All Forum Posts by: Dan H.

I used IKEA 13 years ago on a SFR in San Diego so I am sure a lot has changed.

At the time they did layouts for free.  I heard they changed that but maybe they changed back.

I paid IKEA to provide a crew to assemble them.  So the boxes were delivered and I just checked box counts.  The assemblers were scheduled for the next day and came with a small crew and put them together real fast.  Back then I did not have my current GC so I used an installation crew (not same crew as did the assembly) suggested by IKEA that did a great job.

My current handyman is slow at assembling cabinets. My current GC does not like to assemble them.  So if I were using Ikea today and they still offered assembly I would pay them to assemble it.  They do it repeatedly and therefore are both fast and will get it right.  Also if a part is missing it is on them to take care of it.

The cabinets are holding up well.  The granite counter had no lip and tenants dried their dishes on counter that dripped down cabinet front that is in front of sink so it needs some refinishing.  Everything else is perfect.

We have done 4 rental kitchens since then and have not used IKEA but I would consider using them again.  Two of the kitchens we did since them we used discontinued line of cabinets at great discount, 1 we used refurbished used cabinets (apparently the cabinets were not sealed and so they are wearing at the handles too fast so if you get refurbished make sure they are sealed/lacquered for rental units), 1 we refurbished the cabinets that were already in the unit.  If the unit has solid wood cabinets then refurbishing in place is a viable solution.

We have an LLC. We looked into umbrella coverage but LLC provided better protection. Having stated this properties purchased prior to LLC are still in our name so we are not fully protected.

Analyze your net worth and determine best solution (LLC, umbrella, no additional coverage) but realize it may not be easy converting the two existing properties to the LLC.

Good luck

We have a tenant that was constantly threatening to take matters up with an attorney.  The wife/partner hated dealing with this tenant.  Of course we never heard from his attorney but the constant threat was getting the wife mad. 

She had enough and told the tenant after one of his declarations that he would be taking it up with his attorney that the one month notice worked both ways.  The implication being they can give notice if they are dissatisfied living there and/or we can give notice if they are a pain in the butt. 

Tenant acted surprised at her reaction.   Wife told tenant that she does not like to repeatedly be threatened with potential law suit and that our lease was written by real estate attorney so everything in it should be legal.  

Tenant, possibly fearing eviction, was apologetic and indicated how much he like like living in our unit. This was in our San Diego unit (most of our units are in Escondido). 

Point being stay strong.  Gather your tenant correspondence for defense.  Consider if you have a basis for counter suit and if so counter sue. Then try to look at it in the positive as a learning experience.  I know I would look at it both I do not have time for this crap as well as the learning experience. 

Good luck

My view is that Victorville is for people with more time than money who use that time to commute rather than have free time (to either enjoy or look for ways to improve their situation) and therefore are in a position that is difficult to improve.  They buy at a reduced price and get a nicer place to live but they spend countless hours commuting and have less time to enjoy things or improve their lot.

Compared to someone that buys the smallest property closer to where they work (their home is no where near as nice as if they purchased in Victorville).  They live in a tiny place that may need some TLC but they have more free time (shorter commute = more free time).  In that free time they can choose to use it to find ways to improve their financial situation or they can use it to do what they enjoy (or a combination).   I believe the property with the shorter commute is likely to appreciate more but lets say they appreciate the same.  Which would you expect would be easier to rent?  I think it is very reasonable that the lesser commute will rent easier and probably for a greater rent per cost than the property with the long commute.

I also do not like Victorville.  I like the desert to visit but not so much to live.  Victorville is small and therefore does not have things like Sports teams, zoos, quality museums, etc.  Do you want to commute 2 to 3 hours round trip to see a sporting event?

So unless you and your wife can find work near Victorville I would look at other options (any other options).

@John Linderman

Of the $60K expense, $40K was to buy into a private sewer run that had been purchased by the home owners that had been ordered by the city to connect to sewer (the ones that obeyed the city's demand).   It was not $40K when the previous owner did not do as directed.  When the city ordered the owners to connect to sewer the owners needed to run a private sewer line and have a pump station to get the sewer to the city sewer.  The city offered low cost financing (low for back then but not that low with the cheap money of today).  The way that the contract was written each person bought into the private sewer line but the price had a 5% annual interest rate.  So my $40K buy in would go to the owners of the line to cover their buy in cost from ~15 years earlier.  If someone else bought in after me I would now be an owner of the line and get my share of their buy in cost.  Seeing that virtually everyone bought in when they were supposed to no one else has bought in.  Three houses with larger lots (I think their lots are 2 acre versus my 0.7 acre)were not required to connect to the sewer and still are on septic.

So only $20K was to actually run the lines to the private sewer line and connect (not much more than your $15K estimate and probably explained by San Diego labor costs).  However your estimate could be low as you may need a pump station to get your sewer to the city sewer.

