All Forum Posts by: Dan H.

Quote from @Stephanie Medellin:

Hi Mike, welcome to the community! The maximum FHA loan amount for San Diego county is $2,072,250. The numbers you're seeing are for the maximum loan amounts nationwide, which only apply to the highest cost counties. You would think that San Diego county falls into that category, but the loan limits there are just slightly under.

Here are the FHA loan limits for San Diego County in 2025:

SFR 2-Unit 3-Unit 4-Unit

$1,077,550

$1,379,450

$1,667,450

$2,072,250

When you're doing a renovation loan like 203(k), the loan limit is the max, inclusive of any renovation costs that you're financing.  If the purchase + renovations are over the limit, you would just bring the rest to closing from your own funds.

Keep in mind for 3-4 units on FHA, the property must meet a self-sufficiency test. This means that 75% of the rental income on all units must cover the monthly principal, interest, property tax, and insurance payment. It can be hard to meet this requirement in some higher cost areas.

I'd be happy to talk further and go over some numbers.  I have several options available for 203(k) loans.  

>Keep in mind for 3-4 units on FHA, the property must meet a self-sufficiency test. This means that 75% of the rental income on all units must cover the monthly principal, interest, property tax, and insurance payment. It can be hard to meet this requirement in some higher cost areas.

I will word it much more pessimistically.  Finding a triplex or quad in San Diego that meets the sustainability requirement is about as likely as finding a unicorn.  

FHA in San Diego are virtually only available on SFH and duplexes due to sustainability requirements.  


good luck

Quote from @Ying Tang:

@Dan H. Hi Dan, thanks for your reply! I really like what you like and I'm going to print it out and hang it on my desk. So, you are offsetting that income/cash flow with more investment/loan/interest correct? I really need to dig deeper into this, as currently I pay a lot of income taxes. 

not a tax professional.  Verify everything with your trusted tax expert. 

The loan duration by itself is not really the point of my comment on cash flow being taxed annually.   The reduced cash flow resulting from increased leverage means less tax because you have less “income”.  Note the money extracted via refinance is not taxed until a later time (when you sell without 1031 exchange).  This is true even though you have that money to spend as you desire (ideally invest and not squander).  With 1031 you can put off paying the taxes even after selling the property.  If you die, you and your heirs never get taxed on that money you extracted due to a stepped up basis. 

If you want to write off money from a w2, you or your spouse likely will need to qualify as an RE professional.   This is virtually impossible if you have a full time w2 job that is not RE related.  If you can qualify as RE Professional, then maybe you can benefit from accelerated depreciation.  

Good luck

My view almost matches @Chris Seveney with a little more explanation.  

Unsuccessful people hit a hurdle and cannot clear it.  They often think poor me.  I got unlucky or someone $crewed me, etc.  these little hurdles are excuses not to proceed.  Life is rough on them because they are not equipped to handle these hurdles.

Successful, motivated people hit similar hurdles and they find a way to clear the hurdles.  Even if the hurdles keep coming, they keep clearing them.  As they clear more hurdles, they get better at it.  The hurdles that are road blocks for the unsuccessful people are barely speed bumps for the person who has cleared dozens of challenging hurdles.

Housing currently has poor affordability.  However I have been hearing this for years.  Prior to 2022 q2, housing was more affordable than the bulk of the previous 50 years.  Sure it was not as affordable as 2012, but historically it was affordable.   Various hurdles prevented most wannabe RE investors from investing.  Prices are too high.  Housing is a bubble and going to crash.  Interest rates are going to fall.   Housing shortage, not enough supply.  Too much competition.   Analysis paralysis.  Does not achieve the initial cash flow that I seek,  Etc.  Minor hurdles, but too big for some people to overcome.

