All Forum Posts by: Dan H.

I agree with @Tim G. that many realtors are nearly useless when things go wrong.  I've been told more than once that the reason to use the realtor is when things go wrong with a purchase.  This is when I have found realtors to be the most useless. I once had a $60K non-disclosure, before I was as experienced as we are now, that you would think the realtor and broker would help with the battle but no help was provided.  I had to hire my own lawyer.

My current realtor I only use to help find properties. She and I both know that I know the market better than she does and that we are the experts but have not had the time to get a realtor license. She provides the access to MLS and sometimes the properties (most properties we buy only provide access after acceptance of offer). She knows that we likely have more contacts to address issues and really would be surprised if we ever asked her for assistance with an after sale issue.

Maybe I simply have not found that great realtor but we have used quite a few realtors.  The last one I used that was not our normal realtor convinced us not to put short time limit on offer/negotiations.  While in slow negotiations with owner another offer came in.  I should have went with my belief and not listened to the realtor who was too inexperienced at under market properties and believed our offer was going to be accepted.  If he brings us another property that we like we will not be using his advice in the negotiation.

I also think Tim G advise on how to get of the tenant is correct.  It is often best to pay them to move out with a condition that the move-out satisfies your move-out instructions (I recommend a check-list).   This helps ensure that the property is vacated to your expectations.

Good luck

Similar to @Russell Brazil my mom started her investing fairly late in life (~60 years old around the year 1998).  I doubt her and my step dad ever made more than $50k between the 2 of them and my Mom was generous to a fault (I.e. Every year their donation reduced their actual income significantly and much of her generosity she could not write off such as letting someone down on their luck live with them for extended period of time all the time (multiple people, multiple times)).  

She sold an investment property that had belonged to her Mom and purchased a beach property (duplex) using the revenue from the one property as down payment and her good credit to finance.  She bought at the right time and its value went up.  She leveraged that property to purchase a quad at the right time. It's value went up and she leveraged that equity to purchase beach front in Gulf Shores Alabama that was on the sand.  She loved this property but it ended up not being a great investment and has been sold.  This property initially went up in price and she leveraged it to purchase Lake Front in Alabama.  

Her properties were worth millions (in less than 10 years never making more than $50k in salary) when she got ill.  She was definitely the drive in the relationship.  My step Dad still owns each of the properties except Gulf Shores but does nothing with them.  He has hired a PM for each of them and is retired. 

The timing worked out great for my Mom and I suspect would be tough to match the equity gains starting today.  But it is a perfect example that it can be done on a small income starting late in life.  

In your 30s is still young.  I would start with a house hack if I were in my 20s or 30s.  

Good luck.  

If there is a 3% vacancy rate and no issue finding a renter I would not take a sub 500 credit score.  Why would you?    The ability of a landlord to ding credit is the biggest stick the landlord has.  If a tenant has poor credit there is nothing to ding if he trashes the place and breaks his lease.  

I recommend not changing your criteria because he is active military.  His credit score is sub 500 for a reason.  Active members military can be responsible, pay their bill, etc.   This potential tenant apparently has not done that.  

So I would accept sub 500 in a market where finding good tenants were difficult. 

By the way the only time I have been significantly burned by a tenant is when I let the tenant convince me to rent to them even though they had poor credit. 

Good luck

I trust Broaddus Construction.  Not the fastest (by far), maybe not the cheapest (but I think he is cheaper than most).  He does top rate tiling; good enough that he has done tile in my own home twice (bath/showers) in addition to what he has done for me in the rentals.  My master bedroom bathroom shower is one of the best tile jobs I have ever seen (river rock pan, river rock accent, tiled walls with tile inset).   He has done many aspects of a rehab and he tells me when it is going to be cheaper to use a painter or other contractor.

Mostly I use him because I trust him in every aspect (quality, honesty, etc.).

Note I use my handyman for many things including demolition.  Find a handyman you can trust will result in savings.  I would tell you mine but he is unable to keep up with the jobs I have for him.

Good luck

I have purchased a single family home with seller financing in San Diego but the seller wanted the typical investor property down payment (I put $40K down on a $167K purchase).  I did get a reduction of interest rate over traditional finance, reduced closing costs (no appraisal, etc.) and a much easier close process (minimal documentation was required).

I think you will need to work hard to find a seller willing to finance with a small or no down payment in San Diego.

