All Forum Posts by: David Song

You will have to list up to 3 properties that you plan to buy at least 1 of within 45 days of sale of property 1. You don’t have to be under contract. You can’t close on that property before sale of property 2. You can’t buy anything else except one of those 3 properties. If you fail to close you owe all the taxes.

Because you live they are in CA you’re going to get hosed. They’ll make you file a form every year saying your replacement is still a rental or you owe all the taxes.

0 Votes

Planning to sell two investment properties in CA and buy one primary residence in CA.

Property 1 is listed and expected to sell in August to September timeframe (Around 150K long term profit, total sale price around 0.85M, no loan)

Property 2 is under renovation and expected to be listed in August-September, and close around October to November (around 400K long term profit, total sale price around 1.7 M, around 0.6M loan. ~1.1 M in cash).

What is the best time to buy the replacement property? Under 45 days, I need to identify replacement property. Does that mean I need to be under contract for the replacement property? Or just put an offer into it? What if the offer is not accepted?

The replacement property value should be 0.85+1.7=2.55M or above? Can I still get a loan for this property? If so, do I have to put all the cash (i.e. 0.85 + 1.1 = 1.95M) from the two escrows into this replacement property?

Also, what if Property 2 is sold after Day 45, when the replacement property is already identified for Property 1?

Any experienced 1031 exchanger can provide some insight into this scenario? Greatly appreciated.

0 Votes

Reno is an interesting market, not far from Lake Tahoe.

what kind of property can get around 6-7 cap in Reno?

Quote from @Jake Andronico:

@David Song

What a great position to be in! Congrats!!

Depends on so many factors:

- What it yields

- What you're trying to achieve

- What headache factors you're willing or not willing to have

- What tax implications come from selling (and if you have to replace your debt in a 1031 exchange)

With 1.7-1.9mil that would be a 6-10 unit out here in Reno, NV that with cash could produce probably a 6-7 cap with upsides in rents.

SF is obviously a super strong appreciation market and it will likely continue that way and bounce back (in my opinion).

Best of luck to you no matter what you decide!

0 Votes

San Francisco, California

I am considering either sell or rent. If sale price is over 1.6, likely t sell. If below 1.5, will likely to keep renting out with main house and ADU separately, around 7 k/mo.

If I sell it, will likely just pay the long term capital gain tax.

Quote from @Wilson Lau:

Competition is definitely high on the buy side, and I see more and more buyers coming in as we approach the summer season. What's your plan with the proceed? Are you planning to do a 1031 exchange or a trust deed to avoid/ minimize the property gain tax?

0 Votes

San Francisco, California

The rebound came suddenly amid still very high interest rate environment. Sold price above list price over 200k is normal again.

I am considering putting a house in South San Francisco onto market recently. Bought in 2020 for 1.02 m. A few weeks ago, I was estimating around 1.5-1.6m. Now, it looks like 1.7-1.9 m. This house is under some renovation with an ADU addition, after 4 years of rental. Debating whether to keep it as a rental or just unload.

1 Vote

San Francisco, California

I have only invested in sf Bay Area. No experience with red state investing.I did spend 5 years in columbus, Ohio. I prefer SF area over Ohio for REI.

this is not about politics, but about investment return. SF Bay Area has been the most profitable location for REI in US for the last 15 years, during which I invested. Assuming I spent the last 15 years investing in Ohio, the investment return would be significantly lower.

I will continue to invest in SF Bay Area, not in the city of SF or Oakland though.

3 Votes

The housing price will increase significantly in 2024 in the Bay Area.

The inventory level in San Mateo county and even east Bay Area has dropped to historical low, even though the price has not increased significantly.

This dramatic reduction in inventory is a strong precursor signal of rapid price increase.

For example, in foster city, the active SFH inventory today is down to 1 from 20-30 range.

In Hayward, the active SFH inventory dropped to below 30 from 50-100 range.

There is a huge number of buyers waiting to get into the market. With a simple projection of future rate stability or possible reduction, they have started to jump in. This has happened already, as indicated by the dramatic inventory reduction in December 2023.

The increased supply will be limited in my opinion, especially in CA due to property tax considerations.

My crystal ball says 2024 will be a high price appropriation year.

3 Votes

Orange County, California

Looks like you are doing some really interesting stuff, and best wishes.

when I make a buying decision, here is the process

1: focus on a few zip codes or cities, with about 10-50 active listings. In my case, Hayward, foster city, 94401, and 94080

2. focus on the lower price range SFH

3. search for outliners

4. visit the house and examine interior and neighborhood, determine ARV, repair cost, comparable, and rental potential

5. prefer Two exit strategy should work, both flip and rent/hold.

