All Forum Posts by: Dan H.

Of my rentals, my ex-Home is my worse performing property.   This is even with a prop 13 benefit that results in a ~$3k/year savings.  

My house was purchased to be a good home for my family. It was not purchased to be a good RE investment property. It is a SFR that was purchased at approximately retail price without any calculations on its cash flow metrics.

It does cash flow but primarily because the equity position is high and the prop 13 savings. I think a SFR purchased at retail in the last 2 years would have negative cash flow at least for a while.

Good luck

I wanted to add that we have accepted an ESA at a property that was a no animal property.  

The person is on disability with a disability that is visible but not physically limiting.  He asked about getting an ESA and had a dog in mind that was small (not a putt bull).  

We wanted to allow him to have his pet but the property was listed as no animals because it has a common yard with the other unit of the duplex.  So we discussed it with the other tenants who indicated they had no issues. 

On our properties that we allow animals we charge pet rent and collect a pet deposit.  We chose not to charge pet rent and I do not remember if we collected a rent deposit.  

This represents the proper way for a tenant to request a disability animal.  

I am not a lawyer but I question how many of the above posters who indicate that you must accept an emotional support animal have read the ADA rules.  

I have twice been threatened with legal action.  Neither occurred.  

Again I am not a lawyer but my view of the ADA rules is that they do not include ESA animals, cats (or any animal other than dogs and miniature horses) and that most posters have not looked into what ADA states.  

Normally I do not threaten eviction and would rather find alternate methods of getting rid of tenants that I do not desire.   My usual is to raise rent above market price and let the tenant provide notice.  However if they lie on their application and bring in a dog against lease terms I would consider eviction for cause as they did not abide by the terms of the lease.  

A couple of months ago I experienced the same thing.   After a discussion, the tenant offered to get rid of her ESA and I took her up on the offer and indicated that a future breaking of the lease would result in eviction. 

I suggest you read up on what is protected regardless of how you choose to proceed.  I also view nothing in the ADA allows not following lease terms and that breaking lease terms is grounds for eviction.  

But you need to decide how confrontational you want to be with these tenants.  

Good luck

I agree with @Oren K. that maintenance/cap expense is not primarily a function of the rent amount or purchase price but more a function of things like number of bathrooms, quality of interior, square footage, attached vs detached, type of exterior (siding), unit requires HVAC vs just furnace, etc.  

@Justin R. and I recently discussed cap expense versus maintenance.  I think his view is cap expense are items to be depreciated.  It does provide a clean definition.  Justin is very good at having well defined terminology.  

I group cap expense and maintenance estimates because I realize that it is hard enough to forecast one estimate or the other estimate.  Combining them means I only need to try to forecast a single number.   The actual expense will dictate if the item needs to be depreciated.  

Justin and I each recently posted our expense estimates on recent purchases on a different thread (something like is anyone cash flowing on San Diego rental properties).  We both by happenstance posted on a duplex with 3/1 and 2/1 configuration.  My combined maintenance/cap expense number was very close to Justin’s separated estimates (cap expense, maintenance, yard maintenance) .   My maintenance/cap expense estimate on this duplex was $275 (3/1/1) and $250 (2/1/1) for a total of $525.   For comparison the rent is $3200/month and purchase was $442k.  Note in areas with cheaper rents the cap expense/maintenance cost versus the rent would be worse.

On a related subject...  Last week we experienced our third slab leak in the last 4 years.   It appears the plumber failed to fix the issue on his first try (~3 man days of labor).  Concrete Slabs from the 1960s and 1970s are approaching end of life on the copper plumbing.   Bypass the leak does nothing to make the remaining slab plumbing any newer.   Consider whether the entire unit should be replumbed.   I forecast what I believe are realistic cap expense/maintenance estimates.   When expenses like slab leaks occur I take solace in knowing that I have allocated for these expenditures.

Good luck

He is not the cheapest and does not provide cost estimates but we use Jason at nation wide inspections.  He is very thorough.  His reports are very thorough.  If he sees issues that require further expertise such as foundation issues he notes it and recommends you have additional inspections.  

We will likely use Jason for life.  We once negotiated 1/7 off of a property based on his inspection report.  That savings alone warrants using him forever.  

We used him last month and he got the report back to us real fast.  This is not always the case but likely indicates he is not super busy right now.  Either that or he provides us higher priority service.  

If you desire you can indicate I referred him to you. 

One thing is that he is so thorough that the reports often looks like the property is falling down.  This is because he is very thorough.  Often a decent Handyman can address virtually all or the issues in a day or two.  Realize this.  Concentrate on large findings that should result in price reduction or a credit at closing.  

