All Forum Posts by: Chris V.

Full Article Here: Stockton Job Growth Projected

A new economic forecast predicts the Stockton area will see some of Northern California's biggest job growth this year.

Jeff Michael heads the Center for Business and Policy Research at the University of the Pacific. He says San Joaquin County saw some of the highest population growth in the last couple of years. As a result he predicts more employment in the region.

"People buy things and that creates jobs," explains Michael. "Part of the reason we're seeing population growth pick up in that area is that we've seen migration pick up primarily from the Bay Area."

Michael says that includes Silicon Valley which is seeing a slow-down from the incredible growth rates of recent years.

The report predicts the Stockton area will see non-farm employment go up by 4 percent this year; for Sacramento it's about 2.5 percent.

And California's unemployment rate is projected to stabilize around 5 percent over the next few years.

Michael predicts a lot more new housing construction in California too.

"We expect to see a significant increase in 2016."

He says there were nearly 50,000 single-family housing starts in California last year. Michael projects that'll go up to 66,000 this year and 85,000 in 2017.

"A big part of that is what we'll see in inland areas," says Michael. "So we expect new housing construction to double over the next two or three years in San Joaquin County and the Sacramento area."

Michael says that's because more people are moving inland from the Bay Area. The forecast predicts about 40,000 new construction jobs in each of the next three years.

I use Buildium and it works for me. I wish there was more in there to track the performance of the property (cash on cash returns etc.) but its more oriented to property managers, less to investors. Because its oriented towards property managers I think different LLC's and entities will not be a problem. If you have any questions for them I would just contact them and ask them. Their support is very "supportive":)

I never worked with the other packages you are looking at. Others on here will have. You might want to see which ones are more investor oriented and which ones are really more geared towards property managers.

Good luck with your selection process. Its great that you make a very conscious decision based on research!

Don't think agree with you there... I use Buildium which while not perfect I find very appropriate for my scale (18 units right now). It is about $45 per month for the first 40 units or so with a 10% discount when you pay per year, so say $40. The "FEE" that you pay for the add on functions with the CORE package is very reasonable, like for example online payment setup was like a hundred buck or something, one time! I try to look at it as a "cost per unit". Right now for me its about $2.x per unit per month, if you have 50 units it is $75 dollars which is $1.5 per unit per month. It's just how you look at it. I dont think that is expensive. I am not expecting my contractors to work for free, nor my CPA etc. As long as a proportionate value is being added and continuity is guaranteed spending some money is not a problem.

Buildium pricing can be found here: https://www.buildium.com/pricing-options/ I find this a very transparent model for the software industry

Also; despite what what was being said earlier, Excel can NOT do for you what these types of software packages offer. I am not the most organized person, but by sticking everything into Buildium before I "file" it I can very easily drill down into very detailed information, for example I attach photos or scanned copied for every bill to the bills, which is of great help when I need to back track anything. I can give people like my CPA a login, so she can work on my books, I take payments online, and always have real time access to everything. 

This is way more than shoe box accounting... I guess it just depends on how professional you want to approach your rental business. I can see how you might feel differently if you only had one rental and were not looking to grow. However for me its a "business", so I want to be able to see my balance sheet, look at my cash flow statements, drill down into how they are build up, see in one click when which leases are coming due etc.

 Congratulations! It seems like you have a project on your hands!:) Kidding aside, this looks like a lot of fun, exactly the kind of deal that I'd like to get into, provided the price is right. You start with a bad baseline, which creates a lot of upwards potential and a ton of work to do, which allows you to follow your own vision and do it right! Congrats again and keep us posted!

 Hi Tristan - Welcome to BP! Real estate is definitely a great way to get ahead! You are 18 which is awesome, if you get behind working towards a financially independent future that early you can go very, very far. On a long enough time line everyone that makes the right decisions would become a billionaire. Problem is most people don't live that long, and those that do, start too late:). For example it took me over 10 years to figure out that a corporate job + saving alone pays the bills but does not lead to true wealth. Better late than never, but anyway, here a a few tips that I'd give to myself if I were 18:):

On Wholesaling

Maybe you want to *try* wholesaling (and I say try, because I have the idea that while some people are greatly successful at it, and it appeals to lots of people it does not work as an occupation for the vast, vast majority of people. Kind of like baseball:) ). So maybe you'll want to try that, and maybe you don't. About the spelling an punctuation in your book... It's a fast and loose "industry" and I actually think that being great at spelling and punctuation is not a key to success. I've felt that a lot of people that get into it do so because they have noting to loose (which can be awesome motivation BTW). If they had a college degree and a great job they might not have chosen to get into that hustle. BUT this does not mean they can not be awesome at it! Some are, but it requires a very specific mindset that I think few have. You have to be that guy who goes up to every gorgeous girl in the club who is obviously way out of your league and get rejected *hard* 100 times in an evening. Then goes home alone, comes back the next night and does it again. And feels great doing it. If you recognize yourself in that, I think wholesaling might be for you:))).

