All Forum Posts by: J. Martin

It’s time to schedule (another) meet up in the East Bay! I recently had the pleasure of meeting quite a few fellow BP investors in San Francisco, and had a great time enjoying some drinks and learning from everyone’s different approach/strategy/mindset. I believe Andy Kaufman arranged the last East Bay meetup (I was not there), but I’d like to join in and start another. (I’m going to post this on the old thread too) Hopefully we could make it a regular thing. Please post if you are interested!

I’m proposing to meet in Oakland at the Trappist (bar), about 4 blocks from the 12th St Oakland BART station in early December – Tuesday, December 10? I’m proposing this location due to its central proximity in travel time from many areas within the Bay, and the number/frequency of BART trains. The bar is a pretty good size (‘good for groups’ on Yelp) and has a great beer selection! (and other drinks and food). Not too close to either of the holidays..

BART travel times to 12th St Oakland :

San Francisco, Embarcadero - 11min

Berkeley – 11min

Walnut Creek – 23min

Daly City – 29min

Fremont – 36min

Below are some local folks I thought might be interested. Please post on here if you would like to come, and if you can come on Tues, December 10 from 6:30-9PM (or as late as you want to stay). If you would like to come, but cannot make that date, state if you can do it on the 11th or 12th instead (or some other date if necessary). If you know someone else who might be interested, please tag them also so they can get a notification.

@Andy Kaufman , @Sarah Lam , @Michaela G. , @Johnson H. , @Adam Hofmann , @Arron Sweeney , @Peter K. , @Sam Magi , @Joe C , @Amit , @Jay Dao , @Bri R. @Denise Madrid , @Jaren Barnes , @Jessica Yau , @Ralph E. , @Bill Bockwoldt , @Minh L. , @Jimmy Tu , @Tosin Olatunbosun

Obviously, many of my tags did not work. I tried! I swear! Hope to see lots of folks out there!

I’m also going to add some ‘keywords’ to the bottom of this post for those locals who have keyword alerts for their area:

Keywords: East Bay , Bay Area , Meetup , Meet up , Meet-up , San Francisco , Oakland , Berkeley , Alameda County , Contra Costa County , Solano County , Richmond , Hercules Concord Albany Pittsburgh Marin San Rafael South Bay Peninsula

@Joel Owens @Jon Klaus @Ed Wood

Have you guys heard of the 5 or 10% down conventional on 2-4 unit properties, owner-occupied? Or is just for SFH?

@Steven J. 1 at a time, as others said, except under very specific circumstances, as outlined in my post above, with the link to HUD.

Ya, thanks again @Sarah Lam for getting everyone organized to come out! I'm always interested in the out of state numbers, but just can't quite get over not knowing someone that is there on the ground.. But a lot of people have been killing it all over the country from out of state! So whatever works! You're so knowledgeable about the market.. the water's warm.. can't wait to hear about your first jump in!

@Andrew N. , it was a pleasure, and I am interested in seeing how it plays out over time. @Troy Fisher , I think you have a great idea about poking around to see what people are using for maintenance per foot. In my mind, this is much more closely associated with maintenance expense, along with construction type/materials, age, deferred maintenance at purchase, and last but not least, THE TENANTS! Of course, utility metering, local factors such as tax rates, vacancy rates will all play a part in the total expenses beyond maintenance. I do sort of indirectly use a simplified ratio analysis when prospecting - mostly on the GRM.

Regarding expenses on my properties, luckily (IMHO) for me, I bought almost everything I have when it was vacant, so I went to town on everything with my handyman so I wouldn't have to deal with it later.. And they're about 30 years old, compared to 100+ in SF, Oakland etc. So having modern electric/plumbing helps a lot. (although it's not a new building of course..) Plus no air-conditioning units or boilers/HVAC to maintain. Mild weather. No freeze. Roofs in good condition except for on one of the SFR's. This has kept my expenses/repairs very low in the beginning - although they will go up on average over time - but they throw off enough cash flow to build big reserve cushions.. and some for me :)

$7K in gross rents and <$4K/mo in PITI @ ~ 10% average downpayment (In the Bay mind you!) So taxes and insurance are taken care of there.. The coin-op laundry pays most of the common utilities on 4plex. SFRs pay their own except garbage. One SFR has handyman tenant (not my handyman), and agreed in lease he takes care of all regular/minor repairs. I PM all my properties, with some help from handyman. Saves a lot. Having said all that, if I just wanted to get my principal paydown as returns, I would have to spend $3K/mo on minor items/expenses and long-term reserves to get to 0 cash flow. Only 3 structures, ~5K sq ft, in good condition. I don't quite see $36K in expenses/yr after PITI.. But we'll see what it plays out to over the next decade.. In low-priced areas, you might have to have 10-15 SFR's and 10-15K+ sq ft to maintain, with more weather-related repairs/heating/cooling.. So I'm sure the expense ratio is a little different.. How much? No clue..

@Jessica Yau , we should all do musical chairs next time so everyone can mingle a little more! I'd love to talk to you about your Oakland property sometime. I was putting in a lot of offers in Oakland before I came up to Richmond, but was having difficulty when I was going for fourplexes with an FHA and not enough excess downpayment at the time to make up any gap in the appraisal.. It was rough.. But this was in 2012 when the market was hothothot there. Oh wait, it still is!!! And not a big fan of rent control, as a longer-term buy/rehab/rent investor!

