All Forum Posts by: Joseph Delia

You're in Ohio so I have no insight into how your market dynamics work (although I've heard it's hot, and I went to high school near Cleveland!), but when you say things like "10 offers and 2 in cash" it starts to feel a bit more like Seattle from a few years ago (today Seattle would be more like 30-40 offers, 15-20 in cash).  In Seattle, the way to be competitive (and maybe still not even win) is to waive all contingencies (financing, inspection) and don't worry about the appraisal if and only if you know the neighborhood and market very well.

It's not as crazy as it sounds and here is why:

- Lot of job growth (think Amazon, tech, CA companies migrating north for engineering talent, etc.).

- Low cost of living relative to CA

- Chinese money (in particular) looking for safe haven in areas with a) good schools and b) environmentally clean and aware (it's all about the kids!)

- Limited new housing

- Given all of the above, a lot of cash looking for a place to park itself

The only reason I'm telling you this is to make you aware of the signs to look out for, because the time "might" come where you'll start to see aggressive contingency waiving, particularly in the best school districts.

Lots of votes but David's post still feels like an underappreciated post.  This is a very big deal for the self employed among us and I'll add two additional notes:

- Solo Defined Benefit plan is even better than solo 401k's, if you have the income stream situation to stand behind them.

- For those who live in high tax states (CA, NY, NJ, MA, and more), putting as much income as you can into a tax deferred retirement vehicle is a sound strategy if you plan to move to a no/low income tax state in retirement (that's a 7-10% impact!).  I don't know why this isn't discussed more (maybe because most folks don't think about mobility?).

 Hi Jim,

Not "zoning" issues no (in Bellevue), but I WAS required to get an ADU (Accessory Dwelling Unit) permit. This permit allows you to split the unit as I did, but a requirement of the permit is that the owner lives in one of the units (ostensibly, to restrict investors from buying, splitting, and renting out SFR's in the good school districts, I'm hearing).

It's a one time thing so not a very big deal to get the permit, although it's recommended you get them in during construction (if any) so they can see what you're doing.  There are also certain safety requirements that need to exist in order for you to split it (i.e., proper fire escape exits/windows, etc.).

Let me know if you have any specific questions.

Joe

It IS a tough market to enter presently.  Tougher now than even just last June, but I'll give you my anecdote from then, which may be of slight use.  I bought a tri-level home in Bellevue last year in a very, very, very good school district.  Home needed work which I put into it, mostly on the lower level (I'm of the opinion that it is a tad easier to buy homes that need work as there is a certain % of the buying populace that wants move in ready).  As part of the $100K in work I put in, I split off the walkout basement into a separate unit that I live now in (with it's own  laundry, new kitchen, and remodeled bathroom).  I live in that 1/3 and rent out the other 2/3 of the home, to a family that wants a SFM experience in a great school district.

Works for me, for now, but that's only because I business travel so much that having a 1bdrm "luxury" apartment works great.  It would be a little cramped if it was anyone other than myself (and maybe one other) living there on a full time basis.  Cash flow is about even to slightly negative, but remember, I'm living there too, and the market is appreciating, so I don't care that much.  Even if the market tanks (which I think would take an act of war in Seattle right now), I still have a place to live and I have a rental in a high demand school district.

Not to be too pessimistic but I haven't seen any homes for sale in my zip code in the last 6 months where I think I could pull this off again.  Market has just moved up quickly.

100 times this.  Don't be fooled by summer bookings in Seattle.  Between the great weather and the summer tech industry internships, EVERYTHING is high priced and scarce.  Not saying it still isn't worth it, but get the 365 day numbers from your friend to do a proper analysis.

I may be overthinking this, but I thought it best to call on the infinite wisdom of the awesome BP community.

I just purchased an out of state SFH with separate entry MIL basement suite. It's a major city where I do a lot of business so I'm giving serious thought to keeping the MIL suite for myself (avoiding hotel expenses that I otherwise might have to charge to my clients, and making my life easier) and renting out the rest of the home. The home is in a killer school district where new development is not really possible, so there is a ton of demand to buy/rent in this neighborhood. Even better, this particular home has a pleasant 5 min walk to the elementary school. I mention this only to give perspective that I should have no problems renting the rest of the home even though the owner (me) maybe sometimes living in the basement MIL suite.

So here's my predicament.  I don't want to pay any utilities, including cable/internet, even my "ratio". For one, I don't want the hassle of thinking about them (whether by receiving bills at the address in my name, nor having the tenant telling me each month how much I owe them).  For another, my occupancy of the MIL is so unpredictable and sporadic that it is hard to develop any rationale for the portion I should pay even if I wanted to do so (but it would definitely be less than the sq ft proportion).

So, I was thinking of just laying it on the line for prospective tenants, "yes, you will pay all electric/gas/water/cable/trash, and yes that includes for the MIL suite, but I will pay landscaping ($200/mth) and pest control spraying ($30-$50/mth)".

It probably wouldn't deter the discovery of a decent tenant, but I'm fearful I'd be planting the seed for some amount of resentment, whereas if I were to communicate (or treat) the situation differently, maybe I could avoid and have a nice Kumbaya relationship.

Any ideas on how I could best handle this situation?  Any of you dealt with any remotely similar situations?

I don't want to oversimplify and/or make unsubstantiated claims, but I'm of the personal belief that you can't go wrong on the West Coast buying into the best school districts (THE best that is, not kind of close to the best).  There is a lot of money flowing in from China presently and that money looks for best schools first, new/remodeled condition second, and everything else third (I know how that money thinks very well, I've done business in China for years).

I just made a similar purchase (an SFH) in a Bellevue, WA community that has the best elementary, middle, and high school. I plan to carve out the basement of that $1M SFH (30% down) for myself and rent out the rest for "only" $2750 or so. To me it's a no brainer even if it just breaks even or loses a tiny bit, but then I'm into this property for the long haul.

Logan brings up a good point about taxes.  One of the best courses I EVER took was a course called "Tax Factors in Business Decisions" during my MBA.  A rare gem of a class taught by a guy who advised Wall Street.  Taxes being such a huge part of (my) real estate decisions, anything even remotely similar that you could find would be worth a flyer.  Super interesting stuff and you really come out realizing that in the corporate world, every financial decision is based on tax treatments.

I agree with Andrew. That's serious overkill. I have a top MBA (which comes with a large dose of finance and economics). Useful, but not necessary at all, as college courses focus on macroeconomics/microeconomics/corporate finance/etc. At some schools, there are some great real estate courses (mine was one of them) but even those were geared to folks who were thinking of becoming REIT analysts at investment banks and the like.

In short, it wouldn't hurt, but it's geared for bigger/different things (and costs a lot).  A community college course or two (accounting?) would be all you might want and need.

In Seattle (the hottest of hot right now), I would (and have) waived the financial contingency even though I intended to secure a loan.  That is how I have beaten lower all cash offers (of course, it takes a bit of intestinal fortitude, confidence you're going to get the loan and/or a willingness to risk earnest).