All Forum Posts by: Dr Democracy

I found this forum about a week ago, and I've been reading through it every since.

To give some quick background, I expect to have a small amount of cash ($50-60k after taxes) sometime this July, and plan on purchasing as many multiplexes as I can with leverage to create some supplemental income from rents. My goal is to live as frugally as possible, and continue to save money for down payments on additional properties.

In a year or two, I will be moving to San Diego, and plan on buying a house to live in for at least a few years. After that, my plan is the sell the property and hopefully turn a decent profit. If my business plan is sound, my constraint will be my capital (like most people, I'm sure), so obviously a FHA loan with 3.5% down sounds pretty appealing.

Here is where my post becomes pertinent to the rehabbing and flipping forum: I want to purchase a house that needs work done, and do all the work myself while I live there. I'm not a carpenter, but I am pretty handy. New carpet, lawn installation and maintenance, updated lighting fixtures, paint, or maybe even a patio or deck installed are well within my skills if I have the time to do it (which, living in the place, I certainly would).

I've got a friend who will be going to med school down there who I plan to live with, so when you factor in $800 or so in rent from him, PITI will come close to what I would be paying to rent a place anyway.

Assuming thus far that this sounds like an intelligent plan (and if not, I'm all ears), here is an example of the type of place I would look for:

http://www.realtor.com/realestateandhomes-detail/5372-Barstow-St_San-Diego_CA_92117_M20640-37129

Basically, it looks like it would be a really nice home if the interior was cleaned up, a green lawn installed in the front and back yards, and on top of it all, it's a place that I would like to live in while I'm fixing it (unlike my rental properties, this is one aspect where emotion will factor into the decision).

Also, what is your opinion on properties with a pool? Are they a big selling point in a home? If not, are they even a plus?

I'd love to hear your thoughts on whether I'm looking at a good idea here or not.

Thanks,

Tom

Steve,

Thank you very much for the advice, and the offer to give me your opinion on anything I look at in the San Bernardino area.

It will be a couple months before I have the money to make this happen, but if I'm still looking at San Bernardino I may very well contact you.

Again, I appreciate the input :)

Tom

My intent is to leverage my investments and not purchase them outright, but a number of you have suggested taking my whole 60k and purchasing an SFR without a mortgage.

My mind is open to the idea, but could someone explain why you think that's a better strategy? As long as I'm not concerned about paying the mortgage, is there a reason not to stretch my capital as far as it can possibly go?

First let me thank you all for your replies. I'm very appreciative for all thoughts and opinions about my situation.

Let me start by saying that I intend to invest in California to start. I'm not trying to be hard headed about it, but my uncle (who I recruit for) owns a brokerage here, my father is a loan broker, and my grandfather has been investing in real estate for the past 50 years. Additionally, I've lived all over the state so I know all the places I'm looking at to invest in.

I don't mention that to make it sound like I think I know it all, but I'm FAMILIAR with the market here. If I were to buy a house in Detroit, I'd have to take an agent's word that it's a good deal, or that it's in a part of the city that will pick back up.

But I KNOW Sacramento. I can look at a house there and at the bare minimum ask myself "would I be willing to live here?" My biggest fear is that I'm going to put my money into something I don't understand.

In answer to Scott, for my FIRST property I'm looking for something that needs minimal repairs. I'm pretty handy, but I'm not a carpenter. Anything that needs much more than a lawn installed, some walls painted, or new carpet and it's probably more than I want to take on at the moment.

I don't care about the neighborhood. My primary concern is to get the best returns possible on my money. If that means driving through the ghetto in Oakland for a repair, I've got no problem with that. Also, as long as the numbers pencil, I don't have a limit to how much I'm willing to travel.

My number one goal is to make money - that's it.

Basically guys, I'm trying to take my 60k and make the most profitable business I can. I don't need totally passive income, just passive enough that I can continue to save money and increase my cash flows (for this reason, I've also considered laundromats, but as far as expansion and freedom go they don't seem as appealing as real estate).

This isn't about ego, and this isn't about driving by a house and saying "that's mine." This is about creating the most profitable business I can, and creating one that I can continue to put money into and expand.

Again, all thoughts and advice is appreciated. To those who suggested I buy out of state, please don't take it as an insult that I'm choosing not to - I'm just apprehensive of getting in over my head.

I'm a young guy (25), and I'm about to sell an asset of mine that through a particular area of expertise I have (and a whole lot of luck) will net me around $60k after taxes. I live in California, and given the horrendous state of the CA real estate market, I'm considering investing in properties.

For the past few months I've been browsing through multiplexes on realtor.com, and have created a fairly extensive spreadsheet detailing numerous properties that look profitable. I'm a bit apprehensive of investing in a relatively poor area (like Merced), so all of the properties I'm looking at are either in Sacramento, the Bay Area (Oakland, Antioch, etc), San Bernardino, or Stockton. Los Angeles has a few good deals as well, but most seem to be in those areas.

I won't be ready to buy for a few months, so at the moment I have only pictures to verify that these properties are not in complete disrepair. However, I'm finding a number of properties that seem like they would net me so much more than the "$100 per unit" after the 50% rule that is so often discussed in these forums, that I can only assume I must be missing something.

For example, take this Sacramento Duplex:
Price: $50,000
Monthly Rent: $1,600
Expenses (assuming 50% rule): 800
Mortgage (assuming 20% down, 30yr @ 7%): $266
Profit: $534 (or 267/unit)

Or this San Bernardino 4-plex (each unit is 3/2):
Price: $100,000
Monthly Rent: $3200
Expenses: $1,600
Mortgage (same assumptions): $532
Profit: $1,068 ($534/unit)

Coincidentally, these properties give the exact same ROI.

Now, I'm certainly not suggesting these properties are everywhere, but I normally find a few new listings like this each month (most last about that long before they're taken down - I assume because someone snatched it up).

However, assuming I'm patient and assuming the properties I'm finding with comparable numbers pass inspection, with a 60k investment, I'd be looking at about $38,400 in profit per year, or a 64% pre-tax return on my investment.

Common sense tells me I must be missing something, but even with pessimistic projections I can't see what it is. Can the CA real estate market really be this bad?

60k at the age of 25 is a lot of money, and my hope is if I invest it wisely I can make something of myself (be it as a landlord, or another business). To those of you with experience, I would be very grateful for your thoughts.

Thanks,

Tom