All Forum Posts by: Jacob Y.

Marco Santarelli

Hi Marco,
Thanks for the reply! I guess I haven't :) And, I keep hearing that about California too.

Maybe i'm getting confused, but isn't my investment strategy partly formed by these things? I have a certain set of circumstances that limit my ability to use certain strategies right (funding, location, etc)? So I have to pick strategies that work for those circumstances. Since I am entirely new, wouldn't investing out of state be even more complicated? Here, I have advantages of being able to look at properties with my own eyes, manage the properties myself, do repairs myself, and even rehab myself (I am a carpenter). Out of state, wouldn't I have to immediately assemble an entire team? How does a new investor get started investing in out of state markets? Much appreciated, thanks!

Hey Ya'll,
I've heard something to the extent of live where you want, invest where the numbers make sense. I happen to live in an expensive market, Santa Cruz California and want to get started investing in real estate. I am trying to develop a strategy and am thinking about flips, buy and hold, and multi-family properties. I have no experience, but I may be able to get a private loan for enough to start something in this market despite my lack of experience (I will have to show good numbers for this to happen).

What do people think: if the numbers make sense for a property, is it ok for a new investor to start out in an expensive market (average sfr is like 500k here), or should I start in cheaper markets?

If the latter, how does one start investing in different markets from where they live and work a job at the same time?

Advice appreciated!

Jacob

Hey Everybody,
My co-worker and I are looking to get into real estate, and I am wondering what ideas people have for carpenters. Are there other carpenters who got into real estate who have advice and experiences?

Obviously i'm thinking we can rehab a property with the labor being "free", so fix and flip could be an option where we could increase our margins with some sweat equity. Advantages, disadvantages to this strategy? Also thinking that up to a certain point we could do all property management ourselves. We could also put labor into buy and hold properties, decreasing repair/rehab costs. Are these viable strategies to get started? Are there other ones? Anything else we should consider or know with those?

Thanks in advance!

Ali Boone Oh, and yes, you have a very good point about having that much money tied into one property. Part of it for me is also liking the area i'm in and wanting a place that I can do what i'd like with - we have a huge garden here, chickens, ducks, and I have taught lots of classes here on sustainable living and gardening - you can check out some pictures of our projects at scfoodnotlawns.com. As i'm very new to investing, i'm still wrapping my head around financing, and the ability to invest in other places that are cheaper lol. Would you be willing to talk on the phone with me briefly? If I were closer I woud offer lunch, but maybe there's something else I could do in exchange? Thanks for your help!

Ali Boone thanks for the reply, and very much for the article, I have had a tab open with it, going back and forth doing calculations! I'm very new, and analyzing this property has been a great start for me.

Redoing the numbers and looking at the property closer, I don't think its worth 650k. The property manager, who I think will also be representing the owners as their real estate agent, threw out this number, however after I started looking into it, the house sold in 2001 for 430k. I don't think that there have been enough improvements to constitute that price tag - in fact the house needs quite a bit of repair, which I would do myself. I am now looking spending some time learning about how appraisal and assessment work, which seems like a world unto itself.

I took at look at your webpage, hipster investments, and have been reading a lot of your post responses - you sound awesome! Thanks again for your help.

ANISH TOLIA Ok, got it, thank you!

ANISH TOLIA
Thanks for the quick reply! I see in your profile that your strategy is long term buy and hold of single family homes - if you never see much better than 5% cap rates here, and that is not a good deal, why do you have that strategy? Are you just looking for the rare ones that do have a higher than 5% rate?

Hey All,
I have been reading a lot but have some questions regarding purchasing an investment property to rent:
I have been living in a house for 4 years and the landlord has been talking about selling every year. They say they will entertain an offer this year and I am trying to figure out how much makes sense to offer. Its a great opportunity for me to figure out the math, and I like the place and would like to live here a few more years and then have it as an investment property!

The house is listed as a "2bedroom 1 bath", but there are 7 rooms, and 8 - 10 people have been renting it for 4400 a month for the past 10 years with no vacancies. The lot is almost 9000 sq ft. The property manager who is also a real estate agent, who I interact with frequently, sent me these numbers:

They want 650k for the property.
Tax and Insurance: 766
Mortgage: 2482 with 20% down 4% 30 yr fixed
Repairs: 440 (based on 10% of monthly income)
Vacancy: 440 (same calculation)

Total Expenses: 4128
Net: 272 month, 3264 year

Cap Rate: 3264+29,784/650,000 = 5%
Cash-on-Cash: 3264/ 130000 = 2.5%

First off, is this math correct? Do his numbers make sense? My cash-on-cash return is half of the cap rate. I am a bit confused about why this is so - isn't the cash-on-cash supposed to be higher (the advantage of leveraging)? Ali Boone, in the article "rental property numbers", says he looks for 8% cap rate for rental properties in his market. Should I be looking for something 8%+ as well, or does this vary by market? If my strategy with this property is to rent and hold, is it ok to get away with a low monthly cash flow with intention of building equity? Or should I just adjust the purchase price until I get 8% cap rate with the numbers I have plugged in?

Since I know that the vacancy rate on this property has been 0% for at least the 4 years i've lived here, and possibly around 10 years (this is a college house in a college town), can I adjust that number in my calculation to something less conservative, or do I want to leave it at 10% to be safe. Also, I will be doing repairs myself, so could I safely lower that number too in this case?

Next, if I plan on living here, how do I calculate my portion of rent into the equation? I currently pay 675. This reduces the monthly net, but my expenses for rent are zero - should I just analyze the property as if I wasn't living there? There are some advantages to an owner occupied rental, however, aren't there?

Next, the house needs some repairs, but I think I can make those repairs while keeping the house full. Should I just have the house appraised, calculate total repair costs, and use that number to try to reduce the initial purchase price?

Also, I have several ideas for how I can increase net income on the property in the long run (the structure I live in can be converted and rented out as a studio for more, and another structure on the property could also probably rent for more...btw there are three separate buildings on the property), including a rent increase (we have paid the same rent for 4 years). Should I not calculate this potential extra income for now and then consider that icing if the numbers work for the initial calculation?

Thank you all in advance, and for bearing with my newbness, i'm sure some of these questions are answered somewhere here, and I will continue reading, but the sheer quantity of information is a bit overwhelming. Any help is appreciated! Thanks!
Jacob

Hey All,
New member from Santa Cruz California. Im still currently in the fairly early learning and reading stages of real estate investment, but I have worked for several years in the Green Building field as a carpenter under a general contractor. I am really interested in jumping in with both feet and talking to people in my area about what they see as opportunities in Santa Cruz and the SF Bay Area. I can currently offer my time in exchange for learning, and I am also willing to re-locate to most anywhere in the SF Bay to work with investors and or realtors to get a better handle on the field. Initially, flipping and buy and hold have caught my eyes as strategies I may be interested in. Also very curious about apartments and four-plex situations where I could rent and live in. Thanks and looking forward to learning and meeting interesting people!
Jacob