#1 Real Estate Events & Meetups ContributorPosted My people are up in Richmond, so Peninsula isn't good for them. I'm planning on finding someone down there also, so they don't have to drive so far. But my team has been wrapped up with the Summit, so haven't done it yet..
I would check also check nextdoor.com. Great place to find local people..
#1 Real Estate Events & Meetups ContributorPosted @Amit M. and @Robert C.,
Looks like both of you haven't dealt enough with commercial loans to know the delicacy of them. Inflexibility? These loans are more flexible than anything else. We can almost literally underwrite our own loan terms. Can you do that with Fannie/Freddie loans?
I was going to let you guys have the last words, but the teacher in me suggests I should share it so others can benefit so here it goes ;)
If history is any indication, rents and housing prices tend to rise first followed by interest rates. Interest rate increase tend to be a correlation of taming down inflation likely due to the hot economy. Thus, interest rate is a lagging indicator.
For rents to stay flat or trend down while interest rates move higher, this condition tends to be short-lived. As we enter the recession, rents and housing prices tend to get soft, and interest rates would follow and drop shortly after. For anyone to argue otherwise, they're arguing against history.
I'm an avid student of history and have benefit from it so I respect it. My thesis has been that we would see lower interest rate after the next recession. I wouldn't be surprised to see 30-year fixed mortgages in the 2%ish. I have shared my thesis with @J. Martin and @Johnson H. since we first knew each other several years ago. Thus, I believe getting 30-year fixed mortgages may not be a prudent move given the premium in rates.
With respect to liquidity, say the building is worth $1M and we obtain a 70% LTV in today. When the 10-year balloon comes due, the loan balance is about $550k. God forbid the building is worth $700k when the loan comes due. Did you know you can actually go to the bank and negotiate for a 75-80% LTV and put 5-10% of the liquidity in the reserve account until the building reaches the desired LTV? Once the desired LTV amount has reached, the reserve will be released. $1M in liquidity is huge in this scenario. Can you do that with residential loans when your LTV is not there when you want to refinance because interest rate is at 2% instead of 3.5%? This happened during the GFC. Many people wanted to refinance to lower their mortgage payment but couldn't because they had no liquidity and the property value wasn't there.
Johnson and I chat on a regular basis. He has watched how I've continued to modify my acquisition and loan strategies through the years to adapt with the market conditions at the given time. Johnson is always there to be sure I don't stretch myself too thin or do anything stupid. I'm going to continue to invest and finance based on my thesis while I suggest you do what you feel comfortable with. There's really no right or wrong answer.
Someone reached out to me yesterday due to my post on this thread. He's been a 2-4 unit investor in the Bay. He recently got into 5+ unit and forced appreciate 50% on his recent acquisition just in a few months. He felt it was like cheating. He wish he got into commercial years ago. It goes back to the lack of knowledge that scares others.
I won't try to convince anyone to get into commercial. Do what you're comfortable with as you're the one living with the consequences. This reminds me of the quote "Our lives are a direct result of our choices. If we don't like our lives, it's time to make better choices."
Enjoy your time in Tel Aviv. See you in October at J's Summit in Oakland? Hey, have to make a plug for the brother. ;)
Minh,
I agree that 30-yr rates will likely be lower at some time the next down cycle. It might be another question as to where banks are at on lending, where the person is at in their personal life/wealth/cash flow/documentation, etc. e.g., When I got my last 30-yr fixed, I was a working stiff that had great salary documentation. Now I'm traveling the world running my biz. And not all lenders look at that the same way. Lending terms are definitely different now than they were in 2010-12. Including in commercial loans. And there were a lot of losses on commercial loans also. I was one of the regulators in those banks looking at the individual deals and policy underwriting criteria (in addition to exceptions.)
I go back and forth on the fixed vs variable. The fixed rate premium I see essentially as an insurance policy. I'm not super wealthy, so I like the insurance (as long as that premium is not too high. I think it was 75bp on residential last time I looked, but probably bigger spread for commercial) As long as I can pay my insurance and Prop-13-capped taxes, it doesn't matter what happens to market prices, lending/bank terms, personal circumstances, documentation, etc. Just pay the bill as it comes in and you don't have to worry about any of that. For those that are wealthy and better financial standing, their personal strength and overall LTV might better support lending in most or nearly all environments. But even very wealthy people ran into issues in the crisis. So never say never.
In regards to term/length of loan, the bullet payments present some of the same risks (due in 10 years). The refinance depends partially on internal (you) factors and partially on external factors (bank lending terms, RE market price changes, personal financial turmoil, etc. ) - specifically at the time you are trying to refinance.
