All Forum Posts by: Dan H.

Quote from @Allan C.:

@Dan H. Fair point about inequity of rents limited by AB 1482 if taxes get reassessed. I may have an incorrect assumption that most MF operators have a strong spread between revenue and expenses, especially if assets are held by owners for a long enough time for Prop 19 to have material impact. 

you've mentioned many times that you have significant rent growth on your assets, so how does the rent growth not cover the tax increase? That seems to be the case for my MF properties. I also believe Prop 19 targets SFH more than MF, and rent caps don't apply in that scenario.

will this result in more corporate owners - perhaps. It will surely result in higher rents to offset the tax burden. It will also ensure LLs keep up with the markets rent since they don't have luxury of relying on low tax basis. 

While I get that this prop affects long time owners, I also see this as balancing markets. I fundamentally don't like regs that have extreme biased treatments for legacy owners, even though I am beneficiary. Market prices are set by the marginal providers, and the marginal CA providers (at least for <25 units) are bearing the full burden of property taxes. 

 >you've mentioned many times that you have significant rent growth on your assets, so how does the rent growth not cover the tax increase? That seems to be the case for my MF properties.

Not all residential property owners manage their properties as a well run business.  Many let rents get significantly below market rent.  They can do this and still make money because of the prop 13 property tax savings.  I am not saying this is a smart business approach, but it is very common.

I suspect as often as I have mentioned good rent growth, I have mentioned my cash flow is modest. This is because I maintain fairly high leverage (I attempt to maintain higher leverage than I can maintain). The high leverage maximizes ROI and minimizes the tax (because the cash flow is minimized).

My heirs will have negative cash flow on multiple properties.  More importantly why would they choose to keep any of them?  They are already optimized.  The heir gets a stepped up cost basis.  Are these properties still the best RE investments that can be purchased if the property tax increases to that of a new purchase?  I suspect not.   They have no good value add opportunities.  I have discussed this with my heir and the need to recognize well rum properties have optimal resale value.

The current market has poor return on equity (ROE) at current rates.  With the prop 19 property tax increase, the inherited property is likely to have this poor ROE and typically the best option is for the heir to sell the property.

The same thing happens in regular businesses.   The business is achieving increased profit due to the property tax savings achieved by owning the business property for many years.  Without this savings, the business is no longer viable.

A local welder is in this position.  The family had a large welder/machine shop business that the property had been owned by the family around 50 years.   When the property tax got reassessed at death, the business was no longer viable.  The heir rented out 90% of the property to an equipment rental business.   The heir let go all his employees.  The heir stores his machine equipment on the property in storage (not in an easily usable state) and has a canopy set up for him to still do welding jobs on site.  I suspect he hopes to resurrect the full business at some point.  I question if he would have been better off selling the property and equipment.  Regardless, I consider this a sad consequence of prop 19.

Having to sell off or shutdown family businesses at death (whether residential housing or an other business) I view as an undesirable consequence of prop 19.

As indicated, I am against any attack of prop 13.   What I see is regular attempts to strip prop 13 protections by targeting a small subset of the constituent base.   It seems like every other election there is a prop to remove prop 13 protections from some group.   They succeeded in getting it removed at inheritance (excluding farms).  I guarantee another attack on prop 13 protections will be coming.  

Best wishes

Quote from @Enrique Jevons:

Becoming financially free through rentals is absolutely doable with the right strategy. Here’s a simplified roadmap:

1. Choose the Right Markets
Look for areas with strong rental demand, low vacancy rates, job growth, and solid local amenities. A good location is key to consistent cash flow.

2. Buy Smart
Focus on properties in good condition that offer positive cash flow from day one. Pay attention to neighborhood quality, tenant demand, and future appreciation potential.

3. Manage Efficiently
Screen tenants thoroughly, set fair market rents, and stay on top of maintenance. A well-managed property keeps tenants longer and minimizes headaches.

4. Diversify Your Portfolio
Don’t rely on one property or market. Mix in single-family, multifamily, and different locations to reduce risk and boost long-term returns.

5. Leverage and Reinvest
Use financing wisely to grow your portfolio. Reinvest cash flow and profits into new deals or property improvements to build momentum.

6. Play the Long Game
Real estate wealth builds over time. Be patient, stay disciplined, and let your portfolio grow steadily.

