All Forum Posts by: Dan H.

 I would consult with a attorney familiar with the RE laws in Louisianna but in my opinion the title company is also culpable and unlike the buyer or seller should be professionals and know their responsibility.  In addition, they are the only party that having a suit against is probable to reduce probability of this occurring again as the seller and buyer are both unlikely to use a wholesaler again especially if they are of the belief they were deceived. 

Good luck.  

Calling the debate concluded looking at only one side of numbers is clearly looking at half the info and making a conclusion which is obviously short-sighted. I do not know how the other half would look because I am not an expert on Boston area. However I am an expert in So Cal area and I can state statistically So Cal and San Francisco area have been near best REI return in nation over a wide range of periods (5 years, 10 years, 20 years, 30 years) and it is on property and rent appreciation not cash flow. I can state if you present the numbers above compared to my returns in So Cal during same duration (2009 to 2014) your numbers would be worse than any of my REIs and I have only had one purchase so far that exceeded the 1% rule when purchased (I.e the REIs were not purchased on cash flow).

My point is to know which has been the better investment from 2009 to 2014 requires knowing what such purchases in Boston would have returned.  

It looks like you are desiring this for a residence and not really looking at it primarily as an investment.  Some of my thoughts: 1) you are in a fairly high tax bracket which will provide a good write off on mortgage interest and property tax.  2) You already live in the area and like it.  This implies that you are likely to stay more than a few years.  I recommend purchase over renting for anyone that is planning on living at the location more than 5 years.   3) because you are not really looking for an investment opportunity but instead a home to live in and enjoy it is more important to buy the place you like than purchasing a little below retail (investors in general do not want to pay retail for a place but they typically are not living there (a few exceptions about living in investments such as for house hackers)).

I was scared when I purchased my first home.  It was many years ago and the home was ~4X my salary and the interest rates were in the 8% (early 1990s).  My mortgage to income (>40 of my income was going to my mortgage) would leave very little room for fun items or unexpected expenses.  I cut coupons.  I did every unexpected expense item from plumbing to car repair myself.  I am happy that I did not let my fear prevent me from the purchase.  Today I have made multiple offers sight unseen on various properties.  So the first home purchase is scary but I think if your planning on living there for at least a few years you are more likely to do better purchasing it today than later.

If you were purchasing this primarily as an investment my advice would be a little different such as do not pay retail, consider house hacking, your mortgage to expected rent is to tight to be cash positive with maintenance, vacancy, and cap expense added, evaluate exit strategies, etc.  But you are buying your home to live and enjoy and any investment potential is icing on the cake.

Good luck

I think ignoring cap expense until the unit needs it is short-sighted. Use a cap expense work sheet and determine the cap expense over the life of the items. In So Cal I was surprised that the cap expense was as high as the worksheet indicated. If the cap expense is not accounted for there is no accurate calculation on the monthly cash flow (cap expense costs are unavoidable; they are coming). Calculations without cap expense will show an artificial cash flow with huge cash flow impacts when the house needs to be re-plumbed, needs a new roof, HVAC, kitchen, subfloor, foundation, etc. I think many "cheap" REI look good because the buyer ignores cap expense. If the buyer had an accurate cap expense per month many of these "cheap" REIs do not work (are not worth the effort).

I agree with other posters that the quality of the flip looks great and therefore agree with your assessment that the quality is above what I would want to rent to a tenant.  In my market area homes priced right are selling fast; I do not know what the market is like where this home is located but I suspect you may be priced a little high.  

If you lowered the price would you still be making money?   I would look to lower the price rather than look to long term rent it.  

Good luck.  

Your statement on ROI for CA is very incorrect. In virtually every duration (5 years, 10 years, 20 years, and 30 years) So Cal and San Fran areas have been near the top ROI in the nation.

My oldest buy n hold is from 1992. I put $40K down/closing ($167K cost) and refinanced it in 1998 taking out all of the initial investment so that it currently has $0 capital into it. It is worth north of $500K today. I do not really know how to calculate a return when all initial investment has been pulled but doing simple calculation shows that my $40K is worth ~$520K today. So in 24 years it has increased in value ~$350K not taking into account positive cash flow (this unit is a SFR and only cash flows ~$500/month after maintenance and cap expense (I use $300/month cap expense for this unit)). Note also this unit was purchased near a market high (1990 was probably market high) and initially fell in value to ~$147K (1996). So you do not have to time the market and buy at the right time. This is my worst performing investment property that I have held at least 3 years.

My best performing REI property (duplex) was purchased in 2012 for $303K (this was purchased near market low and therefore purchased at the right time) that I placed 25% down. I took out all of initial investment last year. It is worth north of $600K today so has returned a little less than $100K per year since it was purchased not including its positive cash flow of ~$1300/month after subtracting for maintenance and cap expense (I am using $600/month for cap expense ($300 per unit/month (units are detached))).

Statistics show So Cal and San Fran area have been near the highest return in the nation. You can look it up. Calling CA REI a poor ROI is not only wrong but it is the opposite of the facts (it is near the top in ROI).

My view and recent history (last 50 years) indicates there are very few better areas to have REIs than So Cal or San Francisco areas.  Cash flow is only part of the equation that dictates return on investment. 

I expect in the near term future (next 10, 20, of 30 years) So Cal/San Francisco will continue to be one of the better REI locals.

I purchased a duplex ~3 years ago that was below 0.7% that I have made ~$250k on in equity increase  (on a $100k initial investment) and as of this month it is positive cash flow using $500 ($250 a unit) for cap expense.   Refinanced it a few months ago and got my initial investment out.  So now have cash flowing property without any investment cost.  

Needless to say I still am looking for under market duplex through quads in my chosen REI market.

Good luck finding 2% properties and investing in them.

no purchases or flips for 2015.  

After depreciating structures we are in D on our buy n hold. Note appreciation is not reflected.  Appreciation exceeded the income but less so than previous few years.  So 2015 was likely our worse year this decade. 

2015 is not much to brag about for us. 

my recommendation is you house hack in San Diego.  If you do not know the term house hack look it up on BP. 

Traditionally San Diego is one of best REI returns in the nation over any reasonable duration. 10, 20, 30 years if does not matter San Diego is near the top.

House hack, build equity,learn about property management then think bigger.  

Good luck.  

my experience is very few SFR cash flow when including all expenditures including cap expenses. Multiplexes cash flow in working class areas.

I use $250/month for attached and $300/month for average rental size units for cap expenses.  It may seem high but I have calculated it and believe it to be accurate.  

One other bit of advice which is significantly more important on duplex through quads than SFRs, make sure you use closed purchased and not listings in creating your offers. In my area of expertise there is a huge difference between listing price and sold prices on multiplexes but not such a difference in SFRs. 

Good luck.