All Forum Posts by: Dan H.

https://www.latimes.com/politics/story/2025-06-30/supreme-co...

I feel the lawsuit would have more merit if it came from San Diego LLs.  Not only did the San Diego county board of supervisors ban evictions for non paying tenants, they banned evicting tenants for lease violations unless it was a health or safety concern.   Lease calls for no smoking but tenant can smoke in the unit.  Lease calls for no pets but tenants could bring in a dozen pets.   Lease calls for a maximum of br *2 + 1, but the tenant could move a dozen people into a 2 BR unit.  Also in San Diego county there was no requirement to show COVID impact to benefit from the supervisor’s Covid eviction ban which I believe was the most severe in the country.

What constitutes not taking for public use without just compensation? This seems to me a clear taking of private property against the 5th amendment.

In both the LA case and the San Diego case, the law makers were aware of the challenges of the LL ever collecting all the money owed.   They knew that the law makers were in effect forcing LLs to house people without compensation.   I am disappointed that the SC justices did not rule consistently with the realities of what was occurring.

I guarantee that we will experience more eviction moratoriums as this ruling encourages law makers to keep placing the burden on LLs to house people without compensation.   It is fundamentally wrong to place this burden on the LLs.

Make sure when you underwrite you recognize the risk of eviction moratoriums.

Good luck

My son is 22 years old and starting his RE investing path.   The market  in San Diego (and virtually every where else) is tough right now.  Prior to q2 2022 the cash flow was not good in San Diego, but it was significantly better than today.

my son had led 2 large rehabs for me in less than 5 months.  
he placed an offer last week on a property just south of sdsu but the seller is in denial and apparently not serious about selling (seller is in serious danger of a foreclosure).

he is concentrating on 2 categories both that must have value add opportunity.
- flips: the offer last week was a down to stud flip.
- house hack of small MF ideally with below market financing (assumable or owner financed far preferred to sub to)

Be patient in both the search and the hold. Do conservative underwriting, recognize that at high LTV virtually every purchase will be cash flow negative when using realistic sustained underwriting. I know no one in San Diego a decade after the purchase that has felt they made a mistake in the purchase unless they sold it.

good luck

Quote from @Joe Hammel:

Quote from @Dan H.:

Quote from @Joe Hammel:

Quote from @Dan H.:

Quote from @Joe Hammel:

Metro Detroit has what 99% of Real Estate Investors want. Couple hundred bucks a door monthly cash flow, solid ROI, and yes plenty appreciation. (#1 appreciating city 2023)

I personally make well over $100k/yr cash flow from my portfolio here. All of which, I’ve purchased within the last 5 years.

There are 2 types of people who dog on Detroit..

1. People who don't actually own property in Detroit

2. People who did it wrong and weren't able to execute.

If you do it right, it’s arguably the best market to invest.

Purchase: $80k-$130k

Rent: $1100-$1500 (no rent control in MI)

1% rule: .9%-1.4% rule deals

Coc ROI: 4-12%

Total ROI: 20-40%

Cash flow: $50-$250/door (after all expenses and budgeting for maint, capex, vacancy)

Appreciation: 3-10%+ (has been double digit for a decade)

Location: C+, B-

These numbers are based on the "sweet spot" in Metro Detroit. These are largely in the suburbs and some markets within the city. You can find higher ROI (on paper) here and probably in other cities…but the probability of actually collecting rent significantly decreases. Where these numbers are found, there is a very high rate of rent actually being paid.

We have over a dozen Fortune 500 companies just in Metro Detroit with huge Healthcare, Auto, and mortgage industry National footprints. Ford, Rocket mortgage, Beaumont hospitals and more. All complimented with Amazon fulfillment centers, google, and more tech manufacturing jobs.

The bad reputation of “Detroit” comes from OOS investors wanting sub $40,000, D class properties in poor condition, because they pencil out to 2-3% deals on paper. We don’t buy those.

We have found what works and repeat it as much as funds allow.