7. Keep Learning
Markets change, so should you. Stay sharp with books, podcasts, local meetups, and forums like BiggerPockets.

8. Work with Pros
Lean on accountants, attorneys, and experienced investors. The right advice can save you time, money, and stress.

Simple steps, consistent action, and a long-term mindset. That’s the real estate game.

Want help building your plan or analyzing a deal? Drop a comment!

I take exception to your first statement associated with buy smart: “Focus on properties in good condition that offer positive cash flow from day one.”  

1) the property that has the best initial cash flow is unlikely to have the best cash flow over a long hold.  In addition market where most purchases are cash flow negative the property with positive initial cash flow when including all sustaining expenses is unlikely to be the property to provide the best cash flow over the long hold.   To illustrate this point, look at markets that still have 1% ratio purchases.   Can you find any that have legit 1% ratio properties that has rent growth in this century in the upper 50% of markets?  I doubt it.  It is much smarter to look for markets that project significant rent growth than the market with positive initial cash flow.  In addition, can you find any market that has 1% ratio properties that has above average appreciation?  I doubt it.  Going for the initial cash flow is likely to result in an inferior RE investment for a long hold.  The Initial cash flow typically is inverse relationship with long term cash flow.
2) the most common and easiest value add for most newer RE investors is the rehab.  Adding value via sweat equity can boost early returns which can help get to the point where rent growth provides sustainable cash flow.

i find you second statement associated with buy smart to be the far better advice “Pay attention to neighborhood quality, tenant demand, and future appreciation potential.”  The appreciation is tightly coupled to rent growth..   you purchase in a market with superior appreciation and you likely will have a property with superior long term appreciation.

so my buy smart can include good/great value add assets which often are not in good condition along with your second statement.   

My only other suggestion to your list is that your list appears to be ordered chronologically but learning is at the bottom.  Chronologically learning should be at or near the top.  Ordering the list in importance would have learning and long game near or at the top.   

good luck

Quote from @Allan C.:

I'm trying to understand why this is a bad thing. Prop 13 is great for the incumbent owner, but why should those rights transfer to heirs? why should future generational owners not pay their equitable share of taxes, especially if not occupying the property?

step up basis is still a massive win, while it remains. 

I am against any attack on prop 13, but this applies to all properties except farm land.  What it has resulted in is family businesses that own the property they do business in often is experiencing a large increase in property tax that raises expenses to the extent that the family businesses is no longer profitable.   

in addition, for residential MF properties, the units are rent controlled.  The property tax increases raising costs, but the income increase is capped by rent control.   This result in the heirs often having to sell often to corporate investors.  

the end result is family businesses whether it is providing residential housing or another business other than farming no longer is viable after the property tax increase and the family business ceases at the death of the original owners.

i view this as undesirable.   I view that a death of a family member should not result in the opportunity for the government to obtain a tax increase.

The seller should not be able to simply change their mind.   Your issue is your damages are minimal.  Even if you got damages, it would not be much.  The courts will not order the seller to sell to you.

You do not hold a strong hand, but it is not super weak either.  You can make it difficult for the seller to sell to another party.   To do so, your earnest money would remain in escrow.  

Many attorneys will do a free consultation.   I suspect I summarized what they will tell you, but use a professional especially if the consultation is free.

Assuming the lawyer confirms what I indicated, you will need to make a decision on how far you want to proceed.

Good luck

we use PM/co-host on our STRs/MTRs and self manage our LTRs (exact opposite of the Avery’s).

We have gotten MTR from both Airbnb and VRBO, but I agree that most people using those sites are looking for STRs.  However, it only takes one.  

VVR is Google vacation rentals.  My understanding is that its use is growing    Because we use PM/co-host for our STRs I do not know what is required to get listed or how large am impact they are at this time.  But seeing their impact is increasing, it could be worth the effort to figure it out   Someone that is not our PM or co-host told me that a fair amount of their international booking where coming from GVR.

Your unit is a nice unit in a desirable location.   None of my STRs are at max occupancy for April (I had one at max occupancy in March) and one has real poor occupancy (not only for April, but its calendar is looking very sparse on occupancy).  I fear with the pessimistic economic outlook, bookings may get more challenging.  

