All Forum Posts by: Jannah M.

Does anyone have recommendations for reasonably priced, reliable, and prompt contractors in the South Bend, Indiana area?

AND I forgot to ask about your thoughts on how the potential ADU build in garage of current house plays into your analysis of my situation. Thanks again!

Hi everyone!  

I'd love some advice here.

I currently live in a large 4 bedroom, 3.5 bath home in Oakland, California. A conservative estimate of it's current value is $900,000 with about a $600,000 loan remaining. Yearly expenses for PITI is about $50,000. I am able to get rent of about $52,000 but that doesn't include water, sewage, gas and electric, and wireless, and yard maintenance which are included in rent. I could spend another $100,000 and convert the garage to get about $1300-$1500 more a month in rent.

I am now in contract for a new house at $650k in Oakland, and it needs about $50k in repair work. Yearly PITI is about $44,400. I could rent out two of the three houses in the house for $21,600. The new house is on a huge 10,000 sq foot lot.

Here's my question: 

Should I keep my current house, and count on bay area appreciation or benefit from the house paying itself off?

Or should I sell my current house, take out the $250k or so that would be remaining after expenses in selling the house and use that money to try to build another 3 bedroom house on the lot of the new house?  We could get at least $36,000 in rent from the 3 bedroom house, which I estimate will cost $300,000 to build.

Or, should I keep both houses and just not build?  Or keep both houses and find a way to finance the second house on the new house's lot?

Thanks for your thoughts!

@Brent Tarnow  Thanks!  It seems that with today's prices but high rental market, a duplex or fourplex is my best shot, although I assume I'd have to go further into East Oakland now that all other parts of Oakland have exploded.  

@Account Closed @arlen chou that is so great to hear  that even in this market, rents have kept up enough to achieve the 1% rule in Oakland.  Are you achieving that via multifamily properties and properties in emerging neighborhoods?  Also, are there BP meetups in Oakland?

@Matthew Krickeberg, this is exactly what I did in 2013.  I stilled owned the first house I ever purchased and hadn't save up funds for another down payment but I saw a deal I wanted and saw that my market (Oakland, California) was on the up and up.  

So, I got a 5% conventional loan through the amazing mortgage broker I now always work with and took a withdrawal and took the awful penalty (not a loan, because due to prior loans the available loan funds wasn't going to be enough).  I didn't even have money to pay the penalty, so I put it on my credit card when tax season came.  The condo was purchased for $320k and now is worth $575-$600k.  Well worth the risk, and I made much more than I would have allowing that money to sit in my 401k.

Thanks everyone.  I am super torn between the different perspectives shared by @Dave Foster and @Arlen Chou.  

I'm curious Arlen as to whether your perspective would change if I could cash flow now significantly more.  For example, if I can actually meet the 1% rule conveyed by @Lawrence S., then I could have around $2,000 or more per month in cash flow now.  How does that current lack of cashflow come into account when contrasting that with the unrealized appreciation?  

LS, I'm also curious as to current markets where the 1% rule could apply.  I've done some numbers in California, and I'm having trouble finding areas where that rule can be met.   Also, have you gone through the process of seller finance?  Any advice for a first timer on the nuts and bolts on that?  I also did not refer to a reverse mortgage.  I referred to a deferred mortgage, which my broker explains to me a their term for financing of a property that was purchased in cash.  We plan to pay in cash first, to have the advantage of an all cash offer, then finance later.

@Sherwin Gonzales, thank you.  And yes, I have long thought about scaling up to a multi-family.

Hi everyone!  I'm new here to the Bigger Pockets forum.  (In fact, this is my first post!)  I'm really interested to see what expert advice I can obtain from the many real estate investors here.

I have been fortunate in my purchase of Oakland real estate over the last ten years.  In 2009, I bought a house in Maxwell Park with an ex for about $250k and we sold it for $520k in 2016.  

In 2013, I bought a condo near downtown Oakland for $320k and have had tenants in that property who have pretty much been covering the mortgage and other expenses.  If I sold that condo now, I could probably get $575-$600k for it.  

And then in 2016, I bought the house I live in now for $648k and plan to sell it in the fall for around $875k, hopefully more with improvements I've made.  

After I sell the house, I plan to do a deferred mortgage on a house my boyfriend plans to buy in cash.  My mortgage broker tells me that so long as my half of house costs no more than $600k, I don't have to bring cash to the table.  This is appealing to me since borrowing more money now while interest rates are low makes sense to me.

Here are my questions: 

What should I do with the condo and the proceeds from my house sale?  

My tenants at the condo just told me they are likely moving out of the condo.  If I don't do a 1031 exchange, then I'll suffer a tax hit on the mandatory depreciation for the years it was a rental.  Tax free, I could walk away with nearly $300k from the condo sale I managed to do a 1031.  If I keep it, then it can probably continue to appreciate both short term and long term, since it's a short walk to downtown Oakland, which is only increasing in value.  Plus, I'd forever benefit from the lower property tax basis based on my $320k purchase price.  I could start to cash flow positive with the next round of tenants, but only minimally.  Or should I go through the headache of the 1031 exchange?  

And, what about the proceeds from my house sale?  I could foreseeably walk away after a sale with around $350k.  I am considering investing in emerging areas of Sacramento that are downtown convenient but haven't arrived yet or an airbnb rental near Yosemite with a friend/ friends or a rental or two in Nashville where my brother lives, which seems to have good rental prices compared to purchase prices.  

Clearly, I am all over the map and would love to hear your thoughts.