All Forum Posts by: Jeffrey Magenes

Real estate prices are crazy in California! San Francisco, San Gabriel Valley, Irvine, etc. How is everyone taking advantage of these market conditions? Here are some ideas I had below. Feel free to chime in, critique and add yours as well. I'm predicting a recession in the next 2-3 years. Bear in mind, I'm looking to invest, but not lose my shirt along the way, stockpiling cash and opportunistically hopefully picking up deals when the next downturn comes around.

• Crowdfund your next deal - There's a ton of websites out there such as RealtyMogul and Fundrise. Rather than risking your own money. You can be a deal syndicator/operator. I know these guys only co-invest 5%, but make a killing with a 60/40 split and charge management fees, acquisition fees, etc. Their downside risk is almost non-existent, but their upside is unlimited. 
• Short the Real Estate market via ETFs - KB Homes, Standard Pacific, and XHB.
  • This is probably the easiest. The house of cards falls very quickly, if all else fails, you can profit from the huge decline in the bubble we're in (tech sector, etc).
• Partner with Home Owners for high end flips - Has anyone ever heard of RajuSells.com? He's a top real estate agent that partners with wealthy home owners in the South Bay area for high end home flips. 
  
  • Example - A home is valued at $3 million. His neighbor next door just sold for $8 million. I heard Raju will partner with the home owner, invest a $1 million+ in renovations and then list the home for $6-7 million. Raju essentially 2X-3X his money without taking the risk of purchasing the home at $3 million. This only works in an up market.
• Luxury home real estate marketing - Check out RUHM marketing - http://ruhm.com/. They sell the "dream" lifestyle. Thoughts on just pumping the market higher and higher by helping sellers/agents with high end marketing. Get out the DJI drone and create stunning high end marketing material.
• Low interest rates - High price + low interest rate = low price + high interest rate. The monthly payment is still the same. How about assuming current home owners existing mortgages at extremely low interest rates? Is there a way to scale this? Or is there a way to short the notes/bond market?

Property prices have accelerated to almost 2007 prices and higher in certain areas. WOW! I'm a bit hesitant to jump in now if we're looking at another downturn UNLESS the numbers make sense.

So how is the smart money playing this maket? Home/Land development? Pick up as much cheap money (low interest rates) and just buy and hold? Or just sit back and relax?

I know Bruce Norris is a big proponent that we're about to see some of the best years in California Real Estate price appreciation in the upcoming years, it's just a matter of buying smart.

California Criteria to buy:

Properties within 50 miles of Huntington Beach

1980 construction and up

Monthly rent is 1% or greater of purchase price

Back house or grandma quarters. Preferably permitted sub divided units.

Is it legally possible for a: 

1.) Landlord to reserve the right to terminate a 3 year lease with 60 day notice anytime. The main reason I would like this clause is to have freedom to sell and show the property as I please, and if I do not feel the tenant is a good fit.

2.) Force mediation. That is, if there are any issues during their tenancy, not result to litigation or a court case. I would like to keep things as inexpensive as possible if something were to happen (knock on wood)

@Karen Margrave - I'm very interested in Parlay Investments. It is undeniable that prices for both residential and commercial are very elevated, the buying opportunities of 2009-2010 are no longer there and many of the start money investors are now selling their assets.

But, where are they putting this cash to work? Is land development the next in the cycle to make money? Maybe buying permitted land, getting it zoned for a multi-plex and then building bigger/better and selling for a large profit?

Example property is an Anaheim, CA fourplex for $750,000.

Do you think buy/hold is a good strategy right now? Interest rates are soooooo low right now that a $100K-$300K increase in property price, is being gobbled up by such low financing. Your monthly is only going up a couple hundred bucks.

Obviously, we missed the low housing prices and they are now at elevated levels, but does that price appreciation even matter at this point? Isn't it all about acquiring cheap financing/30 yr amortized loans at these 4-5% extremely low rates? You'll make money from a cash flow basis and can weather any kind of downturn because of the great financing.