Detroit has one the highest rent to price ratios in the country…and we focus on the best balance of price/location within the area.

Here is a picture of my portfolio if you/anyone is curious.

On a sustained basis your cash flow is a farce.   The vacancy rate you use in about 25% of the Detroit city vacancy rate.  Note sure how you derive your maintenance/cap ex but I am certain it did not use lifespan and replacement costs of all the properties components.

good luck

None of my properties in my personal portfolio are in Detroit Proper. They’re in cities on the outskirts of Detroit. It's why I reference “Metro Detroit”.


I’m an above average manager keeping my personal vacancy rate down rather than using a large poor quality PM which drives the average vacancy significantly higher.


You’re incorrect in your assumption that I did not consider lifespan and replacement costs. I have done that math. While it’s impossible to estimate perfectly, I’ve used what I feel is a good number for my specific portfolio. It changes based on property size, age, components age, condition, skill/knowledge on repairs, resources, etc.


I’m a licensed builder with a general contracting company which keeps those costs lower for my portfolio as well.


I know hundreds of other efficient contractors further driving my costs below average (I happily share this list with investors as well)


My personal portfolio is simply an example of what’s possible. It’s on the individual and their portfolio to find their exact numbers.


I hope this context helps.

>I’m an above average manager keeping my personal vacancy rate down rather than using a large poor quality PM which drives the average vacancy significantly higher.

I agree it is possible to do better than the average vacancy rate (which is over 20% in 2023 for the city of Detroit https://smartasset.com/data-studies/vacant-houses-2023), but 1) vacancy rates do not include delinquent rents and I see no entry in your spreadsheet for delinquent rents and Detroit is high on list of delinquency rents 2) vacancy rates not include tenant turnover time 3) your underwriting should be conservative.  No 3rd party would consider using 5% in market where the city’s vacancy rate is over 20%.

 >You’re incorrect in your assumption that I did not consider lifespan and replacement costs. I have done that math

Then you did it wrong.  You have a maintenance/cap ex as low as $86/month.

What lifespan did you put on the unit’s roof?  What cost for the roof?  If we use 20 year asphalt shingle lifespan and $5k cost for a little unit (this is a cheap roof replacement).  This equates to $20.83/month just for the roof.  Do this for all items. I guarantee that your total sustained cost will be much higher than $86/month.   I have seen the AOA maintenance numbers and in large count apartments their maintenance (not including items outside the apartment) are about what you are using as your total including your exterior.   I suspect that $86/month is over $300/month maintenance/cap ex sustained cost.

By the way I have my own maintenance staff.   I employ 2 people as their primary employer and another 3 part time.   I understand it is possible to get cheaper labor than LL that have an unrelated w2 and have to hire contractors for virtually everything.

how about you post your spreadsheet of costs and lifespan similar to what you did for your cash flow?  

Good luck

Feels kinda like you’re more interested in just attacking me, Dan. I'm not sure why. It’s difficult to have a constructive conversation when you clearly don’t read or acknowledge my responses. You do you buddy. Best of luck.

 I read  your response.   I even quoted you in my reply and addressed many areas of your response in my reply.

I am sorry you feel attacked but to be blunt, I am more concerned about a new investor believing a maintenance and cap ex of $86/month or using a vacancy that is 25% of the published vacancy rate for the city.   Your response stating you used costs and lifespan expectancy to derive that $86/month maintenance/cap ex had to be called out.  This is especially true when it is clear you used 5% of rent for the maintenance/cap ex (did you not think it was obvious to someone who sees a lot of underwriting?).  I am not sure you intentionally lied (again I read your post), but it appears that way.  You can search my posts for the fallacy of using a percentage of rent for maintenance/cap ex as it can be an inverse relationship to rent.    Using a percentage is incorrect, but common.  The issue is how did you derive your 5%?   5% is very incorrect at those rent points.  Using actuals is also fairly common, but it has to have the understanding that the big expenses are coming especially when your purchases are 4 years and newer.   Hopefully a good inspector catches anything that is likely to fail in 4 years or less.  The life expectancy/replacement costs is the most accurate method to calculate maintenance/cap ex but does require work   I used to use this method on each property, but it has been many years since I did one on one of my properties   I did do one a few years ago because it was a new market to me and a condo (which also was new to me), but my offer was not accepted.  By the way on the one I did a few years ago, I ran the costs and lifespan I used by the RE agent I was using.   I incorporated his feedback into my final sustained maintenance/cap ex calculation. Prices and lifespan do vary by region  

