All Forum Posts by: Dan H.

In San Diego (not including the worst neighborhoods) 0.75% is a good rent to cost ratio 0.7% is pretty good). This ratio will cash flow nicely using realistic numbers (vacancy, maintenance/cap expense, PITI) if financed via a conventional loan and self managed. If including equity pay down they will cash flow nicely using a PM (10% or rent). I define nicely as worth my time. I would not take on a unit for little compensation as buy n hold rentals are not 100% passive. $150 unit cash flow with high potential for the cash flow to increase via rent appreciation is near my minimum to refer to the cash flow as nice. Less than that is only OK and does not provide good compensation for the effort until the cash flow increases.

 I do not understand how in good conscious you can indicate a need to look outside CA for good returns when statistically San Diego, Orange County, Los Angeles and San Francisco each beat the best mid west locale for 5 years, 15 years, 20 years, and every amount of years between 20 and 50 years for financed buy n hold properties.  This is a verifiable fact.  Pick your choice of Midwest cities and run the numbers against any of the cities I listed.  

So historically the statement is false.  Of course past history is not necessarily an indication of future returns but when the long term returns out perform going back virtually any duration going back 50 years that is a lot of historical data indicating Ca is the better investment choice.  

I question how many of the people who indicate multiple offers not being accepted is a problem deal with MF investors.  I am in San Diego and find list prices on MF in my area of investment are often significantly higher that sold comps.   Investors make many offers but they often do them at a fairly high rate.  Many/most offers will get rejected.  

@Brandon Turner regularly refers to volume offers with a low percentage accepted.  With the right volume this method can provide a real estate agent a good compensation.  

I am less bothered by the exclusive agreement then that he misrepresented a property and wants to charge an up front fee.  He needs to find and close on properties to earn his commission.  

I think your relationship with that realtor is done.  However when you are choosing a new realtor discuss expectations up front.  Ideally this will help find a realtor that is a good fit that will provide benefits to both parties.  

Good luck

@Ron Trinh look at my profile for my area of expertise.  In my area of expertise there are many detached duplexes but significantly less than sfr.  If you PM me I can refer you to some detached duplexes/ triplexes (some of my properties).  

@Lee Rimpa is definitely not correct on not being able to cash flow in San Diego but they may not be the areas that she chooses to live.  That means that you do not need to invest out of the area.  Also if she purchased 5 years ago in any area in San Diego not only would she be cash flowing today but she would have ~60% to 70% property appreciation and 25% to 35% rent appreciation.  

The purchase I completed this month easily cash flows (even with what most consider conservative maintenance/cap expense numbers) and is in a fairly nice neighborhood.  

Note if you purchased a detached duplex as a house hack you would get a better loan rate and not need to put as much down as a non owner occuppied investor.  

It is hard to find SFR that cash flows when purchased as a rental but as owner occuppied you get to write off the interest and currently the property tax (the interest write off is rock solid but writing off the property tax is to be negotiated in the current tax reform). In addition, as owner occuppied you get a better rate on your loan. So while it is real tough to cash flow with a SFR at purchase as a rental it is easier to purchase an SFR for owner occupied at a total cost less than renting.

Now fast forward 10 years.  San Diego has historically been a high appreciation market long term.  This is rent and property appreciation.  So chances are that your purchased property has appreciated and that if you were renting your rent would be significantly higher than at the time of purchase.  In addition, due to prop 13, your property taxes have risen at a controlled rate and are likely significantly under market tax rate.  Finally you have 10 years of equity pay down.   This equity pay down adds up and 10 years into a loan will be significant.  

I understand not wanting to have roommates but there are other options other than having roommates to house hack. In my area of specialty a detached duplex sells for far less than the 2 units would sell for as a SFR. I will go even further that in my market specialty area a 3/1 vs a detached duplex 3/1 and 2/1 have only about $100k difference. This implies that the 2/1 detached unit in effect costs $100k. by the way I just closed on a detached duplex with that configuration.

In my view, the only down side of owning is the reduced flexibility to relocate.  In historically appreciating markets like San Diego, owning will virtually always be the better financial decision for a long term hold.  

Good luck.  

Looks like a great purchase.  In my market I am happy if I can purchase for 10% below my estimated value and most of the time the appraisal does not reflect the 10% below market that I believe the purchase to be (which I am OK with as I have every confidence that I know my market better than the appraiser and I want the seller to feel like they did a solid sell).

So I would be ecstatic at a purchase in my market at close to that percentage below market.

Congrats.

@Elaine Hester I have no experience with 1031 exchanges but I live in Poway and specialize in duplex to quad buy n hold in a nearby city just to the North of Poway.  

If you have questions on that aspect of your plans you can PM me and I will try to provide any insight I may have.   I’m not a realtor; so nothing but my opinions (nothing to sell, etc.).  

Good luck

If I cannot cash flow after PITI, vacancy, maintenance/cap expense estimate at 80% LTV I would question this as an worthwhile investment and I say this from the perspective of a San Diego RE investor. I realize it is not what you want to hear. I will admit I purchased an about cash neutral RE at 80% property a few years ago but I believed the property had at least $50k forced appreciation opportunity and would have short-term appreciation. I was correct as a lower than expected appraisal came in $150k over purchase (was ~$40k low in my opinion) after the forced appreciation.

Today I am much less certain about near term property appreciation. I do have confidence of short term rent appreciation but you are significantly cash negative at 80% LTV. I know you can find better RE investments locally but even if you cannot to have significant equity (20% equity is significant equity) to cost you money (negative cash flow) would be similar to investing in a stock that you know is going to decline every month.

So the question is how confident are you that there will be appreciation to cover the negative cash flow?   What is your profit play?   I would look to 1031 it into a better local RE investment.  

Good luck

I was responding to "My COC is through the roof because I'm using no cash (HELOC). " The HELOC does not apply to help your COC because a HELOC counts as Your Cash versus 0 down or other people's money.

4% of $1100 is $44. That is about what my spreadsheet indicates the cap expense is on a kitchen. A hot water heater is ~$8/month (Cost ~$1200, lifespan 12 years (144 months): 1200/144=$8.33). Basically you need to verify the cap expense numbers you are provided and your 4% estimate for maintenance/cap expense did not give me confidence that you verified the numbers. @Jay Hinrichs has 40+ years of experience. If he can achieve 12% of rent for maintenance/cap expense on a rent of $1100 for SFR it is because he has 40 years of experience because I cannot cover maintenance/cap expense on an SFR for $132/month (or even that close to $132/month). I suspect I may be able to achieve this with apartment units. So my hope you do your due diligence on actual cap expense costs.

Good luck

we have some of our units insured by USAA (as well as our vehicle coverage) and some by Farmers.  

USAA is cheaper.  They also are more selective as well as not open to the general public.   USAA would not provide us an umbrelka policy because of how stringent their criteria is.  

Farmers cost more but they are not as stringent.  In addition to having some units insured by them they also are the provider of our umbrella policy.  

We got a quote recently for a full package insurance but it was not cheaper than our current mix in large part because of the low cost of the USAA insurance. 

If you qualify for USAA and they will insure you they are tough to beat.  If you cannot get insured by USAA then if you have a lot to insure then best to use a universal full package insurance.  

I have no complaints about Farmers except their cost is a little higher than the other options but they give us good service and were willing to provide us an umbrelka coverage that USAA was not willing to provide.  

Good luck.