All Forum Posts by: Dan H.

 I'm not a lawyer but I will be surprised if you can recover anything for an unpermitted unit.  There are many all over San Diego county.  

I do hope you can recover your deposit and penalties.

Landlords like him reflect poorly on all landlords similar to bad tenants reflect badly on all tenants.  If you leave a place in nice condition (clean and no damage) while abiding by the lease you deserve your deposit be returned   

Good luck

I agree with the consensus of the posters that it is not easy to find cash flowing properties in San Diego but my area of investment in San Diego typically cash flows today (just not as much as I want it to in order to invest).

I personally am looking for good ARV (80% ARV) that either cash flows or comes very close to cash flowing in my chosen investment area and those properties are hard to find.

If I was younger and just starting I would look to house hack a quad plex using an HOA loan in an area where the property would at least be close to cash flowing and I would be OK living at. HOA loans typically require less capital. You would learn a lot and the other tenants would be helping you build equity via their rent payments that you would be applying to the mortgage payment. Any appreciation would be additional equity gain. My first step would be to determine the areas I would be willing to live for the next 3 to 5 years. Then start looking for that quad (second best would be a triplex) that comes close to positive cash flow.

In 3 to 5 years maybe do it again to a nicer area/property or use the equity to buy a SFR and just property manage the initial property. The equity would provide you many choices.

As for whether it is a good time: I think San Diego property is in constrained on virtually every side (Ocean, Mexico, Camp Pendleton, too hostile as get to Jamul and beyond) and therefore has a limited supply.  Climate wise it is the best in the US.  Because of this I do not believe that it has reached its zenith but I do expect the appreciation to be much slower than the last 5 years.  I would not expect the appreciation to offset a huge negative cash flow.  Add in the historically low interest rates.  So I think today is a better time to purchase than next year (or any time in the next few years) but worse than any time in the last 5 or 6 years. 

When you do you the numbers on a property do not forget Cap expense.  A lot of new investors underestimate cap expense.  Either use a spreadsheet with expected costs and lifespans or get some help from an experienced investor as San Diego cap expense is significant.

Good luck

How I analyze this is whether I would consider buying this property as an investment and it is not even close to something that I would consider purchasing.  There will be cost associated in selling it but being a landlord requires effort/time.  You have been exerting that effort/time and paying cash to do so.  IMO this is a no-brainer.  After selling costs you will end up with a little cash (maybe $20K to $25k) that can be invested in something that does not require you to work and costing you money at the same time.  It will be too little cash for a decent down payment on a good investment property but it can make a nice investment into a nice index fund or other investment option.

I also believe that the appreciation in San Diego has slowed compared to the last 5 years.  I think there will continue to be modest appreciation but even if it is appreciating enough to cover the negative cash flow you need to compare that against what the money could return elsewhere. 

I would sell it and invest the cash in something else.

Good luck.

All you have to do to take out the appreciation is to refinance or ELOC.  ELOC on investment properties are slightly hard to find but when I last looked (maybe 1.5 years ago) I found a few.

I have purchased multiple properties at below 1% that cash flow at 20 or 25% down (i.e. without artificially making it cash flow by placing a lot of capital into it) using what many people would consider high cap expense numbers (I usually use $250/month for attach multi units standard rental size and $300/month for detached or SFR standard rental size: San Diego is expensive with expensive cap expense). There are many things that calculate into the cash flow including terms on the loan, vacancy rate, condition when purchased (no deferred maintenance), etc. I have also purchase two units that did not cash flow unless I included the equity on the mortgage payment but with rent appreciation those units will cash flow in June (and I have made in 3 years over $200K in appreciation on those units and have all of my initial investment out of those units (I refinanced a few months ago)). So those units that looked to be my worse units are very soon to cash flow in June) and I have removed all of my initial investment without selling them (without flipping them).

If I can find some multiplexes in my area of expertise to purchase (mostly Escondido) below 80% ARV I would purchase them regardless of if the numbers were below the "1% rule".

Every month or so there is a BP meetup at a REI purchase. I think all have been flips. It is a good method to meet other San Diego investors as well as learn various aspect of the REI. For me I mostly am interested in how the property was found and what made the investor purchase it.

You should be able to find these meet ups under the San Diego subject but if you cannot let me know and I will either provide a link or a contact.  

@Thomas Neely It appears you have the time and resources to have a really low cap expense but I still suggest you start with a spread sheet of cap expenses and put in your expected item life expectancy and your expected cost.   Until you subtract a cap expense and maintenance you really do not know what your long term monthly profit is (I still think it will be close to $200/unit).

One thing about your vacancy rate is because you have no mortgage payment on the unit the cost of vacancy is lower than it would be if you had financed.

I still hold the belief that in 10 years you will no longer have this REI strategy but all will be good as you will have learned a lot and probably made some money. For example, I would not purchase a unit if it was projected to make $200/month as owning/managing takes time and effort and has certain risk. I do think your current REI starategy will shape your REI strategy for the future.

Good luck.

@Matt Snow if I was paying $450/month rent near the coast (or anywhere close to that) I would never consider moving inland 😀. I commend you on both your work ethic and your efforts to reduce your debt. I think you have a good understanding of the challenges of REI.

So that leaves me wishing you good luck in your REI pursuits.

Good luck. 

I think your investments are doing ok but without seeing vacancy and maintenance numbers it is hard to tell.  Where I invest I use a cap expense of $250 to $300/month for my units (I used a spreadsheet that took into account cost and expected life span to determine monthly cost of each item and summed it). I realize Southern Ca cap expenses will be much higher than many parts of the nation but I suspect your cap expense cost likely is at least $200/month.  

So your long term profit will be rent paid - cap expense - maintenance - any cost to run such as eviction fees, cost to collect delinquent rent, etc.

My point is not to be a downer but to better define your profit which likely is a little less than 50% of the rent collected.  So your profit is likely closer to $200/unit per month which can still add up but each unit has a certain amount of effort associated with owning/managing it.  

However you may be able to leverage this profit into units that have more profit per unit and your experience with these units will benefit you greatly. 

I think you will learn a lot with these units and in 10 years be into a different category of REI investing leveraging what you have learned.

Good luck

For painting I use Mike Calabrese.  I trust him and his prices are competitive.  Like many good contractors he sometimes is booked out quite a bit.  Two weeks ago I contacted him about painting the interior of one of our units and was told that he was fully scheduled until after Memorial Day.  Now Memorial Day is pretty close but 2 weeks ago I feared the painter was going to be the long item on our rehab but he will not be.

He did a job for me years ago and just finished a wall and the entire paint that he was applying to just peeled from the wall.  He was unperturbed and simply repainted the wall.  No cursing.  No complaints.  No request for additional compensation.

I have used him not only on rental properties but my own home (he just did about 50% of my home a month ago and by now I think he has painted every room in my house and maybe some walls/rooms a couple of times)

PM me if you want his contact info.

Good luck

@Euan Arcia forgot to tag you in my posting asking how you found the property.  

Thanks