My brother was a journeyman electrician.  Went to college and an apprenticeship program making scale salary while working as an apprentice (meaning it increases the closer you get to journeyman and the day you become journeyman it nearly doubles) to become a journeyman electrician.  He was a journeyman electrician over a decade when the state mandate passing a test to be a journeyman electrician.  Brother has dyslexia.  He took the test and barely failed.  He was frustrated, demoralized, etc.  so he let a lot of time pass before taking the test again to once again barely fail.  Again a lot of time before taking the test again and again barely failed.  after 3 failures, he gave up.  I do not have dyslexia so I may not understand all the challenges that come with it.  But if I barely failed, I would sign up for the next available test and study a little harder.  Even if I failed 3 times, if that is my best opportunity I would not give up.  He feels cheated.  He feels unlucky.   However, this is not the only thing he feels cheated or unlucky about.   He feels he has had a rough life.  I feel if I was in his position I would have cleared the hurdles, maybe not always on the 1st try.  He believes I am lucky and things break my way   Whether it is recognizing the value of information before it is commonly known or buying RE that appreciates substantially.

I feel lucky.   I fell lucky that I am able to clear the hurdles put before me whether via hard work, intelligence, experience, or luck.  I feel the world is full of opportunities.  I have made a lot of money via 3 different paths.  I feel there are more opportunities than I have the time or desire to tackle (plus at this point I tackle them because I find financial success to be my fun which is not as motivating as needing to house, cloth, feed a family).

Best wishes for everyone to clear their hurdles

Quote from @Dayana García:

Hi all! Looking for advice and feedback, also share my experience which I think could help to new and inexperienced investors. Year Dec 2023 I bought my first rental property in Lansing MI, purchase price 95000, 25% down + closing cost end up at 30000$, 7.5% interest, so my mortgage with insurance and taxes included was 721$/month. Renting it at 1245$, so it was not too bad. However, I did not know that the taxes did not reflect the purchase price, so today I received a letter saying my new morgage payment was going to be 991$/month, which change the whole picture for us, we are paying property manager since we live in Florida. So we are cash flowing 131$, giving us about 5% ROI, I think we can make higher on another deal. Should I sell? I think we can sell it for 120000, so is it worth it? We think if the interest get lower we can make it work, home is appreciated well I think, roof is new and we pay to change the furnace recently, so I guess in that sense we would not have big expenses any time soon, at least in repairs. What do you think? Thank you for any advice !

Rent minus PITI is not the cash flow. There are numerous other expenses. This property does not have decent cash flow and is likely negative cash flow if properly allocating for sustained expenses

$1245 (rent) - $991 (PITI) - $125 (PM: allocate for it even if self managing unless you believe your time is worthless) - $60 (vacancy and uncollected rent) - $300 (sustained maintenance/cap ex) -$50 (misc: bookkeeping, asset protection, utilities that cannot ethically be charged to tenant such as slab leak, etc). Is -$281/month.

Or via the 50% rule which is aggressive at that rent point (implying your sustained cash flow will be worse than depicted by the 50% rule):

$1245 - 622 (50% rule for all expenses except mortgage) - $498 (P&i) = $125/ month

If it really has appreciated from $95k to $120k in 25 months it could be worth holding for the appreciation if you believe that level of appreciation is likely to continue.

$120k - $95k = $25k of appreciation

$25k / 15 (months) = $1,667/month of appreciation.

Selling will not net you much after subtracting selling costs and expenses related the cap ex that you paid.   

Good luck

Fannie/freddie (F/F) conventional residential loan is the cheapest money available. Leverage properties produce greatest ROI in virtually all markets. cash flow is taxed I. The year it is earned.

I exert effort to maintain high leverage.   I refinance regularly to maintain a high level of leverage and to minimize income taxes.  Choosing 15 year loan over a 30 year loan is foreign to me.  

To show it in a different perspective, does any good investor have any issue achieving long term return in excess of F/f?   The S&P 500 lifetime return approaches 10%.  When F/f rate is high, it implies an inflationary time.  During inflationary times, the returns available via investments are copious. There are a plethora of options that historically produce better return than F/F, some of which produce enough better to even cover the taxes.

If you do not understand how leverage magnifies return in virtually every RE market, educate.  Leverage is the differentiator that allows RE to achieve magnified returns.  Without leverage most people would do better investing in a diversified index fund and the diversified index fund is significantly more passive.

Good luck

I think AI and robots have the potential to increase productivity rates significantly.  Less people will be required to produce what is needed.  I also believe many areas have too many people.   So a gradual population decline would be more to my liking. 