So who's buying and who's selling?

I'm looking to purchase a Long Beach/South Bay/North OC 2-4 plex at a fair market price right now, finance with 20% down, get a solid 30yr loan in place and buy/hold for the long haul? Maybe do a loan wrap on the property, and sell to another buyer, in the future when rates shoot up to 10-15%?

Here's the idea

Interest rates are so low that it's offsetting the big housing price increases we've seen in Southern California. That is, your monthly payment is still very affordable and will still let you cash flow, with low money down through a FHA loan with a first time home buyer.

I know quite a bit of people in their late 20's, early 30's that are perfect candidates for FHA loans but just need the extra push; whether it be through taking care of the landlord duties, or even helping with down payment funds.

Here's an example situation and please let me know if this is possible

A friend of mine in his late 20's and qualifies to purchase a 2-3 plex at $500,000. Can I joint venture with him so that he purchases the property with an FHA loan under his name and all he has to do is live in one of the units? I would handle the landlording and take care of everything else (maintenance/repairs), and in a couple years we sell the property at a profit or possibly sell the mortgage with a wrap at a much higher interest rate than what we see now (4-5%)? Does anybody have examples of deals they have done in the past?

Interest rates are extremely low and I want to take advantage of this as much as possible. I'm looking to create additional leverage through inexpensive, long term financing options to then reinvest into syndicated commercial real estate deals.

For example, an apartment complex syndicated deal in Texas is expected to earn 12-17% annually. Assuming I have a $500K house that's completely paid off, $500K in a 401K, and additional $250K in a brokerage account, would it be financially wise to:

1.) Cash out refinance the home ($375K?) with a 30 year fixed at 4-5% interest rate, and reinvest the cash into the syndicated deal. Maybe an ARM?

2.) Pull a personal margin loan from the 401K or brokerage account, keeping the securities invested, and investing the cash from the loan into the syndicated deal.

3.) Any other options?

Thoughts, ideas, suggestions? I essentially want to make the spread between the 12-17% annual investment return and 4-7% interest rate of borrowed money. I understand the risks of borrowing and the successful track record of the syndicated commercial deal operators.

I'm just finishing up listening to Mike Cantu's Rental Properties and Management CD and in it he mentions a background & credit check company called accuren/accurent? Is anyone familiar with such an agency.

I am currently using National Tenant Network and it is quite expensive for a full report, in addition it doesn't give credit score. I also have tried the biggerpockets version but you must go through a lengthy e-mail acceptance policy and my less technology savy tenats would not be open to this. I would rather run the check on my own.

Breakeven or slightly negative would be an ideal situation since the lack of income can be hedged by my other properties. It's a great neighborhood and would be the first to see appreciation once the market rebounds.

Im thinking about offering $50,000 down and 30 year amortization, ideally with no balloon and wait it out til I find a buyer willing to pay a higher price or til I find a favorable refinance/sell option. Benefit to the seller would be of course to get their purchase price over time, and wipe their hands clean of this.

Irvine, CA 92604
$520,000 (Asking = Approximate Market Value)
3/2 - 1,500 square ft rents for $2,100

The owner has a free and clear title and is willing to seller finance it. The selling agent wouldn't give me any details other than that he wants to be out of the property completely in 5 years, but is willing to carry some debt now as long is it is secured by a credit worthy buyer.

I am the prospective buyer and typically buy for long term appreciation, cash flow income (I think it's a fools dream to invest on property appreciation/speculation). I have sufficient funds to cover the property, but having a balloon payment in 5 years bothers me. Is there anyway to structure this so that in 5 years and the housing market still hasn't turned around (or interest rates go up) I have options?

What can I offer him or do to put myself in a good situation to profit? Offer under market value, take title, and keep on market to try and resell for higher price? What is your standard seller financing offer?