On the multifamily vs 4plex.. I probably should have got into multifamily earlier. But 2-4 units were still more heavily discounted at the time. And I was definitely influenced by the 30yr fixed. Maybe partially because I saw so many people get burned during the GFC due to the clock running out rather than being on a fully amortized term. (back in bank regulation days.) It's like growing up during the great depression.. sticks in your mind..
I agree, there's really no right or wrong.
But I think with 2-4 unit prices no longer providing the same market appreciation ride from the bottom, there is a lot more proportional opportunity in the 5+ unit buildings you can force appreciation on. And the fixed vs variable is more of a personal wealth/insurance issue, IMHO.
#1 Real Estate Events & Meetups ContributorPosted I'll pencil you in for a breakout session on Saturday afternoon, and maybe we can see what topics are of most interest to the attendees that isn't covered yet (since you've done pretty much everything!). I'm sure J and Will are going to be stoked to meet you too. And you'll be able to see Bruce on Saturday also.
@Bac Nguyen,
Happy to help. Glad Jay can make it too! He's invaluable.
These posts have a lot about my first deals and how I got started. Then shoot me a text.
https://www.biggerpockets.com/forums/223/topics/292059-i-quit-my-job-this-week----with-help-from-bp-at-31yo
Thanks for offering up a room! Very generous of you :)
@Ethan Cooke,
Glad you're excited too! I responded on your furnished rental thread, and saw Andrew and @Ariel Smith jump in. She honestly probably knows the most about what demand looks like in the area. So take that into consideration.
@Al Williamson, an investor sharing at our event has a very intentional way he combines Airbnb to provide affordable housing in some of his units, and most developers in the SF Bay Area include at least some portion of affordable housing in their new projects (partially, as required by law.) So most developers out here that are coming will have at least some experience with it :)
Looking forward to seeing you all out here! :)
#1 Real Estate Events & Meetups ContributorPosted ***Attention ALL SF SUMMIT Attendees***
I paid J Martin $246 on August 7th to his personal email address linked to his PayPal account for a 2 day ticket to this years SF Summit on October 6th. Unfortunately I recently found out that I have to undergo a surgical procedure during the time of the conference so I am unable to attend as my health is currently at risk. I kindly emailed J Martin over a month before the event (on September 5th) and asked him for a refund due to my unfortunate diagnosis and have yet to hear back from J Martin. I have emailed him several times now and he refuses to even acknowledge my emails!?! I cant imagine that he would not be willing to refund me for the conference (its not like I am cancelling 2-3 weeks beforehand) but he has yet to reply to any of my emails. I find it incredibly UNPROFESSIONAL and quite frankly RUDE that he refuses to reply to any of my emails and am writing to the BP Community now to see if any of you can maybe get through to J Martin on my behalf and ask that he do the right thing and issue me a refund for the networking event that I now am not able to attend due to some serious unforeseen medical conditions. Furthermore if you have already paid him for the event ahead of time, I wish you all the best of luck during the conference
Glen,
I refunded your ticket price due to your medical issue. Paypal says 3-5 days to process.
It was 2 days between your first series of emails (beginning Sept 5), and you posting this on BP (Sept 7), while I was vacationing on the San Juan Islands. I didn't see any missed calls or texts from you.
I was not refusing to return your emails or trying to be rude or unprofessional. I just don't sit down at a desk every day.
Thank you for your patience Glen. I know it can be tough and frustrating to have medical issues pop up, and wish you the best with what you're dealing with.
***ALL OTHER SUMMIT ATTENDEES***
We do our best to answer the [email protected] emails quickly. But shoot me a text and/or give me a call on the number on my profile if anything is extremely urgent and you don't get a reply quickly enough. Everything is on track with the planning to have another awesome event!
I want everyone to have a great time, learn a lot, and especially to GET CONNECTED. If you got a ticket already, you'll be receiving more info about the event, and within a couple weeks, a link to our networking app, so you can get even better connected before, during, and after the event. We have over 200 (and growing) excited investors already coming out, so welcome out to the 3rd SF Bay Summit!
#1 Real Estate Events & Meetups ContributorPosted Yes, what we discussed previously and what @Ariel Smith says rings true. (btw, had drinks w/ David Adams the other night in Seattle - blast from the past!)
You can go for students by the room at SFSU during the school year, and you know the summer is easy. I think there is plenty of demand for all-school-year students at SFSU in individual furnished rooms. Then they'll leave during the summer when you can get plenty of demand anyway.
Also, like you said, check with realtors, and check online for insurance relocation companies. They will both have demand from families looking for temporary furnished housing over a month. But they usually want a flexible check-out date, which makes it tough to plan ahead..