By the way, I think targeting your local market is the smart approach. It seems you likely have some good purchases. I also like that you are diverse in approaches you are trying (STR, BRRRR, LTR, etc). Quite a few things you are doing great.   I am concerned if you do not recognize how aggressive that underwriting is.

I especially am concerned that a new RE investor sees this aggressive underwriting and believes it is appropriate.   They perform similar underwriting and lose a lot of money.

I am in an expensive market with a staff for maintenance.  My market has vacancy that historically is below 5%.   My expenses as a percentage of my rent should be significantly lower than yours.   However, I am using a 40% expense/vacancy ratio (not including P&I) across the properties and if I deep dive, I have at least 2 properties doing worse than this (largely due to decisions we have made about their operations).   As indicated at your city’s vacancy rate and those rent points, I would be using a number significantly higher than 40% for expense and vacancy.

Again my desire was to educate others.   I apologize that the way I did this attacked you.  Nothing personnel.  You are doing a lot of things right.

good luck

Quote from @Joe Hammel:

Quote from @Dan H.:

Quote from @Joe Hammel:

Metro Detroit has what 99% of Real Estate Investors want. Couple hundred bucks a door monthly cash flow, solid ROI, and yes plenty appreciation. (#1 appreciating city 2023)

I personally make well over $100k/yr cash flow from my portfolio here. All of which, I’ve purchased within the last 5 years.

There are 2 types of people who dog on Detroit..

1. People who don't actually own property in Detroit

2. People who did it wrong and weren't able to execute.

If you do it right, it’s arguably the best market to invest.

Purchase: $80k-$130k

Rent: $1100-$1500 (no rent control in MI)

1% rule: .9%-1.4% rule deals

Coc ROI: 4-12%

Total ROI: 20-40%

Cash flow: $50-$250/door (after all expenses and budgeting for maint, capex, vacancy)

Appreciation: 3-10%+ (has been double digit for a decade)

Location: C+, B-

These numbers are based on the "sweet spot" in Metro Detroit. These are largely in the suburbs and some markets within the city. You can find higher ROI (on paper) here and probably in other cities…but the probability of actually collecting rent significantly decreases. Where these numbers are found, there is a very high rate of rent actually being paid.

We have over a dozen Fortune 500 companies just in Metro Detroit with huge Healthcare, Auto, and mortgage industry National footprints. Ford, Rocket mortgage, Beaumont hospitals and more. All complimented with Amazon fulfillment centers, google, and more tech manufacturing jobs.

The bad reputation of “Detroit” comes from OOS investors wanting sub $40,000, D class properties in poor condition, because they pencil out to 2-3% deals on paper. We don’t buy those.

We have found what works and repeat it as much as funds allow.

Detroit has one the highest rent to price ratios in the country…and we focus on the best balance of price/location within the area.

Here is a picture of my portfolio if you/anyone is curious.

On a sustained basis your cash flow is a farce.   The vacancy rate you use in about 25% of the Detroit city vacancy rate.  Note sure how you derive your maintenance/cap ex but I am certain it did not use lifespan and replacement costs of all the properties components.

good luck

None of my properties in my personal portfolio are in Detroit Proper. They’re in cities on the outskirts of Detroit. It's why I reference “Metro Detroit”.


I’m an above average manager keeping my personal vacancy rate down rather than using a large poor quality PM which drives the average vacancy significantly higher.