I was in the Smithsonian natural history museum yesterday.  Big mistake to go on a Saturday.   The inside was so crowded.  Also yesterday a trip up the old postal building tower had a 1 hour wait.

A few weeks ago the Grand Canyon south rim had a 1.5 hour wait to enter the park.

Local mountains get snow and every Yahoo is there.  Same for a good year on the local desert flowers (this year was not good).   I mostly avoid the local beaches on the weekend.   I do not use the beach house on the weekends.

Quotas that hit quota in a minute or have lottery.  The Wave, Washington monument, JMT, Grand Canyon backpack permits, nearly every trailhead in the southern sierras, etc  

I believe technology will extend healthy years and increase productivity rates significantly such that continued population growth is unnecessary.  

In a housing shortage market, it means reduced occupancy; instead of 2 people per BR in b- to c- areas, it could me maybe a br per 1.25 people.   

I am not worried about the price of real estate or dropping values.

Good luck

Quote from @Keith Mintz:

Quote from @Brandon Seidel:

Hey BP community,

Looking for some feedback on a decision I’ve been going back and forth on — hoping some of you with experience in high-appreciation markets or equity redeployment strategies can weigh in.

Here’s the situation:

• I own a rental property in Carlsbad, CA (ZIP 92010).

• Purchased for $820K, now worth ~$1.5M.

• I owe ~$630K on a 3% fixed mortgage.

• It cash flows about $20K annually after all expenses.

• I now live in Texas and am considering either upgrading my primary residence here or reallocating the equity into something more scalable.

My current thought process:

Pros of Keeping:

• Locked-in 3% rate is hard to beat.

• Strong appreciation and demand in Carlsbad.

• Consistent, low-maintenance cash flow.

Cons of Keeping:

• Significant equity trapped in a single asset.

• $20K/year on $870K of equity is a pretty low return (~2.3%).

Options I’m considering:

1. Sell and use part of the equity for a larger home in Houston (where I’m raising a growing family), and invest the rest into the stock market or other real estate deals.

2. Do a cash-out refinance, though the rate jump makes me hesitant.

3. Just hold long-term and let it ride — enjoy the appreciation and tax benefits.

Would love to hear from anyone who has faced similar decisions, especially those who’ve moved out of state from a high-growth area. What would you do in my position?

Appreciate any insights!

Brandon

Hey Brandon, I understand this situation well. I also live in Carlsbad and my family has been debating the exact same decision. They bought a house in Encinitas in 1997 for $275k and it is now worth nearly $2m. It is in a very family oriented neighborhood with an HOA. The house has been rented out for years since we moved to Carlsbad and we get about $6k/m as of today. Running the number in comparison to other investment opportunity, the cap is S****. I see better opportunity left and right everywhere, which always brings back up the debate. But the pros of keeping it is net cash flow, steady appreciation, and always have a house in an excellent location while always having cheap property tax, for our future family. Doing a 1031 exchange from an investor point of view, makes a lot more sense even with having to pay a higher property tax. But for us, our family will always be in San Diego, so it is easier to just keep it and not worry about it. We have contemplating just pulling equity out and using that for other investments.

So to answer your question, it really comes down to your future plans and preference. North county San Diego, is really more of a residential area for families and those actually wanting to live in San Diego. Real estate is way more expensive in this area compared to southern San Diego. 

Your house will sure appreciate but if your wanting a higher cash flow now, investing elsewhere would be better. Also If you don't plan on living in San Diego again and have no family here, may be another reason to sell it to a family. And buy a better cash flowing investment where you live or in another market that is growing and has cheaper real estate.

I specialize in 1031 and investment comparisons, if you have any further questions or need analysis done. Feel free to connect!

($2m - $275k)/28/12= $5,135/month of appreciation ($61,607/year)  

the only way your cap is not outstanding is that you extracted value.  Likely far over $1m of value. 

What if you purchased at 80% LTV? $55k plus closing costs. Let's use $6k closing costs so $61k all in purchase cost and the property has produced an average return of 100% on initial investment annually from the appreciation alone.

interest rate in 1997 was ~7.5%. On the 80% LTV, 30 year. P&i $1538/month. $6k rent would vied almost $4500/month to cover all expenses and provide you cash flow. The property tax in near fixed, you are likely paying less than $4k/year.