Beyond making more money on the SF houses over unfurnished rents, it depends how much more you make for your time (after subtracting all your hard costs of course). If you were to make $5,300/mo instead of $5,000, I'm sure it would not be worth your time. What would make it worth it? $6,000? $7,000? (net)
As I said, I have mostly small units, so don't know exactly how the houses will perform. Except for my more recent room rental experience in SF.
I will say that Ariel probably knows more about who is looking than anyone else around, due to her experience..
#1 Real Estate Events & Meetups ContributorPosted Here's some ideas to get the seller more on board with your line of thinking..
Why are you offering that amount?
Talk directly to the owner if you can.
Has she walked through the house?
Got a contractor quote?
What do you want to do with the property? Flip it?
Live in it?
If you talk to her and say, "You know, I think it's probably worth $175K after it's all fixed up, I think it will take me $60K with with all the known and unknown work, plus 6 months of my own time (@$4k/mo), interest on the loan, insurance, permits, etc etc, so subtracting that from the final value, I can offer about $50-60K."
That might be something they could wrap their head around (although they still very well may disagree), instead of what just looks like a crazy lowball number, without a reason.
Also, tell the owner what you plan on doing with it. If you plan on moving in, tell them why it's important to you and what it will do for you. If you're going to flip it, tell them the vision for how you want to improve the units to get good families in there and take care of their former property the way it should be.
Some wealthy folks like you're describing will throw people a bone every once in a while.
I think your odds are small, but greatly improved if you approach them with your logic, and as a human.
Good luck!
#1 Real Estate Events & Meetups ContributorPosted I second @Taylor Ferris to go out to @Katie P.'s meetup. Glad you can make it. If I'm not still in Seattle by then, I'll see you there! The Summit will be a cool place to get familiar with the Bay and build your network if you can make it. Thanks for the shout out Taylor. Building a network it was allowed me to find deals, borrow money, build my biz, and quit my job. So I can't speak enough to going out to meet other investors.
Paul,
If you weren't aware, you can get exempt from rent control in Oakland by owner-occupying a duplex or triplex for 2 years. Then you'd be able to get rents up to market. Not for a 4plex though. So keep that in mind when you're looking around.. I owner-occupied a 4plex w/ an FHA loan for my first purchase in the East Bay. It's a great use of capital if you find the right deal that fits your needs.
http://rapwp.oaklandnet.com/issues/exemptions/
Congrats on finding a place!
Hopefully will meet you out here soon also.
I own a duplex in West Oakland, and frankly think it's a bit overpriced. (West Oakland is usually 2 steps forward, 1 to 2 steps back through each economic cycle.) Of course, everyone thinks this is the time it will "make it" and not slip back to its old ways.. Time will tell. I also own a 4plex in East Oakland.
Paul, these lower-end areas tend to be the places where you can cash flow like you're describing, in addition to Richmond, Vallejo..
Let me know if you have any questions.
Welcome to the site Paul, and keep networking!! :)
#1 Real Estate Events & Meetups ContributorPosted Welcome out to Oakland!! One of my favorite cities in the USA :)
Congrats on keeping and renting out your SFR in Boulder with positive cash flow. I said when I started that I would never sell a property, and so far have not (knock on wood.) I own and operate around the Bay Area, and lived on the Eastlake side of Lake Merritt for a while.
RENTAL
I have some furnished rentals near Lake Merritt and elsewhere in Oakland, but wouldn't be able to quite get to your price point. (these are all private (not shared) places.) But Craigslist is the #1 place for sure. Look for shared housing. Good for you for keeping your rent low for the area and saving your cash.
RENTAL TERMS
I respectfully disagree with @Robert Marston on his security deposit statement:
"It is my understanding that you will pay first/last but not an additional security on top of that unless you have a pet."
And I say this specifically because I believe that's an extremely poor landlord practice, don't want you to do it when you become a landlord, and is not consistent with the market.
If you're taking 2 months worth of cash, half should ALWAYS be the SECURITY DEPOSIT, and specifically state in the lease that the money CANNOT be used for the last month's rent. I believe it's in the standard CAR lease. If they give their 30 days' notice and apply any monies with the owner to the last 30 days while they live there, you have zero deposit.
This puts the ball in the tenant's court. You have to come try to get the money for any cleaning, repairs, etc. Instead of them having an incentive to get their money back rightfully from you. No no no. And don't expect to get that treatment as a tenant. Unless you can find the right sucker. (Robert, no personal offense. But I strongly believe in everything I say above.)
I also have a meetup in Oakland with just fun stuff - totally not related to real estate. I think the name on Meetup is Lake Merritt, Oakland, and Beyond.
