All Forum Posts by: Dhanasekaran Ranganathan

After looking at your posts and the threads you've been in you are bouncing like a beach ball all over the map with choices for where you want to invest.

Before investing in Bakersfield, I hope you know the place is so hot even God doesn't go there in the summer.

Aside from that, while properties often look less-expensive in Bakersfield the rents are cheap and the problem with cheap rents is your cost to clean and paint a rental unit and replace the flooring is exactly the same as where rents are more-expensive. Example. You have more expensive units in San Francisco, or Sacramento you may pay more for units, but when you have to paint and repair would you rather have rental units bringing in $2300 per month vs. $850 per month for units the same size.

The previous paragraphs are the reason why I tell people you need to look at thousands of properties and learn to crunch the numbers many ways.

Owning long-distance rental units will cause you to lose many in many ways e.e. you will have to pay a management company more than 10% after they charge for all their extras, management companies don;t have the ability to be as efficient as a hands-on owner when it comes to having to paint, clean and make repairs e.g getting a new roof, repairing plumbing, etc.. 

There is a business model I use and this one is something investors should write when doing math calculations. Blue Chip properties will always outperform low income and low rent properties with the exception that you can get low end properties for a steal. Explanation. One house for $2 million near the ocean will outperform 10 or 20 single family properties in California. 

The next most-important thing to put in a business model is when you are going to invest you want to look for properties that will return 50% to 100% on your investment capital every year. These properties are easy to find, but if you don't have this business model burned into your brain and you don't seek properties that will give you a 50% to 100% return on your investment capital every year then there is no way you can achieve this goal.

You will not earn 50% to 100% on your money investing in Bakersfield unless you found some sort of investment property for 50 cents on the dollar and I will bet that you did not come even close. If I want to earn a stink 5% on my money I would stay out of the real estate business. Some companies like New York Life have some good products that guarantee 5% and I don't have to feed and clothe a dinosaur 24/7 365.

Before you invest your hard-earned cash don't be afraid to post all the numbers and details.

Hi @Dhanasekaran Ranganathan

Glad to hear that you are planning to invest in Bakersfield.  I do believe that this market is going to be good over the mid term hold and longer, and there are many things going on in town that haven't been happening before.  For example, the boom in transportation business, growth in jobs, and development. 

Because we have such an in depth post below yours, I am going to attempt to add to the analysis below and hopefully that can be of help to you as well.

@Account Closed you are correct Bakersfield is hot, however, not as hot as Phoenix, which currently has a population 4x that of Bakersfield and was build around a lot of the same principles that Bakersfield is moving towards now. 

I would agree with your point that in San Francisco, you do have more rent, and the cost of paint really doesn't change that much, but at the same time, you also have to use higher end and more expensive finishes to achieve those higher end and more expensive rents which do end up costing a lot more, and this point is strictly taking into account property appreciation while leaving out the thought of cash flow. 

I agree with the long term rental argument, unless you know how to build a team or have the time and energy to go do it yourself out in where it is that you want to invest. 

I would love to see the math on your business model.  I can see that you might be correct, but just 'back of the napkin':

• $2M house near the Ocean - let's use Newport Beach - 5 year appreciation 27%
• $2M in SFR's - let's use Bakersfield - 5 year appreciation 44%
• Difference - 17% over 5 years - 3.4%/year greater in Bakersfield

• $2M house near the Ocean - Newport Beach - $0 cash flow long term rental
• $2M in SFR's - Bakersfield - 6%/year long term rental
• Difference 6%/year - 30% over 5 years greater in Bakersfield

Now there may be other markets this works in, but my point is statement doesn't really work.  IMO, in all markets there is strategy.

And this is true, if you want to use whole life or some 'wealthy' persons investment strategies then you will earn 4-5% on your money, and if you own a property which will get you the same return then you may as well go with the safer option.  But there are also benefits to people who own real estate that people who have whole life insurance may not get, and the same for stock portfolios, but I'm not well versed in those things, so I would be open to learning. 

@Dhanasekaran Ranganathan the point being, if you are looking to invest in Bakersfield or anywhere else, know your numbers, and make sure your strategy works for you.  If it doesn't then don't do it.  Feel free to PM me to chat further as well. 

Best of luck,

Sunny

The market is super competitive right now. Since COVID, there has been a decrease of 39% in inventory from a year ago in Merced. 

That is a huge difference considering it seems like there are still the same amount of buyers in the market. 

I manage properties in Merced. We have been lucky with the quality of tenants that we have placed in our properties in that they are all still paying rent but I know a lot of self-managing owners and management companies that have 15-25% of their tenants not paying rent. 

Personally, I think that when evictions are allowed to happen in Late February (estimated; subject to change) I think that we will see a lot of inventory back on the market once the landlords evict their tenants.  

When you have more houses available than buyers wanting to buy that is when it becomes a buyer's market.  It is difficult to say how much the market adjusts but I think the inventory comes back which would be good for buyers. 

Feel free to reach out if you have any other questions about Merced. I know the area very well

Dhana -call Justin Lee at CCNB in Myrtle Beach.  He also handles North Carolina and has done commercial loans before.

The 25 year may be a bear. 75% LTV is the norm. The 5.5% seems high unless you're using an LLC for the ownership.