All Forum Posts by: J. Martin

Welcome @Alan Malicse ! It's good to go out and do something new, and sounds like you're passionate about it.. So that's the perfect start! There are lots of investors on the site from the East Bay and San Francisco, so hopefully you won't be short on people to network with. Click "Monitor Topic" on the following link for updates on East Bay meetups. Unfortunately, you missed the last one earlier this week! Also, you can click the "vote" button on posts if you like them, and can earn "awards", which you can see in your profile. There's also some good guides in the intro forum..

http://www.biggerpockets.com/forums/86/topics/106912-east-bay-meetup---dec-10-in-oakland

@Joey Budka , watch it buddy! I'm a state employee!! lol (different dept)

Hi @Thad Miller , I used to live on the central coast near pismo beach, but up in the Bay Area now.. Welcome to BP! I'm the same as you trying to replace the w2 income! (minus the engineer, plus the finance). If you post about something in Santa Ynez, also use more common areas like Santa Barbara in the posting so it will hit member's keyword alerts for your post, if you're looking for some local responses..

Have an aebleskiver in Solvang or some split pea soup for me!

Thanks for the advice @Melvin Yuen . I was considering a dehumidifier for inside too, but I wasn't sure how often the tenants would run it, so wanted to put something that was automatic if possible.. Sounds like it's not doing it any more. It was just very unusually cold and wanted to address it before it got bad.. But sounds like it was just temporary. Let's hope it doesn't get back in the 20's! Crazy!

I can understand the desire to keep something free and clear, especially if it's your primary residence. And especially if you've personally heard the stories of getting wiped out by the change in the economic cycle.. I've seen it far too often throughout the financial crisis, reviewing loans/borrowers on bank's books.. Sad stories a lot of times..

I like the buying w/ cash, cash out refi idea. You can get great deals up front, then get the leverage for the next one.. Like you said, good reserves. And to me, good cash flow that allows you plenty of cushion and the ability to replenish those reserves fairly quickly, if needed, is important..

Good luck on your projects, and looking forward to talking to you more at the next meetup if you can make it!

I know many members on BP use the 50% rule as a screening technique.. I was curious if anyone uses a range of estimates for expenses to estimate potential profit, rather than strictly 50% - either while they are prospecting, or after purchase..

For example, do you look at what your profit and ROE would be if your expenses sucked up 60% of your revenue? 40%? Decreased or increased rents? ("Stress testing") I think this is a more realistic way to assess the likely range of outcomes, rather than some "overly precise", but less informative calculations, where I see people estimating they will be earning $129.72/door this year, with a ROE of "approximately" 17.25834%..

I use a spreadsheet with 5 different columns and some have higher than expected expenses/vacancy, or reduce the rents by 10-15% to make sure I can handle less than ideal scenarios while still making a healthy return. For example, I may estimate an ROE of 8-12% (or whatever they might be) before principal paydown and appreciation, but after a plausible range of expenses. And I think my results will fall in that range a good majority of the time.. (approximately 82.7643% of the time.. just kidding!)

I used to only model my expected scenario and the downside risk. But I also do 1 or 2 to the upside now to estimate longer-term returns for some increased rents, which I also think is plausible. I learned years ago that if you only look at the negative, you may miss the boat on opportunities also.. If you don't price in your potential upside, you may lose out on lots of deals to others who are taking into account everything..

But this also gives you the ability to ask yourself, Am I comfortable with returns on the low side of that range if expenses are higher, or rents a bit lower, than I thought originally? Or if the market changes? Am I dependent upon increased rents to make healthy returns? Can I reasonably expect my returns to fall within that estimates the majority of the time? Thoughts? I think @Account Closed if he's got time for the forums..?

Thanks @Al Williamson ! After reading some of your posts on BP, I can also tell that Sac is lucky to have you.. You can tell a kind soul by the way they care about and treat others..

@Jen Kurtz , they're just white lights. Nothing w/ religious overtones.. The tenants just put some stuff up on the inside of their windows, which is fine by me. While it's not measurable ROI, I really do have the feeling that (like I was blabbing about before) all the little things add up to longer tenancies, which reduce vacancy/refresh costs, and do produce ROI through that channel.. But it would be impossible to calculate that contribution, or even if/how much the little things contributed to longer tenancies..

@Dawn Anastasi, I was thinking about keeping them up all year! And you're right! It doesn't hurt to make people happy whenever!

I like the lights anyway, so I'll probably keep doing it.. I might send some holiday cards too!

On top of all this, you can start estimating a lot more of your specific expenses once you've owned it for a while. How much are the utilities you pay? How old is the property, and in what condition/quality? How are your tenants? Then you can go through and start inventorying what you will need to purchase over the longer term, add some cushion for unexpected repairs, and keep some cash on hand. But I like to estimate a range of returns, rather than say it's going to be right at this.. or that..

An interesting word of advice I heard in my 9-5 job when estimating/modeling potential profit. Calculations that are 'precise' are not necessarily better! Having it down to the dollar (or even cents in your estimate) over simplifies the reality of the situation. When I estimate my potential profit, I use 5 columns on the spreadsheet to estimate a range of potential costs and profit. The middle is what I consider most likely, but I realize that they might be a bit or significantly higher. Or maybe a bit lower over time. But I know those ranges of maintenance/reserves will generate me an ROE of 8-12% on average, depending on where they fall, unless there's a real outlier..

I think saying that it's going to produce $190/unit in profit or a 20% ROE or $135.75, while the 50% is a useful rule of thumb, doesn't really acknowledge the reality that it often will fall above or below this. When you estimate a range of plausible outcomes, you can have an increased probability that your actual outcome will fall within that range. So if you are comfortable with the lower end of that range if expenses are higher than you thought, you can have a higher level of comfort that you'll still be OK.

