All Forum Posts by: Dan H.

 Our property values fell but there was no noticeable difference in tenant turn over and we had zero late or missed payments.  We had no drop in rental income.  Our sampling size is small but, except for the loss of property value, we experienced no consequence of the housing crisis.  

@Lindsay Henning

I have a Dad that is only content if he is complaining about something.  To make it a bit more aggravating he is such a brown nose to people who he is not close to but complains about anything to those he is close to.  Even though my brothers take the brunt of the criticism, I get where you are coming from.

However, I do not rent from him.  If I did I would be having an additional relationship that he would have an interest in and I am sure would find things to complain about.

Also your claim that $1200 is greater than market for 2 rooms in a 4 BR house in San Diego with the other two BRs are empty is not true.  Your rent is significantly below market.  If that was not the case you would be finding a different place to rent.

Also the stock market has done exceptional in recent times and most indexes are at or near all time highs.  It would be very difficult for your parents to have lost money in the stock market in recent times.

As I indicated their rules are not extremely out of expectations.  I also suspect that none of their rules are illegal as long as the cameras are of public areas (i.e. outside).  I think you are bothered because 1) they seem to be like my father and like to complain 2) it gives them additional relationship with things to complain about and additional control.

I realize it may not be easy but I side with the majority of posts that if you do not like it then rent someplace else.  If this is the best all around rental opportunity for you then live with their rules.  Once their rules bother you enough you will chose to live somewhere else.

Good luck

 I do not disagree with if the economy crashes the rent can crash but I owned rentals in San Diego through the 2008 housing crisis and my rents did not fall.  People moved into higher occupancy properties as some people moved in with family or friends.  However the banks held so many empty properties that the demand for rentals stayed strong in San Diego.  I realize my example is one just city and not even very many parts of the city (the family and I had 7 units in 3 areas in 2008) but it does demonstrate that a RE market crash does not always negatively affect rental prices.  

Can't rent rooms is a common condition on lease agreements as is no animals even guest animals.  Our leases have each roommate lease with us and we credit and background check each roommate.  They all are responsible for the entire rent.   I would think it is not that unusual for landlords to have access to security cameras if they provided the security camera system.  This is not the case for cameras the tenants provide ("my security cameras"). 

That leaves the loud music during normal hours and depending on the definition of loud this is not an unusual rule.  We have a no disturbing neighbors/tenants rule. Without such a rule there could be complaints from neighbors/tenants constantly. 

The only item that seems to be unusual is reserving 2 BRs for their use.  However I would not think this as real unusual especially in a family situation but also potentially for vacation areas.  

 You do not indicate how much over half rent they want to charge but you wound be having 2 BRs of 4 BRs with the other 2 empty a majority of the time.  It seems like a deal if you can deal with having your parents as landlords.  

The rules are not as ridiculous as you seem to be implying.

Good luck

You do realize that my projections was using the 5 ARM. Interest rates have risen a lot in the last 3 months. Going with an ARM is risky and could end up shortly with a large negative cash flow. Going with a fixed rate loan, the property will have a more predictable negative cash flow. Neither of the two choices are ideal. By the way I do not consider that a decent rent to purchase ratio which is why the numbers do not work well. If you want to see recent closed properties with better cash flow you can PM me.

Cap expenses are associated with any RE but purchasing a property with projected negative cash flow is risky.  Fortunately in recent years appreciation would have made virtually any San Diego RE investment profitable.  

It appears you are aware of potential pitfalls and at least aware of the risks.  

Good luck

@Oliver Fang research cap expenses. I suspect you need a rent of greater than $3k to have real projected cash flow going with the 5 ARM which also carries the highest risk. If you rent for $3000 to $3200 your projected actual cash flow would be no greater than $200/month assuming my cap expense numbers are somewhat accurate. I project cap expense on that size unit at >$400/month. Then add vacancies and maintenance. I think if you self manage maybe $250/month (5% vacancy at $3k rent=$150 then $100/month maintenance).