But let’s assume you refinanced at some point into a 3% loan without cash out and extending the term.  $928/month.  $5k to cover expenses and provide cash flow.

The loan would be fully paid off in a couple of years.

If you had not pulled out equity and increased the term, you could be paying a few hundred a month (refinance in late 2021) and having almost $6k/month for expenses and provide cash flow.

Or late 2021 you cash out refi at 80% LTV with 3% loan and pocket ~$1.5m tax deferred.

My point is this has been a home run investment but your post makes it seem like something that you would expect other markets to match or beat.   very unlikely.  You purchased in a great area and a good time (mid 1999s locally had a fall in RE values, purchase in 1997 was a near optimal purchase similar to a purchase in 2012). 

Good luck

Quote from @Collin Hays:

We are currently dealing with two homeowners that insist on saving a few dollars on utilities by putting upper and lower limits on the thermostat. They are getting blistered with poor reviews, and future guests are calling in to cancel because of the reviews.  Penny wise, pound foolish.

Just. Don't.  

 I could not disagree with this post more:

- not setting a minimum could freeze the AC resulting is large repair bill

- tenants can set ac low just to run up the electric bill or set the heat to run up the gas bill.

- humidity can be an issue.  It is important for the HVAC to control humidity. 

The important thing is to set the limits at appropriate limits.   If you are setting the limits too restrictive, this is not smart.  But appropriate limits is smart.   Not setting any limits is not smart and can be costly.  A frozen AC can be costly.  Intentionally wasteful utilities can be costly.  

I have limits set on all of our STR HVAC systems.

Quote from @Russell Brazil:

Quote from @Dan H.:

Quote from @Russell Brazil:

It's not an undue financial burden because there are plenty of insurance providers that will insure this at no additional cost.

 A year ago I had to change insurance carriers because of a change of policy by my carrier.   My insurance more than doubled. 

Most of us have insurance with the cheapest option and any change of carrier would result in a premium increase.  Add to this the risk of now having a new insurance carrier if a substantial claim has to be made and the consequences versus making the claim against a long time insurance carrier.  

I suspect in many cases a change of insurance carrier will result in higher costs and additional risk. 

I would deny the tenant based on the increased cost criteria.   I would invite the tenant to get the insurance carrier to change their policy. The prospective tenant will not succeed.  I would not change carriers to accommodate an ESA that my insurance does not allow.   

If they need an ESA, no one forced them to get an aggressive breed.  The issue is tenant caused.   They will need to find a LL where the ESA does not result in increased costs. In other words they will need to deal with the issue that their choice of ESA caused.

 Local governments have been sued and lost based on trying to restrict putbull breeds for service animals and esas. If a city or county can't even defend themselves in a lawsuit with huge amounts of money to use to defend themselves for this, that passed laws banning the breeds....the reality is a landlord stands zero chance in defending themselves on this.

Regulatory fines are a guilty til proven innocent fine as well. So they're out $16k on the fair housing fine, then need to pay to try to get that overturned, of which theyll end up losing. Just to try to make a point.

 Proven innocent is easy as it is a cost increase.  By their own rules, ESA can be rejected GP for cost increases.  If they want to change their ESA rules, they need to re-write the rules. 

I would reject the tenant based on the exemption.  The exemption applies.  The cost increase is real.  There is no argument otherwise; at least until the rule is changed. 

I do not manage my properties scared.  I get threatened to be sued regularly.  I have even been threatened to be sued over a bogus ESA.  I never have been sued for RE because I follow the rules.  The person threatening the suit has zero case.

Easy win.  No worries!

I have one that I believe will lose principle but has not exited (full cycle) and likely will not as long as they can hold it even if holding it may cause loss of all principle.

What time span do you need this info by?   I suspect mine will not have realized principle loss until too late for your use.

by the way I believe only #3 applies in the case of this syndicator but other items not on the list is 1) named partner has exited.   I heard it was related to a divorce.  2) commercial residential prices have declined significantly. 

I hope I am incorrect and these operators can recover at least all principle..