All Forum Posts by: Henry LiChi

@Matt K. I have not cashed out financed my properties yet, since I do not need the funds.  Pittsburg property, I would not buy at it's current value for investment purposes.  Potentially good for holding it long term as more and more is getting developed there and jacking up property prices.  Pittsburg, Antioch and Brentwood is seeing so much develops over the past few years and it isn't stopping.  

The townhouses would be questionable if I would buy at today's value.  It is about a 5% cap which isn't that terrible (in comparison).   It nets after expenses about 140k annual.  Honestly, if all I had was 2.4m and I can swap it for 140k annually for the rest of my life, I may do so since I can live off of 140k.  This is just my sole opinion, to each their own.  How I see it, is that if 2.4m buys me retirement at 30 years old, I'll take it.

@Matt K. that's always the risk.  If you are purely in the game for appreciation, there is always that risk.  If you can hold onto the property and the rents are covering your mortgage or breaking even, then I would assume one would just hold through the the downturn.  

I'll share specifically two of my properties I bought in 2012 because the others are with partners and not for me to share.

Single Family in Pittsburg bought in 2012 for 124,000 cash.  Spent 25k in renovations and repair since then, now appraised at 389k+, but had offers in the mid 400s but I decided to keep it cause I got a consistent long term tenant that pays currently 2200 and covers all the utilities.

5 unit townhouse in San Lorenzo bought in 2012 for 564k and some change.  Was completely run down and spent over 200k since then.  This was bought through a family friend who had financial troubles and I helped him out.  Each unit now rents for 3,125 per month, that's over 15k per month in gross, expenses equal to about 5k per month, plus or minus depending on maintenance.  This property is now valued at over 2.6m.

By all means, East Bay has great rental potential if bought back then, and many still find great deals, but I personally find it harder and harder to find deals.  I may find one or two good ones a year.  Some call it luck that I acquired these properties, but as others mentioned, opportunity presents itself to those that are prepared and I was prepared with cash back in 2012 to make these acquisitions.

BTW, this was a great debate between locals here in the Bay Area and I apologize if it got off topic.  Everyone has their own opinion about investing in the Bay Area and there is a reason why so many that invest here are wealthy, but the competition is fierce and challenging for the most part if you are just starting off.  Should not deter any investors from investing in this great state but like any investment, do your own due diligence and take advice from others lightly.

@Steve Babiak Case by case scenario.  I should have clarified.  I have cases where a camera was able to find that corroded sewer line but the extent of the damage was only able to be accessed via a joint trench excavation. But yes, it is not done by your home inspector or plumber, that was my fault for poorly wording my intent.  

3.5% is if you plan to house hack it, which of course is an option.  I am telling people my case scenario and in no way am I trying to deter individuals from investing here.   I do agree that Oakland has its own game and it has been mentioned here, but you really have to know Oakland.  I am born and raised in Oakland and have owned homes here but yes it is in its own niche.  I personally don't own in Oakland anymore besides being an equity partner for a new 300 unit apartment deal in Brooklyn Basin.  Yes you can find deals with 3.5% down but if it is an amazing deal, majority of the time, a cash investor is going to offer the seller more than a buyer that is going to need financing.

Like I said, I am amazed at your deals and great for you.  What you are doing is not rare, but finding properties with such great returns in the Bay Area are.  You may disagree but it is purely just my opinion and to each their own.

FYI all, he says he has 300k in cash and can get a loan up to 1m with a 300k deposit.

@Account Closed of course it can be both but I am stating what my goal is. All my properties here has since quadrupled in value since I bought then in 2012, which is great and they are cash flowing crazily but that's because I bought it back then. If I bought them at the value they are now, the ROI will be extremely low. I am not suggesting the Midwest as the only option but I get 20-30% returns there and it works for me. I personally have developed a great team there to truly make it passive for me. I am still investing in California regularly but you can't compete with the buy and hold returns in the Midwest, especially if someone is just starting off and doesn't have 7+ figures to invest.

It's great you're finding 20+% CoC returns here, but it is of rarity and the competition here is fierce. Which I applaud your acquisition skills in gaining such properties.

I've only had to dealt with POS violations once and it was in Maple Heights.  They point out the most ridiculous items, but I understand that it is to maintain a standard of living, safety, and community appearance.  Luckily mine was only 1500, but the city said it was too low and waited my GC to increase it to 3000, so he did but it still only cost me 1300 in repairs.  Bedford was sued recently for the whole POS violations requirement but that's because the inspector kept coming up with new items after revisits.  

I see it as a good thing, but some parts of the city go way over board on what they required fixed.  I backed out of over a dozen deals because of how extensive the POS violations were.

First of all, Bay Area is completely out of that price range for investment if you want decent returns.  There is too much buyers with millions in cash and buy properties for 3-5% return.  Great if you have millions that you need to spend and aren't dependent on.  As soon as you finance investment properties in Bay Area, you will be in negative cash flow or barely breaking even at typical 20-25% down.  I own several properties here and flip some regularly, but they are all done full cash and the properties I do own were bought in 2012 when the market was as you know back then.  Finding deals now are harder and harder here.  Cash buyers paying 10-20+% over asking with full cash, there is just too much competition.  I have put over 30 offers the past 2 weeks on several investment properties and they have all been out bid by over 20% full cash.  Hell, I'm trying to find a decent home for my parents for their retirement and they are getting out bid even worst. 

I've been testing the Cleveland, OH market the past few months and so far they have been amazing with cash flow (barely any appreciation though).  You really have to set your goal, is it appreciation play or long term cash flow.  For me, it is long term legacy cash flow for my family.  I plan to hold all my properties until they are no longer standing (or a bigger developer makes me an insane offer on the lot), and by then, I would have made multitudes back in rental income that I can rebuild and resume.

@Theresa Horsch

To simply put it, you would have to just eat the cost of the repair.  There is no way around it, public connection from property to street is owner's responsibility.  Your typical home inspection would not inspect for such unless you got a very specific inspection requesting so, but it would've cost you to dig up the trench to inspect the line.  It's unfortunate that this happened, but it's the cost of owning property.