Duplex - 4plex for sale in Oakland
I own a duplex in West Oakland with a partner on BP. Wouldn't be insulted by an offer. To really unlock the value of the property, someone needs to owner-occupy the property to utilize the owner-occupant rent control exemption. We do not plan to do so right now. So surprise us ;)
Networking
The Summit is awesome if you can make it and a great way to get introduced to the area and different topics from BP folks all in one weekend. We'll also be having an "investing in the SF Bay" panel with successful local investors making it work in a higher-cost area. Definitely go to the local meetups on BP, and there are some good ones on Meetup too. @Johnson H.'s in Milpitas is my favorite.
@Dan Mackin
Thanks for the shout out, and all your help on the Summit last year! That was amazing!
Rent Control
Yes, there is an issue with your problem to fix, then evict/move, then evict/move. If you're living in a unit in the building, it would be extremely difficult if not impossible to evict an additional unit as an Owner Move-In (OMI). Especially repeatedly. I can barely touch the tip of the iceberg on this, but here's the relevant info:
Here is an (older) summary from legal counsel:
"Once a landlord has recovered possession of a rental unit for either the landlord’s use or the use of a relative, no other unit may be evicted for owner/relative move-in. Any future evictions taking place in the same building for an owner/relative move-in must be on that same unit."
https://www.tobenerlaw.com/oakland-rent-control/
And the city's rules and regs:
http://rapwp.oaklandnet.com/resources/faq/
I'll be in Seattle for the next couple weeks, but hope to meet you in person when I get back or at the Summit :)
#1 Real Estate Events & Meetups ContributorPosted Nice chatting the other day, and good luck on your next step! Kimberly Smith, the CEO of Corporate Housing by Owner will be out to share in a breakout session where you can ask her questions directly, and @Al Williamson is our resident expert on furnished rentals and especially the travel nurse community. You should talk to him too at the Summit (or before). He also has a course that runs down how to get everything setup. And I'm happy to give you some more tips too. @Andrew Wong has also been growing his furnished rental biz.. I'm sure others will also be interested to know how you did so well in San Francisco...
I'll give you a ring to see if you know when you're available during the Summit, so we can work you in to share some advice, if you're up for it.. Thanks for the shout out for our event! Can I quote you on that testimonial? ;) Glad to have you out again from Lake Oswego / Portland area.
Welcome out to my fellow Richmond investors! Your knowledge that comes from living in the area so long is awesome! You'll find lots of experienced investors at the Summit. Lots that have done flips. We'd definitely appreciate your help raising money for our charity, and to get the word out about yours. So sorry to hear what happened to your daughter. @Jeff Pollack does flips and has a great meetup down in San Jose (worth the drive down).
Andrew,
Welcome back out from down in Milpitas!! I'm sure others will be interested in your short term rental experience and out of state experience in Memphis. And there are plenty of landlords. I'll try to think of someone that does elderly care stuff...
Offering up your vacant room for someone to stay for the Summit? (Or is this Airbnb?) Either way, nice of you!
My first place was a house-hack 4plex in Richmond, and several others here have done it also. We're also doing a little renting by the room.
Welcome out from Philadelphia! You'll be in good company with @Dave Van Horn and @J Scott coming out from the East Coast. I'm not sure who else is coming from NYC, Baltimore, Washington DC. @Brie Schmidt and @Danny Duran are bringing a group from Chicago. Other speakers and investors are coming from Austin, And @Troy Fisher is coming down with a group from Seattle. So you'll be in good company from the East Coast, Midwest, Northwest, Texas, and folks from SoCal: San Diego, LA. Sacramento, and the SF Bay :)
I Just sent you a private message..
@Nichole Stohler,
Congrats on your hotel deal! And welcome out from Scottsdale! I think we have some Phoenix folks also. I really like the lodging industry, and was hoping to pick something up when ADR's and multiples are a bit lower. That's great you found a property that works. Interested to hear more about it..
Looking forward to seeing everyone there!!
www.sfbaysummit.com
Tag me if you have any questions :)
#1 Real Estate Events & Meetups ContributorPosted @Account Closed,
It sounds like you're familiar with some of the central valley markets and out of state - so in regards to your question about how people make it work locally...
Quite a few folks here buy a 2-4 unit property, and live in one unit. Some, like myself, also rent bedrooms/units out on Airbnb to get some extra income. Many will move to a different nearby city to make it work. e.g., Finding a duplex to 4plex in Oakland instead of SF. Oakland has an owner-occupant exemption from rent control for triplexes and duplexes, so you can get market rent after 2 years..
From a downpayment perspective, there are FHA loans for 3.5% down, SF Owner-occupied loans for 0% down, and other 5-10% downpayment programs for homeowners.
I don't think it's a great risk/reward time to buy in the Bay right now, but I'm still a believer in the long term, and this is exactly how I bought the first of 4 properties in the SF Bay Area..
Whatever you decide, good luck!