All Forum Posts by: Collin Chan

@Tyler Garcia I think the answer is it depends on the property. I've seen some where you buy a rundown house for 25-35k in the midwest, invest 30-40k to rehab and increase the value hopefully to 100k, then refinance to pull money out of your full investment using the 30k ARV as your equity. In this case if you have the 70k to buy cash and do the rehab, then go for it. If the costs are higher and you don't have the money, you might entirely leverage OPM through borrowing from the bank or hard money lenders and you can still make a lot of money with no money.

It really depends on the deal and your individual scenario although having the cash can give you leverage in negotiating the deal and not paying interest on the lending however, it all comes down to if you want to use that money for other deals in parallel or just focus on one.

@Surendran Palanimuthu Welcome to BP!  You'll find a lot of useful information here and many like minded people with experience in different fields and areas of real estate.  What is you current background in real estate and what type of investments are you currently looking for as the options are almost endless from what are covered in the podcasts. :)

HI @Michael Cavalli, sorry to hear about your father.

I looked at your property on Redfin and see some discrepancies in how Redfin is viewing your property.  It's comping your property to those with less bedrooms/bathrooms and smaller square footage.  While the listing represents what you stated above, Redfin's pulled data shows a 3/2 2300sq/ft home which is why the comps and property value might be off.  Most buyers using Redfin probably look at the sales price vs market price.

I do suggest having someone look into this for you. I have a friend who is a great Realtor living in Napa and knows how to market the homes properly. Honestly, the pictures uploaded on the MLS for you property don't do it a lot of justice.

PM me if you'd like the Realtor's contact.

Collin

It's really about appreciation however, people have resorted to house hacking to increase cash flow due to the low inventory of affordable housing (especially in the Bay Area) and housing in general.  It's debatable of whether CA is overpriced and you'll find people on both sides of this debate but the key differentiator is cost of living and wages.  Until the high income positions truly move out of state to other areas, CA and especially the Bay Area see incomes of $200k-$300k increasing at 3-5% per year vs other states where $100k increases the same 3-5%, in 5 years you could see a $70k increase in salary vs $20k in other states.  Factor in many households in the Bay Area are dual income making household $300k-$600k a year in tech, prices growth is sustained.  

The bad thing is wage gaps keep increasing but I'm not sure how that will be solved.

+1 To what Jared said.  It really depends on your motivations and goals.  Of all my neighbors within my close culdesac we have discussed this exact thing.  Out of 5 of us, I was the only one to do a cash out refi to the max value I could pull out.  All others either went to a lower rate in either a 15 year fixed from a 30 year fixed or kept a lower 30 year fixed.  All of us agree that this year will be a great time to invest but each has their own goals and investment strategies as well as current financial status.

Being here on Biggerpockets, the assumption is that you want to build your real estate wealth so that would mean if you can leverage your personal residence to pull out equity, it makes sense.  However, you do cite that you have concerns about future employment so that would be something to evaluate.

If you do a cash out refinance, keep in mind the market values might go down in the near term so it's best to do sooner than later of course mortgage rates crept back up with the flood of people refinancing the past month but is expected to go back down.

I also feel the same.  I pulled back on the construction costs and would rather invest when the market is low.  I think there will be others as well who either lost the liquidity to do construction or will be investing for greater gains.  However, if my GC came back with a discount on construction costs which wouldn't be significant unless materials also took a hit due to less demand then maybe it would make sense to re-evaluate.

It will be interesting to see how this all plays out.

Interesting thought came to mind.  Lots of contractors are paid by the hour or jobs.  The overall economy is slowing down.  I know there is still a need for housing the Bay Area so this might not be affected but any thoughts on how this market might impact construction costs as they tend to drop when the economy slows.  Any thoughts on if you think there might be a good time soon for doing a construction project?

@Shervin R. I have been looking at ADUs including modular and for many of them, the costs are not lower and more restrictive in terms of layout and design.  I decided to go custom and have been quoted $250-$300 a sq/ft including everything.  Most modular don't include foundation and hook ups to electrical, water, and sewage but some will so take that into consideration when looking around.  The savings is more in the time than cost though so if you want less disturbance on site since you live there, then it might be of value to you.

Based on cost, you can use rentometer to see what a 1/1 or 2/1 would rent for in your area (typical ADU floorplans although you could go larger). Then you can run some numbers and see if it makes sense.

Collin

Just to put it into perspective as someone did for me.  If you're borrowing at 2.5% and the USD is losing 2% annually.  You're essentially getting free money.

@Rich Pritzker My opinion is you should do option 3 and pull out as much equity as possible.  Seems like it will be around $600k.  I'm doing the same and using it for a number of investments but focusing on cashflow investments that can pay the mortgage and then some.  You can do local but it's pretty competitive for good investment properties but they're out there.