All Forum Posts by: Joey Wang

Will be an exciting event!

Bill, if you just started about a month ago and have made hundreds of calls, then reward yourself. Then keep it going. Persistence is key.

Jonathan, the Bay Area apartment market does experience lower cap rates compared to other regions, but you're wise to still consider investing here. Remember that cap rate represents return for one point in time. It's not an overall return so it doesn't paint the overall investment potential. Contrary to the residential housing market, apartment is the hottest commercial property sector in the Bay Area currently and across the US. You may have recently heard from local TV news and articles that rents are not only rising here, it's outperforming other markets. So what does this mean if you own an apartment here?

Let's take for example Santa Clara County which has experienced 13% rent growth over this past year. If you had owned a 6 unit apartment with rents previously at $1,200, your total gross rental income (absent of vacancies) would be $144,000. With 13% growth, your new gross income is $162,720, a increase of $18,720. If the property sold at a 5 cap with expenses at 40%, you just realized an additional $224,640 of capital in one year just from rent growth.

There's a reason why cap rates are lower here in the Bay Area, and it can't be understood by looking at a single number.

Edwin, to learn how to evaluate an apartment investment, check out "What Every Real Estate Investor Needs to Know About Cash Flow... And 36 Other Key Financial Measures" by Frank Gallinelli. It's a great beginner's guide as well as a reference book.

AC, rule of thumbs help you quickly determine whether you should consider spending more time analyzing the deal. But Jeff is right. In the end, you need at minimum the current rent roll and actual expenses to gain further interest from a credible buyer.

The City of Berkeley has a rent control policy where you're only allowed to raise the rent each year by 65% of the CPI. Assuming an annual CPI of 3%, sixty five percent would be an allowable increase of 1.95% each year. However, when the tenant moves out, the rent level for the new tenant can start at market value again.

My question is, what's a good way to estimate the average rent increase per year for a multifamily property? Thanks.

Dave and Andy - thank you for the answers.

Andy, I have a follow-up question regarding your response about timing when to take depreciation. I was under the assumption that depreciation should be taken each year regardless because when the property is sold, the recapture is against the depreciation allowed, not taken. With your suggested strategy, it seems to imply that recapture is against depreciation taken. Is that true?

Is there a way to make up for lost depreciation if you already have a rental but haven't been depreciating it (e.g. depreciate ALOT in one year or increase the depreciation amounts for the remainder of the useful life years?)

there seems to be a couple of ways to calculate Adjusted Basis. One method takes into account Costs of Sale. The other method takes into account Acquisition Cost. My question is, which should Adjusted Basis take into account or should it take both the cost at acquisition and sale into account? Thank you.

I tried updating my original post but it cut off my update so I will just post it here...

I want to rephrase my questions because I wasn't sure if they were clear...
1) The table illustration seems to suggest that it's more beneficial to obtain a partially amortized loan. The greater the amortization period is over the loan term, the more advantageous it is for the borrower vs. a fully amortized loan. Am I correct here?
2. What are the risks associated with a partially amortized loan? I can think of one obvious off the top of my head... potentially not being able to refinance by the end of the loan term. What other risks are there?