All Forum Posts by: Dan H.

My STRs in San Diego are slow.  All 4 are booked for thanksgiving but 3 of them booked late enough that they received the late booking rate.   

december has one unit fully booked, 2 units half booked, and one unit that is virtually the same as one of the half booked units that has literally 0 nights booked (why?, it is virtually the same unit).  overall 50% book rate for Dec that still may go up slightly (especially the zero booked unit is likely to book for Christmas).

There is a reason it is called the off season.

Long time San Diego RE investor currently taking a hiatus from purchasing in the local market.   I am in my longest no purchase period in over 15 years.  

I have a live-in (22 year old son) rehab (pt Loma) starting Dec 1 if you desire to see the pre-rehab condition reach out to me a couple days before Dec 1.  My son will be heading up the effort.  He is in the process of finishing his first led rehab.   He did OK, but it was tying at times because he is my son (he gets away with stuff that my past protégés would have never done).  I would discuss financials on this if you choose to come see the pre-rehab on Dec 1 (I have made a lot of money (close to 7 digits after this rehab is done in ~2 months) but due to not executing a cash out refi (due to the rate increases) my return is below my underwriting). We can discuss what was required, why it was purchasable at a discount, and current value (and value after last rehab).  It may be possible that I show you 3 of the 4 units (this is the last of the 4 to rehab).  Note I am not usually making these offers.  I usually make this type of offer after returning from BPCon (I made someone offer to mentor them after BPCon and they ended up ghosting me.  After getting ghosted I received at least half dozen other requests hoping to take the persons offer).  In this case the offer is only to dive into this one project - I already have 2 protégés).

In summary, near rent ready retail units at high LTV have large negative cash flow. Brrrr after high LTV refi have large negative cash flow. The current game is flipping which is a job (stop flipping and you stop making money) or more patience than I have. I highly believe that in 10 years a purchase made today in San Diego area will look good. It may be rough getting to those 10 years.

I am casually looking in 2 markets away from San Diego but I am not expecting to achieve the return that I have historically achieved in my local RE investments.  Primarily alleviating the itch to purchase.

Good luck

In general hands off single ADU additions in single family zoned areas add less value than the cost of the addition. Developing small units in small counts is not low cost development.

Make sure you use good comps to derive a conservative ARV as if you do not, you will not be able to extract your ADU addition costs via the refinance.

Good luck

You have a property in CA without insurance.  WOW!   You are brave or crazy.

I think you $crewed yourself not having insurance. If tenant knows you do not have insurance, which they could learn by searching for you on the internet and finding this thread, they have the upper hand.   They know that you likely have to pay any legal fees as well as any judgement.  If you offer a settlement, they have a big advantage in the negotiation. 

Contrast this with someone that has adequate umbrella policy.   The tenant finds out that the insurance company will be fighting this with their very deep pockets.   The insurance company may settle if the tenant has a case, but it be from a position of strength and primarily to reduce the cost of the fight.  Regardless, the person with the umbrella policy has no big concern and should not lose a wink of sleep.  

get adequate insurance.  Consider an umbrella policy.  Fire the PM.  Do not partner with your brother on anything again.  Pray this does not go real bad as it could go real bad.

good luck

I have been successful in the San Diego market mostly doing brrrr.   The local market has never been worse for a buy and hold investor.  This is a combination of the all time worst rent to purchase cost ratio and interest rates that are near the high for this century.   Some traditional buy and hold RE investors have transitioned to flipping.   Those few that are still buying to hold virtually always are doing large value add that virtually always is more than just a rehab.  

I purchased $4m Dec of 2021 and have one unit left to rehab (starting it Dec 1 and my 22 year old son will be running his 2nd rehab - it will be a live-in rehab so slower than we usually achieve).   If you want to see it pre rehab, we may be able to arrange something for Dec 1 (it is in Pt Loma near OB).

I get a lot of off market property listings sent to me.   I am barely looking at them because with my underwriting (that some would consider conservative), even properties below retail bleed cash.   I do see some flip opportunities, but flipping is a job; stop flipping and the making of money stops,

My next purchase is likely to be in a different market with lower profit expectations than I used to achieve in the San Diego market.  If it is in San Diego, it will likely be a sophisticated value add and not passive.

So if you house hack a local property at high LTV, recognize it will cost you significantly more than renting a similar unit. It likely will require years to achieve cash neutral. If you hold it more than 10 years you likely will do great, but in the short term it will be tough. Negative cash flow is difficult especially on more extensive tenant turn overs or when dealing with a PIA tenant.

Let me know if you want to see the unit being rehabbed on Dec 1.