You’re incorrect in your assumption that I did not consider lifespan and replacement costs. I have done that math. While it’s impossible to estimate perfectly, I’ve used what I feel is a good number for my specific portfolio. It changes based on property size, age, components age, condition, skill/knowledge on repairs, resources, etc.


I’m a licensed builder with a general contracting company which keeps those costs lower for my portfolio as well.


I know hundreds of other efficient contractors further driving my costs below average (I happily share this list with investors as well)


My personal portfolio is simply an example of what’s possible. It’s on the individual and their portfolio to find their exact numbers.


I hope this context helps.

 >You’re incorrect in your assumption that I did not consider lifespan and replacement costs. I have done that math

Then you did it wrong.  You have a maintenance/cap ex as low as $86/month.

What lifespan did you put on the unit’s roof?  What cost for the roof?  If we use 20 year asphalt shingle lifespan and $5k cost for a little unit (this is a cheap roof replacement).  This equates to $20.83/month just for the roof.  Do this for all items. I guarantee that your total sustained cost will be much higher than $86/month.   I have seen the AOA maintenance numbers and in large count apartments their maintenance (not including items outside the apartment) are about what you are using as your total including your exterior.   I suspect that $86/month is over $300/month maintenance/cap ex sustained cost.

By the way I have my own maintenance staff.   I employ 2 people as their primary employer and another 3 part time.   I understand it is possible to get cheaper labor than LL that have an unrelated w2 and have to hire contractors for virtually everything.

how about you post your spreadsheet of costs and lifespan similar to what you did for your cash flow?  

Good luck

I am unaware of any jurisdiction that has airBnB regulations. Cities have STR regulations.

An operator cannot simply not use airBnB as an OTA and be compliant (I wish).

your post would have more weight if you used proper terminology.  To be blunt I did not read past the first paragraph. 

Good luck

I question if the various development issues in south poway are impacting your sales.  I cringe when I drive down Poway road.   I am Not a fan of Vaus and his cronies.  I really dislike his impact on south poway but also dislike his impact on north poway (even though it is not nearly as bad as south poway).

I see you recently dropped the price $25k.   I will say DOM has been increasing and your DOM is still fairly low.  However, I agree with others that each month after July is slower than the previous month until at least January.  This implies you want an offer in the next  couple of weeks.  Note an August offer likely means a September or October close.  School has started.   Poway unified, being one of the best school systems in the state, means a lot of buyers buy for the school system.  If they have school age children, they will want to be have closed before school starts (aug 13) which would already be a very challenging close.

Ideally this would have been listed late spring or early summer.  I realize life does not always follow the ideal calendar.

I do not mind bright colors (orange, purple, 2 different blues), but some buyers do.

not that it is effecting the sale, but some of your solar panels are in the shade of the big tree.

if you are a motivated seller I would lower asking price to $899k in no more than 10 days.  

good luck

AirBnB is an OTA and not an investment category. STR and/or MTR is the investment category.

you are in effect providing one OTA free advertising. You might as well call it VRBO, booking.com, Furnished Finder or any other OTA name. In addition it has the appearance of novice, as novice STR people call them AirBnB. Note we have owned STRs since before AirBnB existed.

best wishes 

The issue I see with targeting high unit count investors is at what unit count does it make sense to bring the management in house? I have a modest number of STRs in San Diego and have considered bringing the management in house (we already have the LTR unit management in house). Note this consideration is not due to me being dissatisfied with either of my local STR PMs (I am satisfied with both my current PMs, I fired a PM a few Years ago), but that it can make financial sense.

I personally think at 5 STR units it may make sense to consider to bring in house (5 STR units $400k to $600k income). Certainly by 10 STR units it probably should be in house.

Good luck

San Diego city went crazy into ADUs with the bonus density ADU program that allowed as many ADUs to be added as desired provided one less than half were deed restricted as lower income units. For example you could add 17 ADU by deed restricting 8 to lower income housing. There was big backlash and last month the city modified the rules to more reasonable. You can internet search if you want more details.

