All Forum Posts by: Jeff Chen

Your welcome! If it is the same building and only a portion of it, I don't think you can be completely independent, you have the same roof, same foundation. Only thing I can think of is if the land was subdivided or if you can build two separate buildings with separate meters, roof, etc. maybe shared parking in between depending on the zoning. Subdividing can potentially take a few years. If you found this comment helpful do help to upvote my comments, thanks!

Hi Nazia,

How did you hold title when you purchased the property? Also what location are you located in, if it is your primary residence in California there is no capital gains for up to $250 for husband and wife, but since this is an investment split other options is to do a 1031-exchange of your portion to another property. If you want your dad or sister were to buy you out and keep the house, get an appraisal for the property and decide on deeding the property to your dad or sister with an agreed upon valuations split. Or if you are all in agreement to sell the property, it should be based on how you originally held the property (even though you stopped making monthly payments when you moved out).

Hi Mark,

There is never an amateur question. How to know whether your offer was really presented to the seller, will depend. We always build rapport with the selling agent to get a feel for what type of agent they are whether we would be considered in a multiple counter situation, how many disclosures sent out and expected number of offers. If in a strong sellers market, there is always possibility that you you won't get much feedback if your offer was low. Just this week we wrote 3 offers for 3 different clients, first offer had 15 offers, we were #13 (Listed price $989,000 - ended up selling for $1.2m - $100k above the comparable homes in our CMA (Comparable Market Analysis) we had no response until the next day after ratified since we were considerable lower even though we offered at $1,080,000. 2nd offer had 8 offers, we were top 2, and were contacted immediately and given the chance to counter, we lost out by just $10k but this was over market price and buyer wasn't ready to come up with the price. 3rd offer there were 17 offers, and our buyers put in their best foot forward, we had immediate contact once offers were due, and ratified that night. I'm sure the selling agent may have been so busy with us that night working with the top 3 offers (countering, negotating) and the other 14 offers probably didn't get much of an answer until the next morning, sometimes none at all. When I'm on the listing side, I like to contact each of the buyer's agent to let them know because it is a lot of hard work, and will help the get a gauge of the market activity especially since they might be competing with those same 13 buyers for the next home. We have a shortage of inventory here in the San Francisco Bay Area!

In most cases, the offer should have been presented to the seller, but I myself was in a situation where I have seen an agent disregard our higher offer to an agent that was double-ending the sale. We only found that out "after" the sale closed (30 day later) and we happened to see who sold the property and how much it went for and it was BELOW the price we offered. At that time I did not have my license and my father was the broker representing it. He was old school and more of a commercial agent, so he didn't build rapport with the selling agent to find more about the activity level of the property. 

Check in 30 days after the home closes, find out the difference of what it sold for versus what you offered. Did you have any contingencies? Inspection Contingency, Loan Contingency, Appraisal Contingencies? Here in Bay Area, the only way to make a solid offer is NO contingencies..

Where are you buying?

Hi Mazyar,

You mentioned that owner of land is not likely to split the land before selling it to you, if so you need to check if the property can be sub-divided in the first place with the zoning and subdivision laws, also to know what is the maximum square footage you can build on the property (may require parking, etc.) 

Depending on how much land you are going to take up, you can consider holding title with another investor/owner as Joint Tenancy (50/50) or Tenants in Common (with a specified percentage of ownership). When constructing the building, if capital is the concern and you found a like minded investor/builder/owner that would take a specific split, it would still be in the same partnership as you hold title - for example take a 65% cost ownership of the building and property and the partner could take a smaller portion 35% or however you decide to "split" the property. 

The other option is that you purchase the land yourself, find out if you can subdivide that property - wait a few years to get the subdivision approval, and then sell the other portion without forming a partnership.

I'm a little confused you mentioned "I would like each of us deal with owner of the land" - who is buying the land? are you leasing the land or buying it?

Hi Elena,

Also in most cases the appraiser will show two approaches, both income and sales comparison approach. For income they may use either the GRM (Gross Rent Multiplier) or Cap rates approach (the more popular method).

 If the property hasn't been updated for a while, and you put in recent updates (no addition to square footage, update kitchen, bath, floor and bathrooms, an appraiser will take those "remodeled" and "condition" values per unit compared to other similar fourplex that have sold recently. 

Single family homes are usually appraised on Comps and Cost-rebuild approach. We usually see them both to get an average of the two. You could also launch a rebuttal on a lower appraisal, if you feel the approach was incorrect and under valued. Talk to your local realtor to get their opinion as well for a "CMA" Comparable Market Analysis report and ask them what the value would be after your budgeted.

