All Forum Posts by: Account Closed

I think it depends on your goals as an investor. If you're trying to build a portfolio of properties, or eventually move back into that specific home, why sell? But if you're not sure about either of those scenarios, I'd sell. Why? Because it's not very often you can make $120k tax free. Taking home $120k requires earning substantially more than that to account for taxes (not to mention your time/energy).

I was in a semi-similar situation only because I had that 2/5 year rule coming up. I decided to sell because 1. I had other rentals that were performing well and 2. I could use the cash to make additional investments in flips and larger commercial deals as well as investments in non-real estate ventures. Having that baby bank of capital allowed me to grow my money faster. Fortunately, I didn't spend the cash on a Porsche like I really wanted to :-)

Investment Info:

Other commercial investment investment in Sacramento.

Purchase price: $670,000
Cash invested: $600,000

Mixed-use property using the buy, rehab, rent, and refinance formula. Raised private funds for the rehabilitation.

What made you interested in investing in this type of deal?

This is a value add mixed-use property in a burgeoning area of Sacramento. The long-term prospects of this property are tremendous.

How did you find this deal and how did you negotiate it?

This was an off-market deal obtained through personal networks.

How did you finance this deal?

We owner financed the purchase and raised private capital for the rehabilitation.

How did you add value to the deal?

This is a complete gut job. We also plan to add value by erecting additional residential units upon the parcel.

Lessons learned? Challenges?

Everything costs more in commercial projects.

Did you work with any real estate professionals (agents, lenders, etc.) that you'd recommend to others?

I worked with Al Williamson, my business partner, to raise the capital. I am the attorney on the deal that structured things and papered the deal.

With all due respect @Russell Brazil, everything you're saying is generalized to the idea of rent control. There's no analysis of this particular ordinance. 

What exactly in the text of this ordinance is troublesome to you? I'm truly interested in your perspective.

Sacramento is experiencing a crisis of rental housing because there are more people moving here than are leaving. Couple that with the tremendous numbers of flippers and developers driving up prices that affordability is the main issue. For example, in 2014, I purchased a rental unit where market rents were $1200, by 2018 market rent was $1800. Folks making $50k/year can't afford $200-300 rental increases in a single year. That's why I think the 6% annual rental rate increases is extremely fair because it allows landlords to make a living while remembering that this system only works if people can afford to rent in the first place.

@Mike Cumbie In that hypothetical you could evict the tenant because you were removing the property from the market. Just give notice and you'd be good!

Sounds like the engaged couple has bigger issues than real estate investing, and that's how they look at money. The larger discussion should be how you two think about money, budget, and want to use money to facilitate your desired life together. Real estate investing is just a part of that discussion. 

On Tuesday, August 13, the Sacramento City Council will likely vote to enact a rent control ordinance. 

Here are the highlights:

• - Landlords will be prohibited from raising rent more than 6% plus the “consumer price index” percentage for the West Region per year. For this June, that CPI percentage would be 2.7%. So in this hypothetical the total allowable increase would be 8.7%.
• - Landlords will never be able to increase rent more than 10%.
• - Landlords will be prohibited from evicting tenants unless 1.) tenants stop paying rent, 2.) are criminally charged, 3.) are illegally selling drugs, 4.) fail to give landlords access to the unit, or 4.) otherwise violate their lease.
• - Landlords will be able to evict tenants if they are making certain repairs or selling the unit and provide the tenants an extensive 120-day notice.
• - The ordinance will not apply to single family homes unless they have been converted into a duplex.

In my opinion, this ordinance seems totally reasonable. The 6% increases are fine. The only sticky point will be the fact that landlords will no longer be able to evict tenants for whatever reason. 

What are your thoughts?

I think Dave's real gift is teaching folks to get rid of their personal debt! No credit card debt and definitely no car loans. Even a personal home is generally not an investment for most people. If folks just looked at their amortization schedule they'd pay those 30 year fixed mortgages a lot quicker so they didn't have to pay so much interest. Obviously folks with ridiculous incomes or have businesses that pay off cars/housing expenses are the exception, but Dave is generally talking to a caller with very littler financial expertise who is stuck making poor financial decision after poor financial decision.

Seems odd folks won't provide this information. We have folks provide a picture of their badge or assignment letter, complete a background check application, and place a deposit. They pay the full amount when they arrive. If someone is unwilling to do this, then frankly we do not want them as tenants. But we've never had an issue as traveling nurses are some of our favorite tenants.

This LA Times article paints a picture of a cooled housing market in Los Angeles and Orange County. I am interested in LA County. What are folks on the ground seeing?

I wouldn't be surprised if California did something similar.