Good luck

Similar to @Rob Brown we own a duplex in Mission Beach (San Diego) one block from the ocean and 2 blocks north of Belmont Park. We have owned it since 1999 and it has done well as a STR. Its annual STR rent is likely more than it would cost to rebuild the duplex (Peak rent is ~$350/unit per day = $700/day for the duplex, Minimum rent is $80/day per unit - it is rented virtually every day).

The fear is San Diego STR regulations. I would like to think that an STR from the last century would be grandfathered in but that is not guaranteed. So any purchase in San Diego with intent to STR should take into account potential STR regulations into any purchasing decision.

@Amanda Fabian seeing that you already own your place, I think STR could provide some additional income. We use a PM to minimize our associated work so STR is work with the tenant turn overs but I think the additional income will justify the work.

Good luck

If I could be all smartly invested in San Diego RE I would go all in but I invest in San Diego RE then pull money out of the RE place it in mutual funds heavily slanted in stocks waiting for another smart San Diego purchase.  Finding smart San Diego RE purchases in the past few years has not been able to keep up with what is going into my mutual funds.

So at this point I am maybe 40% RE, 40% stock (domestic and international), 3% bonds and cash, and 7% mineral rights.  The RE and mineral rights provide a monthly cash flow which is nice.

I do realize it is a very aggressive allocation and not for everyone.  Especially because I am in my early 50s virtually everyone would say it is too aggressive.  However, it has worked very well for our family.  I do not have to work, my wife has not worked this century other than raising a child (which is work of a different category) and managing our RE (which is work but usually very flexible).

We have owned RE thorough both the mid 1990s downturn and the 2008 downturn.  I look at the downturns as buying opportunities that I did not fully take advantage of last time.  They do not scare me.

@Zach Bartelt

We closed on a detached duplex ($442K purchase price) in late Oct with a 4.625%, 0 point loan but at a 75% LTV. We usually do 80% LTV but the loan conditions were enough better at 75% LTV that we took that option.

5% seems high and at 75% LTV. Your closing costs also seem high for that size of loan as mine where not much higher for a significantly higher loan amount.

I would check out the AIMLoan.com but that is not who I used. 

I used Brett at Casa Financial Services.  I have used him quite a few times (probably over a dozen times) and am mostly satisfied. 

You can indicate I referred you to him if you desire.

Good luck.

Virtually every area of San Diego has historically outstanding appreciation.   To achieve best cash flow requires identifying gentrifying areas. 

However, the areas that are working class areas provide the best opportunity to cash flow or minimize the negative cash flow. Duplex to quad cash flow in general better than SFR but with SFR there are more opportunities and therefore more opportunities to find an off market property that is significantly below market.

Most of my RE (and all of my recent acquisitions) are in working class areas.  But if I were to looking to make a long term appreciation play I would consider West Chula Vista.  Chula Vista is somewhat unique in the more valuable newer houses are in East Chula vista.  Properties just a few blocks from the bay are reasonable price (for San Diego).  They are older and often have value add opportunities.  If I am correct in 15 or 20 years west Chula Vista will be transformed into a more typical bay side area.  If I am wrong it likely will have the same appreciation as most of the rest of San Diego which has been historically great.  It is like bet on red and win, bet on black and win big.

The caveat is that while San Diego has historical appreciation going back more than 60 years, the appreciation goes in cycles.  Virtually the only people to lose money in San Diego RE are those that sold when the market was depressed.  Most of those people were over leveraged.  Do not be one of those people.

Justin indicates that he did not post to compare this investment to another but I could not help myself...

Same configuration as my example (3/1, 2/1) - mine have garages and his example does not show if they have a garage.  Virtually the same allocated to maintenance/cap expense but Justin has his separated into a few different cells (cap expense reserve, maintenance, landscaping) while I combined mine.  Similar rent.  

His example property costs less than mine (Mine $442K vs his $410K) and he got a better interest rate (my annual mortgage payment not including escrow holdings is $18,372 (vs $16,529 for Justin)).  So his property has better cash flow than my recent purchase.  His "1% rule" is 0.81% ($3335/$410K) and mine was 0.72% ($3200/442K).

Justin provided another nice example of a cash flowing San Diego purchase.  If it was in an OK/good area and did not seem like it would result in significant management effort I would purchase that property with those numbers.  It appears to be a very nice purchase.

I agree with Justin that there are not a ton of these positive cash flow properties but I have seen 4 in my area of investment since the end of summer (I offered on two of them).  So they also are not super hard to find.  If you are happy with acquiring no more than a few properties a year then the numbers can support it.  If you desire to purchase a positive cash flowing property per month in San Diego then you will likely find it very difficult to find that number of cash flow properties (you may find that number of positive cash flow properties but other investors will be purchasing some/many of them).