Good luck

My belief is in a market like San Diego where values significantly exceed building costs I think that increase in building costs in inconsequential in most areas and that the economic optimism/pessimism will have more impact (polling shows US populace is pessimistic about the economy and I believe San Diego is more pessimistic about where the economy is going than nationally

I believe in Vacation markets (mission beach, down town, etc) the RE prices will decline. These are typically markets that values far exceed building costs so building costs play virtually zero impact. Less people feeling confident of the economy means less or smaller vacations (less STR income); less STR income means more incentive to sell STRs. Poor economic confidence means less purchases of secondary/vacation homes.

In the non vacation markets which is most of San Diego, the building cost increase is a blip so not likely to raise prices.   But unlike vacation homes, people need a place to live.  I would expect the economic outlook to usually slow sales, but the volume is already low so I question question any impact. 

In summary, the economic outlook will have a bigger impact on San Diego home prices by far than a $6400 additional cost to build (affordable housing currently is adding more cost than that in developer concessions in many local markets).

I hope this crisis does not get much worse.

Quote from @Allen Ramirez:

Hi Jimmy! Thanks for the invaluable feedback! Again, I've been hearing good things about Ohio. And coming from a real estate agent that's actually there, makes it that much more credible :) 

Do you invest as well in Ohio? If so, do you have a team together? (i.e., GC, PM, etc?)

At one point, once I finalize an area, which is looking more and more like a city in Ohio, I'd like to fly out there and meet with possible future team members. It be great to have a guide if you were willing or had time. It wouldn't be anytime soon but I think likely sometime within the next few months, maybe end of summerish. 

If not, no worries! thanks for all the feedback anyways! 

 I have nothing against Ohio RE, but thought I would balance the Ohio RE Professionals posse’s plaudits for Ohio RE.

According to Core Logic, California leads all states in percentage of SFR investor purchases, 34%. Ohio is tied for 3rd lowest percentage of investor purchases, 24%. Do you believe the investors investing in CA do not know what they are doing?

Neighborhoodscout has the following appreciation for this century:
- San Diego: 10/10 nationally, 306%. https://www.neighborhoodscout.com/ca/san-diego/real-estate
- Cleveland: 1/10 nationally, 79%. https://www.neighborhoodscout.com/oh/cleveland/real-estate.
- Toledo: 1/10 nationally, 52%. https://www.neighborhoodscout.com/oh/toledo/real-estate
- Dayton: 1/10 nationally, 78%. https://www.neighborhoodscout.com/oh/dayton/real-estate
- Columbus Ohio: 5/10 nationally, 154%. https://www.neighborhoodscout.com/oh/columbus/real-estate

Note only Columbus has appreciation higher than 50% of San Diego (Columbus is barely over 50% of Dan Diego’s appreciation). In addition, some of those markets the RE appreciation has not kept up with inflation implying, in inflation adjusted dollars, the values have decreased.

What do you think has historically the stronger correlation to cash flow over a long hold between the initial cash flow or market appreciation? If it is not obvious, it is market appreciation. This implies that San Diego historically has produced the better cash flow than the Ohio markets for a long hold.  

Do you think the stats are incorrect?

I think RE investors local to Ohio can do well investing local. I think most California OOS investors that invest in Ohio are falling for the temptation like Fool’s Gold.

This is not to imply that San Diego RE is not currently without its challenges. My post earlier in this thread hopefully was clear that there are challenges investing in San Diego RE. I believe that is currently true in virtually every market.

Good luck

I have 4 STRs in the San Diego area. 2 have been STRs since 1999, so I have a lot of years of STR experience (but it is a moving target). I also have 20 something LTRs. I used to have a unit that was an MTR (due to initially not getting an STR Llicense).

I do not have any furnished LTRs.  I do not know the market for furnished LTRs, so will discuss as though it was a MTR.

I am assuming that STR is out. Possibly not allowed by the HOA.

I think your unit looks nice and is in a good location. 

Is there a reason you are not listed on Airbnb, GVR, and VRBO?  

My local STR units do not have as high an occupancy as they used to. One of my STRs (one that has been a STR since 1999) in particular is struggling at the moment. My point is that you may be priced competitively but there are vacant units. The days of near 100% occupancy are gone. If you do not want a vacancy, you may want to ask below market price.

Good luck

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