Have you considered first a HELOC (Home Equity Line of Credit) on your investment property first to use for the rehab, then the refinance? If you have enough equity, that may be one route to get funding for the rehab, then refinance. You will still need an appraisal to determine the equity you have and can take out.

What kind of updates are you looking to do? once you've updated, I'm sure you will get higher rents as well.

Hi Elena,

In my experience, appraisers will usually appraise based on the comps, unless the fourplex is fully occupied, and income is at current market rates of other comparable homes. They could also go the route of the current cost-rebuild approach vs comps or income in the area.

Is this property vacant or partially occupied? Are you rehabbing with the tenants? maybe look into rehab then re-appraise at newer updated value?

Single-family residence buy & hold investment.

Purchase price: $180,000
Cash invested: $210,000

During 2008 housing crash, we saw multiple 4bd/2ba home in San Pablo with a huge 7,500 sf lot sell for $180k, and continue to drop to $120k - the price of a home that was well below the cost to even build a home (less than $127/sf.) At that time, I encouraged a lot of friends and family that this was the time to buy real estate when everyone was trying to let go of their homes. The value of the home and the lot size was beyond what I have ever seen in the Real Estate Market.

What made you interested in investing in this type of deal?

Home prices were below the cost it was to build a home, you were almost getting the land for free. Great rental income! Where else can you write off your depreciating asset while in fact it is appreciating!?!

How did you find this deal and how did you negotiate it?

As a realtor, I found this deal on our bay area multiple listing service, and negotiated with the seller.

How did you finance this deal?

1031 Exchange - cash exchange from an investment property I owned in Firebaugh, CA

How did you add value to the deal?

Rehab'd the home, got it ready for rental. Have been renting it out since 2008. 2nd update in 2018 (new paint, new flooring after renters damaged old pergo floors - went with 100% vinyl flooring with lifetime warranty.)

What was the outcome?

Right now, home is valued at $550k - tripled my initial investment.

Lessons learned? Challenges?

Wish I had bought more. Probably should have did a cash out refi, and bought another home. Leverage the cash, but keep 20% equity in the home. Challenges? pick your renters wisely, don't try renting out room rentals, rent out as a whole house.

Did you work with any real estate professionals (agents, lenders, etc.) that you'd recommend to others?

I worked with Jeff Chen - he was my real estate agent - 650-222-6682. - LOL I'd recommend myself, but if you need help anywhere in California, I know a network of agents in that area that can help you find off-market deals as well.

Investment Info:

Single-family residence buy & hold investment.

Purchase price: $180,000
Cash invested: $210,000

During 2008 housing crash, we saw multiple 4bd/2ba home in San Pablo with a huge 7,500 sf lot sell for $180k, and continue to drop to $120k - the price of a home that was well below the cost to even build a home (less than $127/sf.) At that time, I encourage a lot of our family and friends that this was the time to buy real estate when everyone was trying to let go of their homes. The value of the home and the lot size was beyond what I have ever seen in the Real Estate Market, I wish I had the cash to buy more. Currently still own the property now valued over $550k with a positive cash flow of $30k/year. Put in about $30k to remodel the property. See Before and After pictures - need to upkeep the lawn. lol

Current

What made you interested in investing in this type of deal?

Home prices were below the cost it was to build a home, you were almost getting the land for free. Great rental income! Where else can you write off your depreciating asset while in fact it is appreciating!?!

How did you find this deal and how did you negotiate it?

As a realtor, I found this deal on our bay area multiple listing service, and negotiated with the seller.

How did you finance this deal?

1031 Exchange - cash exchange from an investment property I owned in Firebaugh, CA

How did you add value to the deal?

Rehab'd the home, got it ready for rental. Have been renting it out since 2008. 2nd update in 2018 (new paint, new flooring after renters damaged old pergo floors - went with 100% vinyl flooring with lifetime warranty.)

What was the outcome?

Right now, home is valued at $550k - tripled my initial investment.

Lessons learned? Challenges?

Wish I had bought more. Probably should have did a cash out refi, and bought another home. Leverage the cash, but keep 20% equity in the home. Challenges? pick your renters wisely, don't try renting out room rentals, rent out as a whole house.

Did you work with any real estate professionals (agents, lenders, etc.) that you'd recommend to others?

I worked with Jeff Chen - he was my real estate agent - 650-222-6682. - LOL I'd recommend myself, but if you need help anywhere in California, I know a network of agents in that area that can help you find off-market deals as well.