6. determine offer price and negotiation strategy.

7. offer

Quote from @Steven S.:

After feedback here and elsewhere, I realize developers already have a method of acquisitions that works for them. I made a tool for developers to use in acquisitions, people who are doing and making decisions that matter constantly. Those two don't mesh very well, lots of friction & seemingly pointless on their-end to try and change what they are already doing since it is working. But that's who it is really built for. So from this app's/product's perspective, it's either best for a new-to-the-game flipper/wholesaler, or developers who want to get more efficient and scale their internal ability to review property & the respective market confidently, they will be highly interested and have near-frictionless interactions.

I realize these two options yield a small market for ample & proper use. My question to the developers on here is: Do you check the market before buying, and if so, how do you do it?

0 Votes

Los Angeles County, California

Not enough collateral. LTV too high. You can easily walk away and the investor stuck with a vacant house.

1 Vote

Quote from @Carlos Ptriawan:

Quote from @David Song:

Quote from @Carlos Ptriawan:

Quote from @David Song:

Syndication certainly favors the syndicator, with all the risk on the passive investor. Even worse, the investor has no control. It’s probably better just to invest in SP5000 or QQQ.

With the current interest rate, commercial RE is in big trouble. I was on the phone with a BMO commercial mortgage guy this afternoon. The commercial mortgage market is DEAD, quote.

Rates are 8s up to 10s. Whereas the cap rate on active listings are 5, 6 range. No transactions. No qualified commercial loans based on current interest rate and cap rate offered.

To solve the problem, either the rate has to come down significantly (probably not going to happen in a few years), or the cap rate has to go up to 10s, which means the price has to be cut by almost half.

For those folks that has a maturing commercial mortgage, they can not refinance based on today’s rate. They can not sell at 6% cap. What are they going to do?

thanks for being so direct.

the LP bought at 4 cap.
GP wanna get out at 5.5
buyer wanna buy at 6.5 only.

I keep hearing in-refinance , i don't know what that is, maybe refinancing / debt restructutization for another 5 years ?

Most commercial loans are only for 3 to 7 years. At the end of that period, the owner must pay off the existing loan and get another loan to pay off that old loan. If the loan is maturing in the next few months, the owner has no way to refinance at the current high rate, since the cash flow will not qualify for the double high interest rate. Oops! Bankrupt.

THATS IT !

So there is inherent danger in commercial that never been talk about, becoz every GP is rushing to buy at discount->to rehab in hurry->to rent it out->to sell it quickly and do the same/repeat, this cycle can't be repeated in basic math because at one point, the cycle would go againts them. And that cycle is now.
Everyone is promising the same thing. Multifamily syndication by average expecting 15% IRR with high single digit cash flow.

I am not blaming those GP, but from financial perspective, the lending aspect of it doesn't make sense. What has to change is, the lending structure, they should be able to keep the property for ten years, so if there's unexpected happening in the future , they could recoup the losses.

There should be lender or banks that could finance them for at least ten years.

From macro economic perspective, These cycle can only be executed when Fed is increasing money supply.

Syndication is like the wolf eating a wolf game, it's just at what one position during cycle that would determine you make it big money or you may commit suicide ( there's GP that's already committed suicide) just saying how serious it is ...

My fist commercial mortgage was a 10 year. However, you pay more with higher rates, etc.

I never invested in syndication myself, so I can not speak to the GP’s experience, net worth, etc. if I ever invested in a syndication in the future, I would like to know that the GP has personal net worth of a minimum of 50M, with verification from successful REI. This does not include other people’s money. There are too many inexperienced people pretending to be experts and want to be a GP. That is simply not acceptable. GP needs to actually have a lot of net worth from REI to prove that they are actually good investors.

2 Votes

All Forum Posts by: David Song

David Song has started 24 posts and replied 661 times.

Post: 1031 exchange from 2 properties into 1

Post: 1031 exchange from 2 properties into 1

Post: SF Bay Area housing market show strange rebound

Post: SF Bay Area housing market show strange rebound

Post: SF Bay Area housing market show strange rebound

Post: Investing in Blue States > Investing in Red States

Post: Effect of lower interest rates on market prices (trick question)

Post: I made LA/Ventura & SF/Bay Area Underwriting tools you can use

Post: Debt Investment offer

Post: Don't become passive investors