All Forum Posts by: Dan H.

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. 

Typically when granny flats are added the permit is issued with an signed agreement that it will not be rented as a separate unit.  

There are San Diego RE investors that purchase properties that need a rehab.  They perform the rehab and add a granny flat.  They then flip the property knowing the buyer is going to rent the granny flat as a separate unit.   There are many areas in San Diego that there is no enforcement of the no rentals of the granny flats.  

Your case is a bit different because you would be permitted to rent a room to a roommate.  I view this as a short term roommate.  

I recommend consulting an expert such as a real estate lawyer if you are relying on being able to short term rent the area. 

Good luck

I have purchases from a few years ago that if sold today would produce a good/great return. A REI property I purchased in 2013 did not have positive cash flow when using my conservative expense numbers. I purchased it expecting property and rent appreciation as well as recognizing that equity could be obtained via a rehab. The property has been rehabbed and the rents produce a solid cash flow. The property has appreciated almost $200k.

A purchase today in San Diego likely will not cash flow enough to be worth the effort.  Recent interest rate hikes have made financed properties less affordable.  The implication is that greater rent and property appreciation (greater than the good appreciation of the last few years) will be necessary to produce the same returns as recent purchases.  

The reduced number of potential income producing properties has also increased the competition. Yesterday I looked at a SFR in Escondido that needed a full rehab and entered the market 2 days ago. It already had, as of lunch yesterday, 5 all cash offers and it looked like an open house when I was there at lunch as there where 4 or 5 different investors looking at the property. The rehab was a bigger job than I was looking for and I expect the price will be much higher than the asking price (listed at ~$300k for ~2200 sf (bigger if including the unpermitted work) with a view and 0.8 acre lot).

In summary there are not many properties that look likely to produce the return of properties from just a few years ago and the competition for good income properties is significant.  

Good luck

I understand the rule as it is easy for every corner to get cluttered with signs if they can be just created and placed.

Versus having a sign spinner requires effort and of course is not just left there even if they are there every day.

What is more difficult to understand are the charity signs for charity garage sales, electronic recycling, car washes, etc.  Is there something that allows those signs?  I suspect it is more that it is a good cause so the rules are not enforced.

I get a mailer for purchases almost every day.  I suspect they are not targeted mailers or if they are targeted I have no idea what the criteria is except the property I get the most mailers on has been owned many years, purchased in 1992.  The more recent purchases get less mailers.  The mailers I receive go into the recycle bin so I suggest you somehow target who you send mail to.

Good luck

I do not have any sources for the info you requested but I went to Germany a while back and stayed in a prefab house that was comparable to my house in quality and there is no way anyone would guess that it was prefabbed.  It was fairly large (over 2000'), very stylish, with luxury features like hard wood floors, solar, granite counters, nice looking cabinets, etc.

I was told the fact it was prefabbed saved ~30% on construction costs which if it was the quality of the prefabs from a couple of decades ago I would not have thought it was worth the savings but this was a very fine house.  Put that house in my neighborhood and it would be >$800K.

So I like your thinking and hope you find a good source of Tiny prefabbed homes.

@Dawn Anastasi suggestion is correct but using zillow rental manager (formerly Postlets) will post on zillow, Trulia, and Hot pads from a single portal. It also creates HTML for posting on Craigslist.  It is nice to use a single portal to post to multiple sites but the formatting on each site is less than perfect but that is the price of using the single portal.  

Good luck

You "investment opportunity" is a 10% return which typically is only maintainable with risk.  However I will also point out that I expect my REIs to have better than 10% annual return on my initial investment (including the equity gain).  To word it differently I would not purchase a property that I did not believe would achieve 10% annual return on my initial investment over the long term. 

In Cal appreciation has virtually no impact on taxes (prop 13).  

Your statement on actual ROI being determined after selling is one of the few statements you have made that I mostly agree with but I am not a CPA or accountant and question what the return is when there is no longer is any initial investment in the investment. Only 2 of my units have any initial investment still in the properties. Sounds like you have purchased your units without any initial investment which is outstanding but virtually impossible in So Cal.

Good luck

Your first point seems to ignore that the equity gain on the unit has been 36% annually ($6k/month). If you were just calculating return from cash flow I suspect you were generous but that would be added to the 36% from appreciation. She could refinance at 70% LTV and remove 70% of the appreciation if she desired.

I see nothing in the investing definition that states the expectation has to be based on anything including solid business practices.  You seem to have a special calculator and a special dictionary.  

I invest in San Diego and expect REI appreciation. I believe virtually everyone investing in San Fran is expecting appreciation. Between my family and my REIs we have purchased in San Diego in 1969, 1977, 1992, 1997, 1999, 2004, 2012, 2013, and 2014. Each and every one of them has appreciated at a rate that has exceeded inflation for the initial investment. Look at the statistics for San Diego appreciation. Recognize that if purchased at 75% LTV the appreciation on the REI is to be multiplied by 4 for appreciation on initial investment. Some of these properties were purchased near market highs (1992, 2004) and at one point depreciated. For every single duration (1, 3, 5, 10, 20, 30, 40, 50 years) from today going back at least 50 years San Diego has appreciated (look it up). I suspect San Fran is similar but with greater appreciation. History indicates that if I am not forced to sell on a down cycle the REI will appreciate. Speculation were no one who owns today has been incorrect is not much speculation. It is using historical data to realize the certainty of equity increase. I do not look at speculation as a dirty word. I just do not think there is as much risk investing for appreciation in San Diego or San Fran as you seem to believe and the stats back my view.

I know of many areas in the nation that at one time cash flowed that the properties are now virtually worthless and cannot be rented.  All you need to do is find a town that is declining in population to find such areas.  

Your property appears to be a very good investment.  The property from the above list purchased in 2012 was purchased for $302.5k and has had better equity gain than your return and has cash flowed nicely since day 1 (it is a duplex - 2 tenants to manage).  The property that you first commented on has had equity increase return about equivalent to your example (assuming cash flow neutral since purchased: initially negative cash flow but now positive).  

It seems cash flow is working well for you which is great. Appreciation in So Cal and San Fran has worked well for many investors. Different paths leading to success in REI.

Good luck

In my market the small multi families (2 to 4 units) have a huge discrepancy between what shows on the MLS and what the properties sell for. I tell people when looking at duplexes to quads only look at the closed sales when looking for what to offer (fortunately if you make a mistake here but are getting conventional financing the appraiser will find the mistake but it could cost you a few thousand). Even with the recent interest rate hikes the duplex to quads that have sold in my market area cash flow when using conservative expense estimates (to me conservative expense estimates are $300/unit detached cap expense, ~$100/month maintenance per unit, and vacancy at 5% of rent). My units so far have done better than the maintenance expense and vacancy estimate but the cap expenses I do not have enough data but I suspect to be fairly accurate for my units.

Good Luck