Good luck

All things equal I would take the duplex hands down.  Why?  It is not because I necessarily expect more turn over on the quad.  It is because the number of tenants/units corresponds to the amount of effort involved.  More tenants to deal with, more items to break/repair in the quad then the duplex.

So for me to choose the quad I would desire it to have close to twice the benefit of the duplex (i.e. twice as much cash flow and/or twice as much equity gain). 

In general I do find quads typically do have twice the cash flow and/or equity gain of duplexes but not in your scenario where the rents of property are virtually the same.

From the info provided I would definitely choose the duplex but there was minimal information provided.  Do the units cost nearly the same?  Is there more upside equity rise to one than the other?  Is one in a better neighborhood or school district than the other?  There are many things to consider when investing in residential property.

I can find positive cash flow properties virtually every day in San Diego.  I am still a strong buy for San Diego for buy and hold investors.

I posted my rationale in this thread:

https://www.biggerpockets.com/forums/311/topics/277902-best-most-profitable-region-for-rentals?page=2#p1817640

Good luck

I forgot one bullet.  Even though San Diego has not successfully passed any significant anti-growth initiative the real estate is very constrained (limited supply):

- To the North Camp Pendleton constrains.

- To the South Mexico constrains.

- To the West the ocean constrains (poor us :=).

- To the East the harsh climate constrains (good luck living in Anza Borrego through a summer)

The supply will always be constrained.  The climate will always be the finest in continental US.  The beach/ocean, mountains, desert, arts, and sports will always make San Diego desirable. There is a reason so many pro athletes and wealthy people choose to make San Diego county their home.

The point being that even though real estate has risen ~500% since 1980 in San Diego there is little reason to think it will not continue to rise.

I am from San Diego and realize you requested out of state REI locations but I want to pitch San Diego.

Positives:

• You live here.  There are so many positives to this including you can self manage if you have the time, easy to check on, you know the market area, easy rent analysis, easy appraisal analysis, etc.
• Prop 13: My family had a REI property in Gulf Shores that the prop taxes went up way faster than the rents and then the hurricanes hit and getting contractors from afar when everyone needed a contractor was impossible. Took multiple trips out there. We sold that property and we do not sell (we are buy and hold). Prop 13 is a big plus for buy and hold investors. I have a property in San Diego purchased in 1993 that is worth ~$520K that I pay property taxes as though it were valued at ~$250K. That is ~$3K difference in what I pay in taxes versus a new purchaser of the property.
• San Diego real estate has gone up ~500% since 1980. If you maximized LTV and only used 25% of cost to purchased and financed the rest that it a return over the 36 years of 2300% (2300/36=63% per year (not taking into account compounding)). In practice I would have done better (my first unit is from 1993) because I take cash out when I can if it does not cost me a significant interest increase.
• It is still possible to find positive cash flow properties in San Diego. I use a cap expense cost that most people think is way high (I think it is accurate) of $300/month per unit.  I use self managed vacancy rate of 5% of rent (I have experienced much lower vacancy rate but when purchasing a property I use 5%) and maintenance of 5% of rent.  I can still find positive cash flow virtually every day (not including the equity gain on loan payment which amounts to additional net worth gain) my issue is I am spread too thin so I look for largely under valued properties.  If I used what many people use as cap expense finding positive cash flow in San Diego county would be so easy.

Good luck where ever you decide to purchase.

Add in prop 13 protection and that most properties investors purchases have positive cash flow and I continue to be a strong buy on CA investment properties. 

In addition most investors attempt to maximize loan to value increasing the rate of return. For example if I purchased a $100K property in 1980 but put 25% ($25K) toward purchase and financed the rest then if I experienced 500% appreciation (for simplicity of calculation there is no refinance) in San Diego then the property is now worth $600K on my $25K investment for a total ROI (over 36 years) of 2300%. Without taking into account compounding (simply dividing 2300 by 36) provides an annual increase of 63%. Not bad. In practice I would have done better than this because I take money out when the opportunity allows for doing so without much negative consequence (I never refinance into a significantly higher interest rate). In 3 of my properties (7 units) I got all my cash out within 4 years. What it the ROI for those?

Too bad my first purchase was in 1993 and most of my purchases have been in the last 5 years so while I have done fairly well I have not done as well as those that started in 1980 :=).

Great post.