On Buy-and-hold and Flipping

On the flipping, buy and hold part; its very simple. You'll need money. Either you need to persuade someone to give it to you, or you need to have a reasonable amount plus a job history to get a loan. You hear a lot about low/no money down etc, but that has not been my reality. Don't take it from me, talk to a lender to get the real facts instead of guessing. When you know the facts you can make a plan. As far as getting private money, if you have experience you might be able to persuade people other than your family members. Otherwise, you'll want to start there. To get experience you could consider working for someone who actually in involved in real estate already. This might not be too glorious but it will give you some real knowledge and perhaps an inside track.

Side Business

Real estate might be the goal but to get the money to get in, consider starting a side business you can run when you are not studying / working. There is a ton of really low treshold ecommerce things you can do, for example Amazon resaling. Yes, this is a lot of work, but you make your hours and if you put in the work you can open up a decent stream of extra income until you can get your money working for you. I would not want to do that long term (its like a job, requiring constant attention), but short term it might help you ramp up some cash and scratch your entepreneurial itch at the same time. Or maybe some other side business to get some money. Whatever is really easy to get into would work.

General Money

On money in general; start saving today. One dollar here, $2 there, $5 there. Someone that can not keep their money in their pocket while they are young will be unlikely to be able to do that when they are older and actually have real amounts to play with. 

I'd be easy to argue that whatever you save now is insignificant in the future, but what you are really doing is training yourself to delay consumption now to reap benefits in the future. Simple and boring as this sounds, a majority of people never get this. Even a lot of people that come to this forum looking to get "rich" (with no money and no credit:) ) don't get it.:) Saving alone will not get you financially independent, (you'll need to get that money to work at some point), but an inability to save will make sure you'll never be independent:). I am assuming you read Robert Kyosaki, "Rich Dad, Poor Dad"? If not, read that first before you read anything else. It details all the basics of money in a child like simple way, I think it should be mandatory reading in high schools.

Anyway, everyone needs to find their own way. If I could go back and talk to my 18 year old self and I'd listen I would be financially independent by now:). 

In reality though; I would probably not have listened:). Because I knew better! I was 18 after all!:)))

 Hi Sean - It sounds like you are really action oriented, which I think is great. I think most people that don't get ahead so so because they don't have a strong enough bias towards action. So I think that is great!

However, I'd strongly recommend to take some different actions first before listing your property:

1.) Speak to a mortgage broker in your area and go over your particular situation. Tell them honestly what your plans are and ask them if you could get loans based on what you want to do. You have just changed jobs, and it sounds like you may have taken a pay-cut? Since you have been renting out an SFR for a while your prospective rental income MIGHT be counted towards your PITI vs. income ratio. Or it might not. This is really important too. If you don't know of a mortgage broker in Tracy, or your realtor can recommend you mine, she's out of Plesanton, but since most if over the phone internet it does not matter that much. Also, while I am very happy with her, mortgage brokers are plentiful and all will be happy to help you figure out where you stand. The consult part if free, because they will only get paid out of the closing cost when they actually provide you with the loan. Anyway, In summary, it is extremely important that you know if your plan is going to work. If not, ask them what you'd have to do to make it work. It is definitely worth doing this BEFORE you do anything else. 

2.) If you plan to buy a new investment property you will want to do a 1031 exchange. I am no expert but if you sell one rental property you can buy a "like property" (also rental) without paying capital gains tax. Here is the catch; there are time limits. This might sound like boring tax stuff but you need to look into this. Your realtor should be able to explain this to you or get you with an expert. Since you have a time limit you'll need to time finding a rental property and listing your current rental property. If you list your current rental property today and tomorrow someone puts in an offer the clock starts to tick, research this, but I think you need to designate the "like property" within 45 days of closing the first property, that property then needs to close in like 180 days, which is the easy part. I am not saying this could not work out, but by listing before you did your research you will force an artificial time limit on yourself. So you have to buy a "deal" under time pressure, which is not good. 

Also realize that the capital free exchange can only go toward "like property". If you are selling a rental, you can buy another rental without paying the capital gains tax. But not a primary home. Also there are some things that you do need to pay taxes on I believe, like the write down you took on the property? Anyway, a tax person can tell you this, talk to one before hand...

Your listing realtor, who probably is a great person, gets paid when you sell. And he/she will rather get their commission today than "maybe later"... Realize this when asking their advise. And educate yourself on what that 1031 means to you. I would not list until I had a reasonable idea of what I wanted to buy. Also, I don't know where your current rental is but the market is on your side.. Its still going up. Anyway, I think a consult with a qualified tax person is a worthwhile investment. You are about to make some big financial decisions, and a few hundred bucks up front might save you a lot later.

