All Forum Posts by: Christie Gahan

 Go drive around on Saturday night.  Are you thinking about locking the car doors while you are in the car ?  Would you let your daughter out of the car ?  IMHO, it's as much a gut check as anything else.  When you are answering those questions, did you have to stop and think about it?  If you quickly answered yes, you are A/B .   

 Okay, what he said and add, " With a fixed rate, a cash cushion and a long term buy and hold strategy."   Maybe add a little equity.  I was around in those days.  If you could fog up a mirror you could get a loan.  

I've had this discussion with my son.  On the one hand, floating rate loans are "normal" in this space.

On the other hand, when rates are at a 50 year low ... where the heck do you think they are going to go?  

The "Smart Money" got the lowest rate possible ( floating) and everybody's Grandma got a fixed rate.  Now, who are the smart people ?   

Maybe, the "Smart Money" was smart because they got their payday when they sold to the individual investors?  

 I don't think this is just about honesty.  I'm honest and I make mistakes every day.  I need to know how you are preventing these mistakes happening again.  If someone doesn't want to discuss their mistakes, they should not be investing other peoples money.  

I agree that investors have to do due dilligence.  My question is, How do you do that if no one publically states names?

 That's called original architecture.  If it' s in a historic neighborhood you have to be careful if you start ripping stuff out.  The value of the house can go down.

When is the auction ?

I'm concerned about the fact that there are two divorced people on the mortgage.  For your plan to work, they both have to sign off on the sale.  You have to clear both names.  I think you could assume that they don't get along and they don't work well together.

Overall, I like your strategy.  

What price point are you at?  $20k on 1,000,000 is nothing.  $20k on $100k is a problem.

Getting a comp or appraisal on a suburban development is easy.  They only build like 4 floor plans so you have an easier time getting a comp.  Is there something unusual about this house or lot that makes it hard to find a comp.?  For example, I looked at a house on an acre lot but all of the other big lots had already been split and developed.  There is an issue there.  A residential appraiser will not put as much value on the land as a commercial appraiser or builder might.  But, as it is a personal residence, the bank will want a residential appraiser.  

No shame in backing out of a deal.  Happens all the time.  Do what is best for you.

I look at things from two perspectives, personal finance and investment.

1.  Personal Finance:  This is a holistic view looking at someone's life.  How steady is your income?  Are you single or do you have others depending on you financially?  Do you have debt?  Do you have an emergency fund?  Have you done your tax planning with a good accountant?  Do you have a spouse or partner that needs to be involved in decisions?  What kind of investment portfolio do you want to have?  Stocks? Bonds? Real Estate? What percentages of each? 

2. Investment: I've answered my PF questions and I know I want X risk and X return. I know how much I can invest in each category. Now I am deciding which specific property to buy.  Which market?  What type of property?  Etc.

It is hard to give someone advice if you don't know the answers to the personal finance questions.  A lot of these answers are very personal and should never be shared on a public internet forum.  Do you need long term growth or income?  You could find a great property for income but if you aren't looking for income then it doesn't matter.  You will need a good accountant that loves tax strategy.  Find someone that thinks tax strategy is more fun then Monopoly. Vet them and make sure they share how aggressive a tax strategy is.  ( Aggressive tax strategy can be a red flag to the IRS.)

Assuming you have these pieces down .....   I'm selling at least one property.  With out the locations, I can't say which one.  Why ?  San Francisco is one of the toughest markets in the country.  Folks with 40 years experience are puzzled by the rent laws, taxes, population exodus?.... vs.  Is it now an international city? Meaning that there will always be buyers of financial means that want to live there due to weather, beauty of the city etc etc   The great news is that it is a market you know.  The bad news is that it is not beginner friendly. For that reason, I would not have multiple properties.  Buy a house to live in.  Maybe one rental.  Follow the market.  Reevaluate if/when interest rates drop, more local issues get resolved etc.  I would look at Washington County, OR.  ( Portland.  One hour flight.)  Two new chip fabs sched to be built and opened in the next four years due to CHIPS money and Nividia wants to build a third with out CHIPS money.  The Intel plant alone is projected to bring in additional 35,000 people and there is already a housing shortage.  Classic path of progress stuff in a close-ish market.

The other option ( which could be very unpopular) is to sell both and preserve the down payment funds.  Put that in a high yield savings account at 5%.  In two years you have aprox one million dollars and you pay cash for a house to live in.  

 Be nice.

Run a Worse Case Scenario.

( Get some solid numbers from a property manager).

Multiply monthly expenses by the number of months that it takes to get an eviction.  Add costs for lawyer and court fees.  Add 3 more months of monthly expenses ( including utilities, insurance etc) to cover the vacancy of potentially distressed property.  Add estimated costs of new flooring, paint, drywall repair, and countertops using the quality of products expected in that neighborhood and double that estimate.  

If you had to pay that, how much would it hurt?  Would it wipe you out?  Would it require you to change your lifestyle?  Or would it just piss you off?  I would want to be able to cash flow those expenses or have a pile of cash set aside as a Rental Property Emergency Fund.  

If you can not cash flow or have a big pile of cash for the Worst Case Scenario, you need to sell at least one.   Protect that down payment money.