If a little bit of extra maintenance/reserves quickly causes your profit to vanish, give that some thought also. This analysis doesn't have to be anything crazy, but simply use twice the expense/sqft, some lower rents, or whatever you think is a plausible risk/benefit, and copy and paste the rest of your figures/formulas to calculate an ROE for each of them. Just my .0239274 cents!...

@Marcia Maynard , Nice to see another cheer-loving landlord out there. The kids definitely do love it, and the tenants commented on it this evening, so I think it was worth the $30 "capital investment" for the lights and a little electricity for the "goodwill" you create and making it an enjoyable place to live.. With the overall approach I take, ideally, I want my tenant's guests/friends/relatives commenting to them on how much nicer the property is than their own rental, let me know if a unit comes open, etc.. I think it's one of those little touches people just enjoy.. But of everything in the lease and rules I created, I never had thought about holiday lights..!

And as @Al Williamson suspected, other neighbors started putting up their lights too! My adjacent neighbor put up some similar ones, which is a great complement to ours.. Another one on my short street.. I'd like to think it was some source of inspiration.. Glad I did it either way :)

I agree with you @Pam R. . I like to ask generally if there's anything that needs to be fixed when I collect rent monthly, then I ask specifically about any leaks every once in a while. But I don't like to intrude on the tenant's space more often than necessary, because they pay good rents and I don't think people generally like strangers coming in their home (even the landlord!)

So it turns out, the rain stopped, but the moisture stayed. After inspecting more closely, it turns out that it wasn't leaking from the roof. It was getting so damn cold, condensation was forming to the extent that it was dripping from the ceiling. It has already mellowed out as it's not quite so freezing (crazy cold week! and unusual for here!). But I'm going to seal up any cracks/holes between the ceiling and attic, and maybe put in some air-driven fans by the attic vents...

@Elizabeth Colegrove , I have found that some tenants, even good tenants, would either just rather not have someone bother them, not notice, or not think much of it when little things pop up - until it affects them. But maybe it's different in your area.. I was mainly trying to see if anyone takes a proactive approach to interior maintenance/repairs by communicating with the tenants, but it sounds like that's not the case for your situation..

@Kevin Auyong , I agree with you. Some place not so loud. I'd also like more seated space. I think a different location would be better next time. Hopefully I can talk to you more then!

@Joey Budka , glad you enjoyed it! Bring me some cheap MF in Richmond, and I'll consider them! But 2-4 w/ 30yr fixed is just my thing right now..

@Viet Nguyen , nice meeting you briefly. More next time!

@Michaela G. , I wanted to ask you about your new non-RE venture too, but maybe next time.. ?

@Ken Lau , We can chat more next time. Don't remove the monitoring on this forum, and I'll post the next one here, probably for Wed, Jan 15..

@Ralph E. , hopefully you'll be there next time too, so I can finally talk with you!

@Sam Magi , it was great having such a variety of people, and glad I got to meet you after chatting on here. Congrats again!! I'll be in touch..

@Account Closed , your buyer (Christopher?) mentioned that rooming house 4plex in Richmond. There's probably about a 50% chance I've talked to the listing agent for any 2-4 unit on market in Richmond..

I was thinking about buying the same agent/seller's duplex on Bissell (+lean-to shack in the back w/ someone living in it). But he seemed to want full $/ft & rent for the deteriorating "handyman special" shack in the back.. so I just couldn't do it. I think it was Nathan..? He also mentioned that 4plex, and I had already asked him about the leases & tenants. 4 units. 16 leases. down in the low avenues. some slow-paying tenants. I just can't quite imagine what kind of strangers want to live with 3 others, sharing 1 shower/kitchen/LR per 4 heads.. :-/

Not my style (or I would do it myself & save $100K), but it sounds like this seller has a few... shall we say.. "resourcefully utilized" types of properties.. The headline GRM looks nice! But rent rolls might be a different story!! He said he's moving to SoCal in 5-6 months or so, just a heads up! Maybe you can squeeze him more later!! I might try the same with his duplex later.. shhhhhhh!!!

@Chris Music , glad I got to talk to you and @Denise Madrid before you two took off! I have a good feeling about Oakland prices in 2014, so looking forward to hearing the good news!

Next meetup probably on Wed, Jan 15. Will post link on this forum! Thanks to everyone who came out!!!!

It depends!!!

I use lower-cost contractors (or my handyman) for my jobs, but the rates will vary from area to area, and more importantly probably, from contractor to contractor. @Bill Jacobsen is right about estimating per foot for many things like flooring, or just on average, but all depends what it looks like now, how nice you want it, etc.. Any structural, wood rot, plumbing, or electrical issues.. All can cost a lot potentially.

I got some decent laminate installed w/ padding for about $3/sqft ($1/ft for laminate materials). Granite countertops on very small galley kitchen was about $1,300 apiece installed if I remember correctly. For paint/materials and labor to repaint a 3br w/ 2 coats, about $1,200. Cabinets can be big depending on the size of the kitchen and quality ($3-8K+ installed). Heat, A/C, or HVAC working? I recommend going to look at some other rentals on Craigslist (or whatever they use there) to see what kind of finishes, features, prices landlords have for the college rentals, unless you're already very familiar..

Of course, you will have college student tenants presumably, so get big deposits/cosigners and/or be an amazingly good judge of character! I have a relative with a college rental and they have had so many headaches/small claims court for damage (even w/ cosigners.) So also get stuff that's durable!!! Damn kids!

Good luck!