All Forum Posts by: Doug Shapiro

Hi @Nichole Landow,

I've ran into this issue many times before, and my decision has always been to buy the best investment possible for what I am willing to sacrifice.  In other words, this is a personal decision for you and your husband.  What can help make your decision easier is to list out all the pros and cons on flashcards for each purchase option (desirable duplex vs other investment) and to order each in terms of importance.  It sounds elementary but it actually really helps break everything down.  

For example, the pros list for the desirable duplex may look something like this:

1. Safe location
2. Updated kitchen
3. Nice views
4. Location proximity to work
5. Washer/dryer in unit
6. Dishwasher
7. Etc.

If you don't care to do the exercise above, then my short advice is to buy the duplex that you like.  You literally said that you couldn't picture yourselves living in the other 3-5 unit properties.  If you've been following the real estate market in your area, then you should have a good idea on what is a good deal.  You can ALWAYS wait for something better to come onto the market, but then you may find yourself waiting forever. 

Hi @Matt Sobers,

Welcome to BP!  If I were you I would buy a primary residence elsewhere (the lower the down payment the better as long as you are comfortable with the numbers) and rent out your current Silicon Valley place.  In the future (not sure how long in future for your Silicon Valley place to legally be considered a rental from a 1031 perspective), you can do a 1031 exchange to buy a new rental property. This would save you a ton with taxes - although it is in your best interest to speak with an accountant who can run the numbers for the different scenarios. 

Hi @Nathan Lilly,

The rent from both properties combined is $1,650 and the combined expenses are $1,530? Assuming that you're accounting for ALL expenses including vacancy, maintenance, CapEx, insurance, etc., then that is still a low return from the cash flow side of things. Unless you can do almost no down payment or you want to sell the properties for a profit, then I'd say pass on this one.

Hi @Aimee Gaede,

Too bad you aren't in NYC.  I just opened a brokerage and am looking for agents like yourself.  Hope that some brokers from San Diego chime in here.  You definitely don't want to be paying a monthly fee or a % transaction fee when you are initially just looking to buy properties for yourself.  

Hi @Melonie Dickson,

Wow - lot of responses.  

As others have said, waiving the inspection contingency will improve your chances of getting the property.  It all depends on your comfort level.  Maybe you can bring an engineer or architect with you to have another viewing of the unit before submitting an offer?   

Hi @David Hollenberger,

Use one of the BP calculators to get a better idea with ALL costs. You need to factor in vacancy, maintenance, CapEx, and other costs.

Hi @David Hollenberger,

Welcome! That is a nice goal.  One thing you can definitely do (if you are not doing already) is to go to open houses in the area(s) you want to buy in and to get really good market knowledge of what different neighborhoods are like and what properties are selling/renting for. 

Hi @Amy Innocenti,

Your realtor doesn't always know whats best, but they could be right.  It is an interesting social relationship at play because you and your agent have slightly different goals.  Your goal is to buy a place at a great price, and your agent's goal is to mainly help you buy a place.  

As a real estate broker in New York (where inventory moves quickly and it is difficult to buy at steep discounts), most times it is not worth it to go around putting in lowball offers for my clients mainly because the market moves quickly and also because it wastes everyone's time.   

Not sure what the real estate market is like where you are, but my advice is to put in the lowball offer and see what happens.  Make sure your agent communicates the reasoning why your offer is low (extensive renovations are needed, place is old, layout needs work, building permits needed, etc.).  There is always the chance the owner will be offended at the lower offer, but I doubt a rental company owner would take it personally.  

Furthermore, submitting an offer doesn't take up too much time at all.  As an agent, I would only think its a waste if I have a client who wants to submit a lot of lowball offers and the response from the offers is bad for my reputation or hurts my client's chances of getting an accepted offer. 

Hi @Bobby Stead,

Those numbers look decent they are a little off.  The vacancy % seems a little low to me.  2% means that in-between tenants the unit will be vacant for only 1 week each year.  Also the maintenance seems a little low considering it is a single family home. Unless you plan on doing all the work yourself, you should factor in termite inspection/prevention, possible tree removal/trimming, clearing gutters to prevent leaks, sending contractors to fix things that break, painting unit after each tenant, changing locks after each tenant, cleaning, appliance maintenance etc.  And if you plan on using a real estate agent to rent out the unit in the future, then that is an additional cost to factor in. 

Lastly, the CapEx of $32.50/month is low. Let's assume that in 15 years you will have to replace the following: house roof, refrigerator, a window that broke, and to retile the bathroom walls. For the CapEx of $32.50/month, that is $5,850 in 15 years. The cost to replace the roof is maybe $8,000 alone. Very rough estimates to replace the other items: window ($500), refrigerator ($500), retiling ($1,500). In just this example, your CapEx should be at least double what you currently used. This doesn't even factor in other things in the house that need to be eventually replaced over time like the HVAC and water heater, flooring (depending on what its made of), and other appliances (oven, microwave, dishwasher).

Hi @Ethan Morgan,

Welcome! BP is a great resource to use. I would also suggest to speak with some lenders in your area to find out what options are available for you. You can get creative with different financing options - there are first time homebuyer programs, you can use up to 10k from your IRA as a down payment, and others. Check out this site to see if you qualify for any state programs: http://www.ahfa.com/ if you're buying as a primary residence.