However, the addition of single ADUs in San Diego area in SFH zoned areas is and has been getting crazy low valuations. NAR Data from Nov 2021 shows homes with ADUs in San Diego only sold for $13k on average more than homes without ADUs. This implies a huge initial negative equity position when adding an ADU. Like most current residential RE holds, cash flow is initially modest or negative, so this large initial negative equity position will take many years to recover.

Here is a list of why adding a single ADU in single family zoned areas in my CA market is typically a poor RE investment (some of these will not apply in Reno, but is does appear Reno is NOT allowing STR of ADUs):
1) The value added by the ADU addition is often significantly less than the cost of adding the ADU. Search the BP for ADU appraisals to encounter numerous examples. This creates a negative initial position. This negative position can consume years of cash flow to recover. Make sure you know the value the ADU will add to the property before building the ADU.
2) the financing on an ADU is typically far worse than for initial investment property acquisition or is often not leveraged by the ADU (HELOC, cash out refi, etc). Leverage magnifies return.
3) The effort involved in adding an ADU is comparable or larger than a rehab associated with a BRRRR. However if I do a BRRRR I can achieve infinite return by extracting all of my investment. Due to item 1, adding an ADU can require years to start achieving any return (once the accumulated cash flow recovers the initial negative position).
4) Adding an ADU is a slow process. It can take a year or more to complete an ADU. During this time you are not generating any return from the money invested in the ADU. This amounts to lost opportunity because if you had purchased RE, at the closing it can start producing return.
5) ADUs detract from the existing structure whether this is privacy, a garage, or just yard space.
6) this is related to number 1, but there are many more buyers looking to purchase homes for their family than there are RE investors looking to purchase small unit count properties. This may affect value or time required to sell.
7) Adding an ADU does not make the property a duplex. For example in many jurisdictions I can STR units in a duplex but cannot STR an ADU (some jurisdictions will let you STR if you owner occupy). Duplex have different zoning that may permit additional units. Duplex can always add additional units via the ADU laws.
8) Related to number 1, purchasing a property with an existing ADU is cheaper than buying a property and adding an ADU. Why add an ADU if it can be purchased cheaper?
9) adding multiple ADUs or adding an ADU to a quad looses F/F conventional financing. This reduces exit options and affects the value.
10) Small number of small units is the most expensive residential development there is. This implies residential units can be built at lower costs and provide better return than building a single ADU.
11) adding an ADU to SFH can make the SFH fall under rent control. In CA currently only MF properties are rent controlled. If the house is older than 15 years old and an ADU is added, it can become rent controlled. Rent control laws are market specific. Make sure you know the impact that adding an ADU will have on any rent control.
12) investors seldom include the land value in the overall ADU costs. The reality is the land has value.

This study released by NAR is slightly dated (from Nov 2021) but has a table of property values with an ADU and value of properties without an ADU for many of the larger cities (look at the table at the bottom) . If you subtract the value of homes without an ADU from the value with an ADU you obtain an average valuation of ADUs for your city. Compare this with the cost to add the ADU subtracting off any loss of garage for garage conversions and you have the average value added by ADUs. In my San Diego market, an ADU added $13k of value on average, but a hands off, quality garage conversion is ~$150k. Ground up addition is obviously more. In addition before the summer of 2025 there was not a cap on number of ADUs that could be added. I question if the multiple ADU additions were eliminated if San Diego would have lost value when adding an ADU.

I wish the study indicated what percent of the ADUs in each city was a garage or other existing space conversion. I also wish it noted how many ADUs were added to the property. In virtually all southern CA cities, the cost added is less than hands off grounds up ADU addition. In most of the So Cal cities the average cost added is below the cost of a nice garage conversion. Note in some markets in the US including some in So Cal (Torrance), adding an ADU lowers the value of the property (property was worth more prior to the ADU addition).

https://www.nar.realtor/magazine/real-estate-news/study-adus-can-add-35-to-home-s-value.