3.) Continue to educate yourself on how to analyze multi family rental property. Its not extremely hard, but "rent" - "mortgages" does not equal cash flow:). This forum and the podcasts are a pretty good place to get started. I am curious it sounds like you are thinking of moving upstream/west to not have to deal with 580:). However I think the "deals" if any are exactly the other way (east)...:)

Anyway those are my few cents...:

Yep, the DSCR is tricky. I just ran into that myself:). Also, do those expenses include Insurance and property tax based on your new purchase price? You should really take a really hard look at that and get some actual numbers. I find it hard to believe that your expenses would really be less than 25% of rent, I would expect them to be over 40%. A property that is being sold for a price that is anywhere near reasonable is usually not managed extremely tight...

One more thing: what interest percentage are you using? For a small (under 1M loan) deal like this I am being quoted rates of around 5% for a 25 year amortization (not 30!!) and a rate adjustment after 5 years... This is what killed my DSCR on the last deal I looked at. Like your numbers show you'll have to put a very high percentage down to make that work, and even though you might or might not have that money laying around, you still incur opportunity cost on it; no such thing as free money.:(

Good luck finding a great deal!

Hi Jay - Your profile states that you want to get into wholesaling. So here is my advise: don't put the cart before the horse... Instead of spending your time worrying about where you *would* pay the most taxes *if* you would make money, start making some **** money!:) Once money starts pouring in and you find yourself paying a lot of state taxes then decide if you want to move elsewhere.

Now I know this sounds a bit harsh but try to see it as encouragement; the advise here is: get busy. I see people on here that have done ZERO business. Yet they are worrying about things like; start an LLC or not, what tax structure to use, what logo to use, business cards, stationary, do they need to get a separate phone for business, should they get an S-corp, will the be able to deduct part of their mortgage expenses for their home office etc. etc. etc.

All of these can be valid questions, however from my observation all these details are often used as escapism for people who are, for some reason or another (fear mostly), not willing to commit and do some business (wholesaling, flipping, land-lording etc.). It becomes a pleasant distraction that keeps them from doing what they know they need to do; jump in.

And the worst thing is that by bogging themselves down into all the details they will never jump, and miss out on a great thing! Do whatever has the lowest threshold for you first. Get your feet wet.

So I am not saying don't cover your basics, but get busy instead of worrying about stuff that is (for now trivial). Remember that a marginal income tax rate of 13.3% calculated over $0 in deals is still.... Zero dollars! :) See if you can move to Nevada, Texas, Tennessee etc. for $0...:)))

Sure, feel free to ask me about it any time! My tenants are not necessarily paying automatic. There is a check box to make the payment automatic. However the way the portal is setup does not (in my opinion) steer the tenant aggressively enough towards  towards going that route. So far only one of the tenants has set it up that way. While you could argue that most of them don't want it setup automatically because they don't know when exactly their bank account will have the funds, I wish Buildium would take a more pro active role in steering the customer down the most desired path. Just like for example the Debit steering that the smarter POS systems do. Debit transactions have a fixed transaction fee, while credit transactions charge a percentage. So smart POS system are setup to default the transaction to credit if the percentage would be less than the fixes fee. If the credit card percentage would be over the fixed fee the POS signature capture terminal defaults to debit. The customer can always opt out of credit/debit, but most don't care that much, so steering saves the retailer a *lot* of money. Anyway, I wish Buildium would do some more of that sort of stuff, but overall I am pretty happy with it. It is super simple to use.

I do agree with the point that for people that don't have a lot of units it is getting more expensive. Its about $2 per unit per month, but it has a lik $45 minimum... If you just have say 2 or 3 units that is a lot of money.:( My solution for this "problem" is just to grow the number of units I run:))) Once you get over the $45, $2 per unit per month sounds reasonable to me:)

Thanks! And yeah, I think so too, especially since my units are nicer that a lot of the rent comps that I included in my analyses. All in all, I was really surprised how much rents had gone up across the board.

I just checked my rent roll, and I have 8(!) units that have 2 bedrooms that are renting for under $800. Then I did the math and found that if I raise the rent up to $800 for these 8 units I will generate another $515 in cash flow. And as long as no-one leaves, at no additional expense.

In general I like the idea of rewarding long term tenants for staying by keeping their rent under market. Long term tenants are *the best*, because I find that your saving on rehab and vacancy until you rent it again take a looooooong time to recoup. However this whole exercise did make me realize I probably do need to be a bit more aggressive on raising the rents on my legacy units (especially if I don't get any organic turn over (which I usually use to rehab and raise the rent to market). It's a delicate balance:).