb has higher demand IMO. MTR seems a bit slower now compares to previous years during Covid peak. Berkshire Medical Center brought in more medical professionals back then. Beside traveling nurses, the summer peak season will also bring in some retirees and interns which will rent from 1 to 4 months. Winter is definitely slower for MTR in Pittsfield. Hope this helps.

Hi @Sophia Bahena

I truly admire your courage on considering a 4plex on your fist deal. Great way to start. Cash flow is generally better in 2-4 units vs. a SFH in the same area. Here are my 2cents:

1.  Tenants: established tenants have Pros & Cons. You might want to consider if the rent is below market rate, can you raise the rent in the future? Do your existing tenants have stable income to cover rent? Getting rid of all existing tenants - you might need to keep good relations  with them so they don’t trash the property when moving out. You can also reduce the rent and remodel each unit while tenants are in them.  

2. Occupancy: SFH tenants tend to treat the property like their own and stay longer. 4plex might have a higher occupancy rate & turnover rate.

3. Pro Property Management or Self management: PM usually charges 1st month rent when it places a new tenant. For any repairs, some PM companies will charge a fee too. If you are first time self-manage, you might have to think about one vs. four toilets, appliances, house showings, and leases …etc.  Handymen and contractors are in short supply theses days- a property manager should have access to these resources to limit delays on any projects that need to be done. 

4. Properties Age & condition: this will affect your future capital expense, cost. 

5. Taxes: you can ask for taxes return record from the current property owner as one of the contingencies on the P&S. It will show clearly how much is the rent on schedule E.

6.  Utility sub-metering for 4plex: it might cost more to set up, but you will save more money in a long run. If it’s in a colder states with only one boiler, if might not be feasible. You can bring an experienced  general contractor during the home inspection.

7.  Leases: some states are better to take over without existing leases from current tenants if it’s month to month. Other states are better to take over with existing leases due to eviction laws.

You might want to check with a legal professional to make sure if this in your specific state.

8. Downpayment: anything less than 4 units should have similar loan terms. It should be the same DP for SFH & 4plex.

9. DOM: 4 months might seems long for a 4plex nowadays, you could check past 3-9 months sold history for duplex/triplex/quadplex in the same area. I would compare town size, rental history, property conditions, locations, listing price…etc to understand why this particular property is on the market for so long. Talking to some local PMs, realtor, handymen, and contractors might also provide good insights too.

10. Exit strategy: 2-4 U it's have a more limited resell market- only other investors (or house hackers) will buy it and the resell is based on estimated cash flow. SFH has a larger pool of buyers because it can be sold to another investor, to somebody that wants to occupy it or for use as a STR. In many markets, SFH will show more appreciation because the selling price is based on comp sales instead of cash flow.

Here is another post about the same topic. Best luck on your 1st deal on whichever one you choose to do. Happy Investing!!!

~ Candy C.


https://www.biggerpockets.com/...

Hello @Suzanne Villanueva,

Glad to hear you are successful on your own investment. That’s so awesome. I’m in CA & investing out of state and I’m still learning too. 

1. Podcast: I feel BP Real Estate Rookie podcast is very helpful, you can check out episodes #30,#31, #64, and #73,  

2. Books: 

Start your own corporation by Garrett Sutton and his other books. The writing style is pretty simple to understand. 

I also borrowed many books from Kindle Unlimited, one of them is very useful for partnership & JV:"Investing in Real Estate Private Equity: An Insider’s Guide to Real Estate Partnerships, Funds, Joint Ventures & Crowdfunding by Sean Cook. 

3. Legal: my lawyer suggests to set up a LLC in the states I have properties. Personally, I will suggest to have a separate bank account, umbrella insurance, and use a CPA from your investing state too. Partnership is for funding & LLC is for taxes & asset protection if it's set up correctly. It probably also depends on your personal situation, HR structure, tenants, property location & types…etc. I'm not a legal nor a CPA, so you might need to check with a professional in TX on this.

4. Website & YouTube: many websites & YouTube channels talk about Real Estate LLC or RE LLC for Californians. Beside focusing on why choose LLC vs. other biz structures and how to form one, you can also check out what's Pro & Con of forming a LLC. The link below is helpful for me. Investopedia & Millionacres have many good articles too.

https://www.investopedia.com/

https://www.millionacres.com/a...