I am also surprised at the rent numbers being as high as those indicated in this post but Mira Mesa is not my area of expertise.  In Escondido that size rental would not be getting as high rent as $3k/month.  Maybe Mira Mesa has higher rents but make sure you do your rent research to know what market rent is.  

If you purchase this property your profit will likely have to be in appreciation.  By your description there is very little opportunity for forced appreciation (replacing carpets with wood floors is not going to result in much, if any, forced appreciation).  So your appreciation will be based on market property and rent appreciation. 

I am a bit surprised that experienced investors have not posted on the numbers. I would not choose the 5 ARM (like all the other posters I would go fixed 30) which means this property would result in negative projected cash flow at my financing choice.

I do not want to discourage you but are you sure this is the RE investment you are looking for?   The numbers seem not good when using the safe financing options.

One final item is to look at composite flooring when considering the wood flooring.  Some look very nice and are very low maintenance and hold up great. A lot of rentals are going to this flooring because of its low maintenance, the low cost of installation, and it looks good to great.  

Good luck

@John Dunn

I recently took cash out at 70% LTV on 2 duplexes. The loans closed in Jan which means they started last year. My rates were what your loan are currently at.

I did have issues with one appraisal but that is a separate post and a separate issue. 

My point is your loans are basically in-line with what I was able to get closing a month ago which was noticeably higher than rates from 4 months ago.  So your rates are not so low that you are giving up much in terms of rates (if giving up anything).

Good luck

@Tanner Verhoeks

It is my belief that most homes purchased to live in rather than as a RE investment do not make good rentals.  I have one of my ex-homes in my rentals (located in Claremont) and it is my worst performing rental by far.  It is worth ~$525K and rents for $2100.  It is slightly below market on the rent; market may be $2250 (it is a 3/2 with nice size yard and 2 car garage in good condition).  For comparison my second worse performing property is worth ~$430K and rents for $2700 and market rent is likely $2900.

I also think the acreage will be a hassle as a rental as it is tough to find tenants that will properly maintain large yards.

I think the rural location will not help finding renters or getting a good rent and the size of the unit and property will mean high cap expenses (my estimate would be >$400/month cap expense).

The reason your home does not work well as a rental is because you purchased the property to be a good home and not a good rental property.  Versus purchasing a property because it makes a good rental.

So I suspect your belief to sell your home rather than use it as a rental is likely the correct approach but I did not follow myself when I was starting out.

Good luck

Last Thursday I looked at a potential flip in Escondido at lunch and that had been on the market just one day. It was on the market at ~$300k with an ARV of close to $500k. There were already 5 all cash offers and the property looked like it was having an open house as there were 4 or 5 investors looking at the property including one from Temecula. I suspect the unit will sell for significantly above asking price.

That is the current market place in San Diego.  Finding a deal takes work.  Your completion is experienced and often have teams looking for those deals.  They often have cash for all cash offers.  They have experience.  They can spend many hours working title issues knowing those hours are at risk if the title cannot be cleared.  

I receive offers to buy properties almost daily.  Mailers in this environment are likely not going to be very successful. 

There are already many I buy houses signs.  

I do not want to be discouraging but I also want to be clear that finding deals in this climate is a lot of work.  This is not to indicate it is impossible.  If you work hard you can find a deal.  I would suggest driving for houses with a target mailing to only properties that you identify via your drive for houses.  

Good luck

I think you can find flip opportunities in Chula Vista but the competition is tough everywhere in San Diego.  I was at a flip opportunity on Thursday in Escondido at lunch time.  The property already had 5 cash offers after one day on the market and when I was there it looked like an open house; there were 5 or 6 other investors looking at the property at lunch including some from Temecula.  

So you will need to work it hard as many of these flippers have a lot of experience and big pockets. 

I do not hope to discourage you but to make sure you know the competition level in San Diego.  I believe with hard work you can find a good flip prior to it hitting the market.  

Good luck.