Originally posted by @Tou V.:
Originally posted by @Radhika M.:
@Tou V. I have been reading the conversation and wanted to point to you that you are using 10% for vacancy in SF and that is very high rate for the area. I think 3% is the commom but I would go for 5% to be safe. Also you have 10% for repairs which is good but most turnkey property proforma's I have looked at use 5%.
I think you may have missed one important point that @Account Closed I know the conversation got a little off track but good luck with your investments. I am conservative by nature so based on that I would say is slow down a little before you expand to so many different markets so quickly. Based on your profile you have been doing this for less than one year and this the 3rd out of state market you are considering. As many of the experience folks have said the returns may not be the same over a long term so may want to see how your current rentals do.
@Radhika M
Thanks for pointing that out. You're right about the SF area. Vacancies are lower and since this is only a duplex (one physical home), repairs should only be a fraction of what 10 separate homes would cost. I understood what Minh was trying to say about rental increases and appreciation. It's just hard to justify putting $200k down and not getting much in return, until much later when appreciation and inflation kicks in. Kind of like a 401k or Roth IRA. lol..... My dilemma is should I put $200k down on 16 - Midwest units which (hypothetically) may return $4000 ($250 x 16 - which is reasonable using 50% rule and real returns from users on BP) monthly cash flow immediately and hopefully continues to perform. Even if it only performed half as good $2000 monthly income, I'd even be able to accept that as the $200k is costing me $1100 month to borrow. Or, use that $200k on a SF / Bay property and get 0 or minimal monthly income, but know what the property will appreciate and in a few years and when rents go up, should return some monthly cash flow. The SF property definitely not going to return around $4000 a month anytime soon. What are your thoughts? I really appreciate what everyone has said.
Sorry, I didn't go through the entire thread, but just curious if you're factoring in the fact that SF is under rent control. Unless you're buying something with no occupancy at the beginning, not sure if you'd be able to count on getting $3k/unit/month guaranteed. If appreciation is what you're hoping for, I'm curious about how that is achieved if you're stuck with tenants whose rents are typically locked. Oakland, just across the Bay Bridge, also under rent control, seems to have a lot of occupied multi-units available, but the rents are typically 40%-50% below market rate, and justifying rent increases based on repairs does not seem to add much. Unless you're willing to put a lot down to lower your monthly mortgage to match the existing cash flow, I'm not convinced this is the best way to go for the beginning investor (me).
