All Forum Posts by: Christian Rojmar

Originally posted by @Account Closed:

Originally posted by @Tony Kim:

Originally posted by @Account Closed:

Forgot to put the picture of the house that just sold in Torrance California

 Come one Jack, you and I both know that this property is hardly representative of Torrance. This location is in one of the worst parts of Torrance and if were located near the courthouse it would be well over a million. Anywhere past Anza and we'd be talking 1.5M. I know this because my wife have been combing the neighborhood looking for a new house to buy.

Also, we both know that prices have shot up tremendously since 2001. I don't think anyone here is naive enough to believe Torrance SFR prices are the same from 21 years ago.

Judging by your profile the appearance of your age in your profile picture and your stating you have 5 years experience in the real estate business you are not qualified to make a guess in regards to how much properties were selling for in the cluster of homes across the street from the courthouse. I've been purchasing real estate in Torrance since 1973, more than 48 years. I am a plumbing repair contractor and I installed new water piping , drains and sewers in about 20% of all the homes in the city of Torrance because I started my business in the city of Torrance in 1973 from a rented apartment at 17575 Yukon Avenue APT E. 

Attached, is an image showing a property for sale at 911 Hickory Avenue in the cluster of homes across from the Torrance courthouse. As I stated, houses were selling for this price or more back in 2001. The houses continued to increase in price until 2008 when the market crashed and the prices are either equal to, or a little less than their 2001 prices and this indicates that housing prices did not keep up with multi-unit properties that increased in value by 400% to 800%.

Even if I am a little wrong you will not find a significant difference in my claim e.g. it is not significant if those 1200 sw ft houses were selling for $750,000 to $850,000. Even if that is true their increase in value is nothing compared to multi-units. We need to find some charts, or some proof for actual sales going back to 2001, 2004 (I think I posted), or any date prior to 2008.

I did not median prices in Torrance were $900k to $1 million. I mentioned the average prices near the court house. There were homes in Torrance in the $1.5 to maybe the $2 million range and I feel confident when I say that many, or a nojority of the homes have not recovered to 2001 prices, or even if they did increase to above 2001 prices the increase is insignificant.

Look at price history of the above listing at 911 Hickory Ave. 90503. It sold for $335,000 in 2001 and is now valued by Zillow at 3x that and would likely sell for more than Zillow estimate....

Hey Community!

The lease for one of my rental properties expire in a month from today. The tenant do not want to keep "throwing away money on rent" but is not in a position to purchase a home due to her credit score and is wondering if we can do seller financing. While I understand seller financing on a high level, I have very little deep knowledge on the topic. The property is worth about $200k in the market today and rents for $1500-$1600. I have close to $90k+ of equity in it and was considering refinancing and keep renting it out.

While I would prefer to refinance and keep renting it, I see some benefit of doing seller financing. Do you guys have any insight as to typical/reasonable terms regarding price of home, interest rate, down-payment, term of loan, etc. or is that all up to the buyer/seller to negotiate? Also, are there particular things, other than down payment, that can be done to reduce the buyer's incentive to default on the loan for whatever reason? My thoughts are to ask the tenant to extend the lease for 6 months with the option to buy with owner financing at end of the term as it will give me more time to get an attorney to put together a contract etc. However, it seems as if I would need to get the general terms of the owner finacning agreement in place prior to renewing the lease.

I realize there is a lot here and much of it probably depend on the tenant as well as my situation so any details you guys need, please let me know.

Thanks,

Christian

@Jeff K. And I should clarify... IRR is often used to compare multiple investments with higher IRR = better investment. So you may want to run the IRR with your current property and compare it to another investment opportunity that may generate more cash flow but less appreciation.

@Jeff K. While the $120,000 isn't out-of-pocket money invested, it is still cash that you can use elsewhere if you sell your home. You seem focused on one of two things: 1) Sell your home, take the $120,000 (less closing costs), and invest that money elsewhere or 2) keep the $120,000 equity in the property and rent it out. If you rent the property out, the $120,000 is sitting in the property and you earn a return on it which is minimal per the calculation in my previous post. If you sell the place, you can take the $120,000 (less closing costs) and invest it somewhere for a CoC return that is a lot better. You may want to do an IRR calculation (which would considers appreciation etc.) to see what your expected return will be over X number of years as appreciation is your focus on this property.

@Jeff K.

You may want to contact a realtor and have them provide a market rent value for your property. If the smaller house in your neighborhood rented for $1,800 (discounted due to 5 year term), you may be able to get more than $1,950 depending on size difference etc. and it could make a difference.