@John Linderman

I am sorry about the non-disclosure.  I am a fan of septic systems but of course not where they cannot be replaced and their failure could result in a large expense.

I suggest you contact a real estate attorney.  You may be able to get references from people on Bigger Pockets.

The attorney that I used when I had that issue had indicated that he believed we could have gotten full value of the non-disclosure if we had closed on the property but because our damages were limited we were constrained in what we could collect (so I accepted $9K reduction in price).  Note that determining the value of non-disclosure is harder in your case than it was in my case because in my case he was on septic when the city had already indicated he had to be on sewer (he simply ignored the city's demand to connect to sewer and the city never checked or enforce their demand).  So my damages, to be compliant with the city's demands, was the cost to hook to sewer (~$60K).  In your case you are currently compliant but may have issues staying compliant in the future.  Knowing this would have resulted in you taking that into account with any offer on the property and you likely would not have purchased the property or wanted to purchase it for less than you paid.

Get a good real estate attorney.  He will be more knowledgeable than I am on your rights and best approach to collect damages.

I should not recommend this and it has some risk (but probably worth the gamble) but if your system fails you could try what the person that sold me the property did and try to ignore the demand to hook to sewer and hope the city never checks.  He likely spent $1K or $2K repairing the septic to save >10X that amount.  If he got caught and the city enforced the demand he would have been out the $1K to $2K he spent to fix the septic.  Note even including my $9K price reduction his decision was cost effective. Hopefully if you take that approach you would disclose it to the buyer of your property when you went to sell it.

I agree it is possible to cash flow in San Diego but the cap expense is higher here than most other places.  So a lot of properties that look like they cash flow do not.   

However if you have the time and skills to do a lot of the rehab yourself you can get instant equity gain and the resulting unit is more likely to cash flow.  

I suggest you look at a cap expense itemized sheet and their numbers then realize their costs are way lower than in San Diego.  For smaller units I use $300 per unit per month.  I derived this number by starting with a cap expense sheet and replacing the cost on the sheet with my experienced cost in San Diego.  I also modified a couple of the life spans for what I am actually encountering.  

By the way my area of expertise is Escondido.  I claim to know price point of multi units in Escondido better than any reactor I have yet to encounter.  Arrogant?   I or my wife have looked at the exterior of virtually every reasonably priced multiplex on open market for last 5 years.  We have placed many offers and tracked what each sold for.  I can virtually always predict which one will be sold within a month and which will linger.  

If you choose to invest in Escondido I am willing to tell you what I think of the price point of a property if you desire a sanity check.  

I agree with virtually all of what was written above.  There is a lot of good information in the post about leveraging money rather than big down payment, about how to determine room rental rates, and about taking vacancy into account.  I agree with the information provided so I will not rehash it.

I want to make sure you realize cap expense rates in the populated areas of Southern California (including San Diego) is significantly higher than for the nation as a whole.  For a 3/2 in San Diego I would use a cap expense of between $300 and $325 per month.  So your cash return should take into account vacancies (I have never done room subletting but for my units I use 5% vacancy rate and I am always significantly under so far - for last 5 years I am below 2%), maintenance (I self manage and use 5% of rent), and cap expense (I recommend you budget at least $300/month).

Finding positive cash flow on a SFH in San Diego is not easy if taking into account full expenses and minimal down payment (and like the posts above, I recommend minimal down payment to better leverage your money).

Good luck

In Escondido do not look at the MLS active listings of multi family units to determine the market price. Look at the price of recent sold properties. Escondido is full of listings of multi family homes that will never sell at close to their currently listed price. A multi family home priced correctly in Escondido in recent times has always sold in less than a month.

As an investor ideally your price point is below the market price but that is every investor's goal. This typically means the rare value on the MLS which will have multiple offers in a week or off market properties.

However, in Escondido you can positive cash flow on multi unit properties at market value assuming traditional financing.  So you do not require below market but as I indicated even the market rate multi families go quite fast (less than a month). 

Good luck

I am a fan of So Cal residence investors investing in So Cal:

- I can still find properties that cash flow even using my cap expense that most people would consider conservative (I claim they are accurate).  They do not flood cash (certainly they do not cash flow like Cleveland) but they are positive.

- There is an intimacy in the area you live that is comfortable.  You should know the rents, vacancy rates, maintenance costs, property values, and any positive/negative events that could affect the market. 

- Prop 13 protection is nice.  My family had a property in Gulf Shores Alabama that the prop tax increase was incredible but the rental price had barely moved.  A good investment became so-so and after 2 hurricanes was a poor investment.  We no longer own that property.

- So Cal continues to have increased property values.  It will always be a nice place to live with a finite amount of homes.  In San Diego there is very little room for further construction.  The property values could fall but due to supply and demand I expect them to always rebound.