Good Luck

I am often the contrarian. And I will state different jurisdictions have different rules, processes, expectations, etc.

In my area you are required to have a permit to swap a water heater.

I have never pulled a permit for a water heater swap, know no one that has ever pulled a permit for a water heater swap, ever seen or heard about one getting red tagged for no permit, and have never had a plumber recommend getting a permit.

However, if you ask the city if you need a permit for a water heater swap the answer is yes. They will take the permit fee and send an inspector that will provide some assurance that the work was performed correctly.

I pull permits for removal of load bearing walls, addition of bathrooms or bedrooms, addition of footage. I have pulled a permit for removing a fireplace, but probably would not have but I had a significant remodel going with permits and did not want hassle of him making an issue of removing the fireplace (the inspection for fireplace removal consisted of only verifying gas cap was in visible location, he did not even spray it).

I have gotten red tagged once for unpermitted work. The lesson was exactly the opposite of what should be desired. Tenant had some risk items such as extension cord going from outside to inside which invited an inspection. Some of the red tagged items proceeded my ownership. The city made me conform to their exact permit application process which was burdensome and frustrating. An example is on one permit I had plans for electrical, plans for gas, plans for AC condenser. I got comment to submit a single plan. I initially had no clue to the comment so went to permit office. They wanted me to append the 3 plans into a single document. The lady said what if there were 100 documents, my response was there are 3 documents and no where near 100. It took a lot to comply with their permit expectations and was frustrating and time consuming. Prior to inspection I replaced one outlet cover. The inspector wanted me to add 2 screws to anchor the condenser and he did check for leaks at the gas connection (the gas connection that was flagged was decades old and I questioned if was before a permit was required but city stated it was up to me to prove that it was there prior to permit requirement). All that hassle for 2 screws to attach condenser. The lesson to me is jurisdictions can make the permit process to be painful, requiring tribal knowledge. If I had applied for permits when work was done I would have experienced the same permit process issues. It discourages applying for permits.

So my lesson is permit application can be a hassle. Some things do not justify that hassle. Other things such as adding bedrooms, bathrooms, square footage justifying permits.

Good luck

I have a laundry room that is exactly the scenario that you describe except the water is already split across the 2 units.  Not sure if the washer and dryer you are supplying are coin operated or free, but mine are coin operated

Tenants pay for the utilities and it has been zero issue because I do not allow it to be an issue.  If they are not happy, they can leave at the end of the lease.   This is pretty much my response for any complaint about anything that was well stated in the lease and the tenant has agreed to.   If the tenant does not like it, they should have rented elsewhere; not complain about it after they agreed to it. 

The problem will be no larger than you allow it to be.  

Good luck

Quote from @James Wise:

Quote from @Eric Prescott:

Quote from @Bob Stevens:

Quote from @Calum Bressington:

I recently bought a new rental and the previous property management told me I need to get a lead paint inspection every two years in Cleveland, does anyone know anything about this?

Thanks

 Yes simple, you have it inspected by a led cirt guy, 500 per door. Of course, plus any work required.  We have past about 350 over the last two years . Good news is the FED reimburses you $750 ,so you actually make money, 

 Where do you go to request the reimbursement?

The notion that you actually make money during the lead certification process is a complete fabrication. Before anyone viewing this thread takes any advice from "Bob Stevens" I recommend you click the link below.

 Who is Bob Stevens AKA Bob Prisco and what's his involvement in Cleveland?

 Entertaining thread.   I was aware of the two names because of his SEO site.   I assumed he wanted some anonymity on BP but instead of using Bob P (like Dan H) used an alias Bob Stevens.  I never investigated further.

I always questioned his recommendations because at the price/rent point he was advocating, the maintenance/cap ex would consume too much of the rent unless actively self managed.   Never thought that BOB S/P was unlicensed to be a PM.  

I have never performed a brrrr on a mobile home, but my most successful BRRRRs are where rehabs add the most value.   Mobile homes are relatively cheap.  I question how much value above costs can be achieved.

An ideal BRRRR has zero costs and has positive cash flow after the refi to extract the value add. If you achieve the ideal BRRRR with zero costs, you might as well perform it in a high PSF location (as high as you can tackle with conservative reserves).

My last rehab was on a property that was almost $2k psf.  Adding half a bathroom per comps added $50k valuation.   What would a half bathroom add on a mobile home?  Something to ponder.

Good luck

 I forgot seasoning on the refi.  Understand its impact or know ways to by pass the seasoning.  The seasoning can impact when you can extract the value add which can impact when you can start the next effort.  

Good luck