The nice thing with the property being remodeled and new is that it will require very little work in the first few years other than regular maintenance (filter changes etc.) so it should be easy to self-manage - this is the reason I am planing on self-managing my property in Austin during the first few years as well.

In the end, it is your decision. You have $120,000 in equity ($370,000 [value] - $250,000 [loan]). If you don't self-manage, you are sitting on a negative COC. If you do self-manage and including such amount in the calculation (even though you shouldn't as you are paying yourself for working) you get a COC of ~1.5% ($1,800 [~$150/month in cash flow in year 1] / $120,000). That is a bad return on your cash. On the other hand, if you see your market continuing to appreciate over the next X years, it may be a good investment - there are many people that take $0 or even negative cash flow because they focus only on appreciation - that is a riskier play tho. Personally, I would never touch a deal with $0 or neagtive cash flow in today's market as the next few years are pretty uncertain - but that is just me.

@Jeff K. Are there any HOA fees? You always want to set asside money for Cap Ex. and maintenance costs even if things are new - particularly if you are planning on holding for a long time. Also, even if you are planing on managing yourself, you always want to account for it in your calculations in case something happens in which you cannot manage it. From quick calculations based on inputs I use for Cap Ex. maintenance, and management in my area and my situations.

Rent: $1,850 (on high end?)

Vacancy (assuming a new tenant every 3 years and it takes a month to find new tenant): ~$50

Mortgage, tax, insurance: $1,400

Cap ex.: ~$175

Maintenance: ~$90

Management fees (assuming 7% monthly and 50% of first month for new tenant): ~$200

HOA fees:?

Monthly true cash flow based on the above is -$65

If you self-manage, you can pay yourself that $200 monthly. Are you expecting a lot of future appreciation in the area? Reason I am asking is that I am in a similar situation in Austin. I am planing on keeping current home as a rental and purchasing a new one. However, I have true cash flow when considering all inputs and will cash flow about $500 if I manage the property myself. But main reason I am planing on taking this approach is because I believe the Austin market will continue to appreciate over the long term.

Note that the above numbers are rough and you may have to dig in to the expenses that you will experience in your market and with your connections.

That was a ride! Acquired a SFH in Overland Park, KS in July of this year and did a decent sized rehab – gutted interior, added HVAC, and added a bedroom. With COVID in full effect, much of the material was back ordered and shipments were delayed. Fast forward, the rehab project was completed in early September, about a month later than expected. Rehab crew was fantastic but not much they could do with the material I ordered being delayed. Here is the interesting part, I had a property manager lined up who, on paper, was fantastic. She new everything there was to know about the market/area, had all the right answers during the interview, and good references…. Fast forward to September and it is time to get the place rented… Week after week goes by and she says that there is a lot of interest but no bites….. Mid-October and she tells me that she doesn't advertise the property on Zillow or any of the other big websites but rather just through Facebook and Craiglist etc.…. When I ask her about it, she casually mentions that the main real estate websites do not help to get a property rented… I let her go and put the property up for sales. We have a ton of interest, but the right buyer does not show up during the first 3 weeks. With the holidays closing in, and less demand during the cold months, we again put it up for rent, this time through my realtor who advertise it on Zillow etc. and within days, we have the place rented.

Lessons learned: Before knowing and and fully trusting the people on your team, do not simply assume that they will do their job as well as you would - Instead of checking on Zillow etc. if the property was up for rent and making sure the property manager was doing everything necessary to get it rented, I just assumed she was. Mistake on my part which resulted in some additional holding costs.

Below are the details of the deal – average deal at the moment but should be a pretty good investment over time – two of the largest  projects in KS are being built approximately 5 min from the property

• Purchase price: $128,000;
• Seller pays $2,000 towards closing;
• 25% down;
• 3.375% interest rate (no points paid);
• $28,500 rehab costs;
• ARV: $180,000 (forced appreciation ~$23,500);
• 3 bed, 1 full bath (added a bedroom);
• Detached garage;
• Property taxes: $2,081;
• Insurance: $1,236;
• Property management ~9% (including tenant placement fee etc.);
• Rent: $1,380;
• Vacancy rate: 6.25%;
• Repairs: 5%;
• Capital expenses: ~11.0%;
• True cash flow $250/month (betting more on appreciation with this particular property).

@Linda Weygant thanks for the detailed response, much appreciated! If I do not have time to run through a plan of action with a CPA prior to the rehab project, is it acceptable to start with the construction projects (floors, bathroom, kitchen) and then do the minor items and eventually provide a list to future CPA who can tell me what can be written off right away v. depreciated?

@David M. Thanks, I will certainly take a look on the IRS website!