All Forum Posts by: Jason Monroe

I have two 9 unit buildings in Oakland CA. I want to try to setup relationship with VA to make housing available to service members. When I went to VA regional office in Oakland CA. I was told that they only handle claims. I'm looking for a contact in the Bay Area that might help be able to provide any number of qualified applicants. As I have one unit vacant at present with some number of vacant units available soon.

Does anyone happen to have one? 

Before people claim that I am an evil / unjust person. I accept applications from everyone, but I can choose as a business decision to advertise selectively. 

I would like to welcome you all to the party. I bought my apt buildings in Oakland. The properties are subject to rent control. I get 3.5% this year which is higher than last year. I would love CPI+5%

prop 6 was a clear indication there was a problem, and public appetite to introduce a change but it was to broad. 

Be mindful Alameda california had 5% flat for 4 years and the city council just cut that in half to 2.8%. That CPI+5 could get cut more. 

A bunch of owners are selling their MFH in Alameda as a result. 

Just because it can be difficult to operate in California shouldn't sour people on the market as a whole.  

Each market is nuanced. 

The rents are high in California but so is acquisition cost. It may cost more to operate in, but if you are house hacking you have to live somewhere. 

People live in California for a reason understand so it's important to understand the legal climate associated with the market your operating in. New York City has a history of abusive landlords and have a significant number of laws governing interaction between landlord and tenant. 

You can mitigate fear through knowlwege and better understanding 

@Gadiel Del Orbe,

All these crazy people talking about "if the numbers make sense"

The numbers might make sense if the property is vacant and you get can top of market rents for both units without a ton of rehab. In California in premium markets you generally have to put work in to cycle tenants cuz #justcauseeviction #deferredmaintenance 

Short Answer: If your concerned about market conditions buy the duplex and put a voucher tenant (section 8) and not a market tenant. Up in the Bay Area you don't know what the tenant portion will be until you agree to take them on. You can get a lead from what they are currently paying. If there is a market correction you have a guaranteed source of income that will likely not go away because it's now pretty difficult to get on housing in California in most cities. 

If population in California in the markets you're interested in continues to increase you'll be slightly insulated from market corrections. The process of making the property perform in lots of rent control areas is not short so why not start now.  

Generally speaking I thought there was rent control for most areas in LA proper? Inland empire might be different. There are owner occupied evictions at least in the bay area and recent city ordinances at least in the Bay Area require the owner to pay tenant relocation which is a sliding scale based on how many bedrooms the unit is a 2bd is 8700ish in 2019 in Oakland.

I don't know the specifics of your situation as you didn't talk about financing that you were looking at. FHA loans (3.5%) for owner occupied duplexes most of the time don't work because the rents aren't high enough which push you into a different loan program. At 10% down it usually won't cash flow because there is rent control in many cities in LA until you cycle tenants (possible cash for keys buy out)

Owner Occupant evictions at least in the Bay Area make it so you can't return the unit to the rental market for a couple of years (2 or 3 ) once you complete the work. 

The Moral of the story: 

I can applaud your desire to get a duplex. Check to see if the property that you're interested in is subject to rent control. If it is you should talk to a lawyer. Know that the lead time on lawyers of this type doing things for you is longer than you'll likely want it to be. Understand if the cities that you're interested in buying in have just cause eviction. If they do short of someone not paying rent you'll likely need to buy them out to increase the cash flow in the fastest way. 

Now the pain: 

If it's in a rent controlled / just cause eviction area it will cost to make the property perform the exact numbers are dictated by the tenants, their needs, and how you can negotiate.

Oh BTW: Rent Control / Just Cause (maybe vacancy control ) will come to more markets in California it's only a matter of time. 

@Account Closed, the biggest challenge associated with finding a partner is ensuring that your goals are perfectly aligned is key. Contracts help a lot. Also saying this partnership is for the purposes of a property rehab and sale only OR if it's a BRRR that you agree to sell it after 18 months or something.

Lisa has some great content on her youtube channel: https://www.youtube.com/user/AffordableREI

She was on the show and spoke about investment in Baltimore 

@Nghi Le,

Those terms were with other hardmoney lenders. Lending Club didn't structure their business that way.

I'm confused I have looked at SoFi their terms of service when I looked at them earlier last year indicated you were not to use it for the purposes of investment in real estate where as there have been promotions with lendingclub on biggerpockets.  When did they change their policy?

@Account Closed, 

https://www.biggerpockets.com/bpp29-dawn-anastasi-...

The magical question is how much do you need? The above link can offer people a means through lending club to get access up to about 70k if have good standing which means that the access problem can go away to a certain extent. 