Above are resources I used during my very beginning of researching. Hope it helps. Best luck on the next cheaper of your RE partnership. Happy Investing! 

Candy C.

Hi @Tommy Mckeown

It's so awesome that you are thinking about your future investing decisions and realized about the inflation in such a young age. Time is on your side.

IMO, you should definitely put your money into mutual funds. You will lose money value by putting your money into a saving account as bank's interest is only 0.01% nowadays. If you must put money into a saving account, maybe look into a high-yield saving account or a money market account to temporary park your money before purchasing a property.

1. Financial Education: You can take some personal financing planning, personal investing, real estate investing classes in college. Those are very helpful.

2. 401K match/Roth IRA: some companies such as Starbucks offers a good 401K match programs with an educational or tuition reimbursement. I will suggest save as much as you can and max out your annual 401K or Roth IRA.

3. Stocks: You can use Nerdwallet.com to calculate how much money you would have in five years from your investment.bogleheads.org and humbledollar.com offers good advices too. FinancingLife Academy has free classes such as “Where should I put money?” and “Common Sense Investing”

4. Risk tolerance: This will help you decide % on stocks/bonds/cash reserve. You might have a higher risk tolerance due to you are far away from a retirement age. You can invest in low-cost total market index funds.

5. Self-direct IRA: you can also roll over your 401(k) into a self-direct IRA by choosing the real estate as your investing option. You will need to find a reputable self-directed IRA custodian and a trusted lawyer.

6. Other Items: Improve your credit score to over 760 if it is possible, avoid paying PMI with at least 20% down payment, make sure your DTI is low by paying off student & car loans, budget extra money for closing cost, and have a stable income. Those will help you use OPM and secure a mortgage with a good interest rate.

7.Mentorship: Partnering with seasoned investors and offering your sweat equity. Learn by doing is the best way IMO to understand the market you plan to invest in.

Those are items I wish I would have known at your age if I were saving up to buy my first real estate investment. Hope it helps. Please do consult with professionals before any investment. Best luck on your RE journey & Happy Investing!

Hello @Christopher Lamp,

Congratulation on getting your startup fund from a family member. That's the best way to start. I admire your courage to pick up a flipping project on your first deal as it is harder than buying a turnkey or a minor rehab property. 

1. LLC - unless you need to share the equity or profit with this family member, otherwise I don't think it is necessary to have the LLC for the first deal because you do not have a property or tenants yet IMO.

2. Internet: LLC will be under commercial and not residential loan. Interest rate percentage is different. The lender will look at your rental income under LLC. Since you do not have a property under LLC yet, it might be harder to get a loan under LLC. LLC or commercial loan might be ARM and balloon payment vs. personal will be a fixed rate mortgage

2. Fix & Flip - you might need an experienced partner or a project manager that knows about the construction unless you are going to oversee the project yourself.

3. Gift or Estate taxes - This is minor, but I will suggest to look into gift taxes in your state, so you do not end up paying extra taxes on the gift for 2021. Parents can give up to $15K per year for children. Federal estate tax is $11.58 millions in the 2020 tax year. You might need to check on your state law for more details. Some states are very specific about it. 

4. Title: not sure if this family member needs to be on the title. You might want to check the probate law in your state to ensure there is no issue on this in the future during the sell.

5. Credit: if you have a good credit score and have less than 10 properties. Your credit might work better to get a lower interest rate than a business loan. 

6. Finance: Hard money loan, private lending, or some local credit unions might be better. Big banks will not fund a distressed / fixer upper property.  If you have a good relationship with a local small bank, they might be willing to work with you for a construction loan. 

7. Contractors: It's very hard to find a general contractor or sub-contractors due to surge of demand. I will recommend you check to make sure a general contractor is available based on your timeline before starting the project. 

8. Realtor: You would also need a good realtor that understand investors/flipper and have lots of local connections. It's harder to find a realtor that wants to deal with foreclosure /short sales/for sales by owners/distressed properties. 

Hope those tips help. It is my personal experience, please do check with your legal/CPAs/lenders for advices in your particular state. Best luck on your project! 

Candy