I have written notes at 8% because less than that it stops making sense. 

The people I have talked to for deals in AZ were in the 8-12% range wanted up to 3% origination fees and there would generally be a prepayment penalty AND possibly a loan exit fee.

I've talked to people in California where the terms were very similar 1% to obtain the loan 1.5% to do the loan so 2.5% with a 6 month pre-payment penalty. 8% interest rate. WITH 1% cost to exit the loan. 

@Amir B.

I was just up there looking to eat your lunch. I don't like Sacramento the yields suck 5 or 6 cap and you're paying 150+ a door. I don't know anything about lakewood other than it's very far and the drive is a good time in a fast car. 

SMALL BUILDINGS make the owners or managing partners work for the building.  

Most of the deals are off market and the people that offer them up in Sacramento are the big houses. NAI, Marcus and Millicap, CBRE. If you talk to one of their sales guys and you ask them who they typically recommend to get the financing done then you can get qualified through that person. 

It's all about relationship and the ability to get the deal done. If you can "pre-qualify" or rather get a terms sheet from one of their preferred lenders then they will bring you deals as they are shopping them around.  Since they know that you can successfully execute a deal. 

When I was talking to banks to fund my first 9 unit deal. They told me if you don't have someone in the deal with a net worth that is 1x or 2x the size of the deal they might not want to work with you under normal terms but will happily write a hard money loan at 7.X - 10% 

All these people that do a 75LTV loan from a local bank where they put down 10-15% the seller carries 10-15 is not a thing in major California markets. They might get down like that in Yuma, Needles and Bryon (read desert)  

Google / Facebook / IPO millionaires are to close and after the IPO they need a place to park their money, so carries are not a thing like they are in "fly over country"  

Look here for people that solo 401k / Solo IRA loans that might keep it in their portfolio as they usually have more flexibility in how they underwrite their opportunities. You can talk to these people as to help you with the numbers and give you a preferred rate and then shop them against the big brokers in house or preferred lender.

When someone has more than 10-20% of the entity that will be assigned to the property they might have to be vetted by the financing company the same as the managing principal. So ensure that you get the criteria from the lender so that you can avoid awkward situations like when you ask your family friend for their last 3 years of tax returns.   

Another year another opportunity for where one might receive applications from Independent Contractor (gig) workers.

Does ANYONE have a process that they use to manage the risk associated with taking on Gig / Lyft / Uber drivers as tenants ? 

You will be down voted if you say thing about 2 years of tax returns!    

IT is SOOOO RARE it's not a practical criteria. 

In the past I have 'tried' to say Okay you have a "story" around your employment ok. Please show me your bank statements to provide some amount of assurance that they have some number of months cushion so they would continue to be solvent in the case they get sick or in some way can't drive / perform the activity. 

@Krisy Kim,

I'm the Bay Area. First commercial multi family deal was in Oakland. 

If you don't have a high net worth partner, inherited property or a lot of money, or were subject to AMT (Alternative Mean Tax) over the last few years it's going to be difficult.

Here is the thing that NO ONE talks about but it's implied. 

If you buy a C class building in the bay area it will be small because you're spending 200k + a door 

SMALL BUILDINGS with value add plays ARE HIGH TOUCH & MANAGEMENT INTENSIVE, so if you don't live nearby it's going to be more of a challenge. 

Because it's a small building it will not throw off enough money to support help of this nature. 

If you buy in the Bay Area not that Central Valley stuff then you will likely have to do buy outs or other forms of tenant relocation. This makes it so your capital infusions are frequent further limiting your ability to hire help.

You won't know who to work with from a contractor perspective so you will need to be present to oversee the work and accept the work product when it's complete. This again makes it difficult to purchase properties with LOTs of differed maintenance far away.

Oh and a lack of GOOD INCOME (most are rent controlled remember ) for the building AND lack of experience in multi family will hurt you loan prospects limiting the people that will loan to you again further limiting your ability to hire help. This limits the pool of players to the criteria listed above. Again further driving you to work for the building since so much will be riding on the deal.

Because the income will in many cases be pretty bad (rent controlled + entrenched tenants ) for the buildings you'll need to be @ 30 - 35% down

Since that is A LEAST 350k (remember 200k * 5 / 30% + reserves )

Let's pretend then you need 100k to do buyouts and or deal with deferred maintenance.

Now you're in for at least 450k 

450k - 600k will get you a nice building with a 8+ cap with low  - moderate appreciation in  California's Interior or Red States 

Just things to think about when considering buying in the Bay Area