@Bill Bockwoldt , same deal! I didn't get to talk to you much.. but hopefully at our next meetup in SF, or out in the East Bay!

@Ralph E. , it sounds like you have the experience behind you! Good luck on the next phase!

@Andy Kaufman , it was nice talking to you too, and we're going to get a regular East Bay Meetup going!!

If I missed anyone, I'm sorry! And looking forward to seeing you all and others at an upcoming East Bay meetup too!

Isn't it funny how quickly the conclusion can change?

I got an appraisal on my last deal at $265K. Then a few days before close, they sent a new "final" appraisal at $245K because they found out I had negotiated the price down before the appraiser even went out there..

Amazing how the appraised price = the purchase price when you have a "good" appraiser! If you fail once, try, try, again..

The answer is...... YES YES YES! ...most likely! (though check with an FHA lender)

From FAQ on the HUD website:

"To prevent circumvention of the restrictions on FHA-insured mortgages to investors, FHA generally will not insure more than one mortgage for any borrower (transactions in which an existing FHA mortgage is paid off and another FHA mortgage is acquired are acceptable)" (italics added by me)

In your case, the refinance you plan on doing will pay off the "existing FHA mortgage", then a new FHA mortgage is acceptable.

The caveat..

"FHA will not insure a mortgage if FHA concludes that the transaction was designed to use FHA mortgage insurance as a vehicle for obtaining investment properties, even if the property to be encumbered will be the only one owned using FHA mortgage insurance."

http://portalapps.hud.gov/FHAFAQ/controllerServlet?method=showPopup&faqId=1-6KT-879

You really have to talk to the loan agent/broker who is doing your deal to get the specifics, but HUD's FAQ states that it is acceptable. Don't know how exactly they would go about assessing if it is being used "as a vehicle for obtaining investment properties." It's a great program though!! 1 only myself! Good luck!!

Like @Lee Marsteller said, I have heard Odesk is good, and I've heard from many that the Phillipines is the place to outsource to, due to price, understandability of English (which apparently understandability is not a word, so they won't use it..) and educated, hard-working people. Although I'm sure everyone's experience isn't a success.

A fellow forum member @Adam Hofmann has a bit of experience with this, if he doesn't mind chiming in..

Hi @Pete Tam ,

To get some cash flow out of your investment, you'll either have to go inland/out of state as others have mentioned, or out to the periphery of the Bay Area up away from the South Bay. Places like Richmond, Pittsburgh/Bay Point, Antioch.. Still within commute to employment centers, but not the A/B markets like San Francisco, Berkeley, parts of Oakland, and the South Bay.

The South Bay is on fire! Tech is booming! There's spillover in high rents up here from SF & Oakland, but prices are still reasonably affordable. If you're interested in some hard numbers, message me or email through my website below. You can also talk to BP members about of state investments that have much higher cash flow, but much higher expenses per dollar of rent (low-priced areas w/ very low prices, and rents in the $300-1000 range, or more sometimes). I wanted something I could drive to and keep an eye on if I wanted, but many others are also finding success out of state. As others said, the most important thing is building a trustworthy team in that area, and to some extent, having enough properties to make it worth building that infrastructure in another state..

@Matt Mason is right on. 3.5% down FHA on up to 4 units is the government's gift to an entrepreneurial spirit! They will also count about 75% of the rents on the 3 non-owner-occupied units when underwriting your loan, so the purchase price you can qualify for can double, triple, or even quadruple, on the properties I have personally looked at.

Good luck Pete! Let me know if you have any questions, or explore the many great forums here on BP..!

Interesting John. I wasn't even aware that distressed sales weren't in the Case-Shiller (as stated, no expert on their methodology..). I seem to hear people talk about the impact of foreclosures on prices, but maybe it's not through the index, and just through the overall impact on neighborhood prices..

Thanks John!

I can tell you have a kind heart @Michaela G. !

It seems like any solution I see on BP, whether it be this, late rent, etc is file eviction immediately and throw on the street! I saw the same thing from BP members on a post you replied to regarding towing a car in SF (take it to the street and have the city tow it!).. Maybe it's just the experience of having dealt with so many poor tenants.. There's no slack.. But that's a great way to piss off the tenant and have them thrash your unit/garage/exterior whatever.

I agree with you, that often times there is a mutually beneficial agreement that can be arranged, given that you are stuck in a situation that no one wants. Maybe you can review their app/credit and make something work out, letting them know the legal alternative.. I always start by approaching someone with respect and reason several times before taking the hard road out. I was going to suggest in the tow situation that they let the tenant know they can get $300 cash and towed to the scrap yard for free typically, rather than have to pay a tow fee and impound it, which they will never get out.. maybe it would light the fire to get it moved.. and avoid a pissed off tenant that might come back to break something!..

I am firm when I need to be, but I'll learn to be more of a hardass someday like other BP members.. In the meantime, I'll try to treat all humans with respect and courtesy until they've proven undeserving of it.. :)

@Bill Gulley , I agree the index increases are heavily pushed by marketers of real estate, and I love your quote:

"Realtors and builders usually to form public opinion and generate business, if prices fall, it's time to buy, if prices are going up, it's time to buy now." lol

@John Rooster , your 'code creep' comment is very similar to what I'm talking about. Although in these few years in the crisis, this has happened in extreme amounts and in a short time period over just a few years. If 1 of every 10 homes was a flip at 100% increase over the prior purchase price, then it adds about 10% to index price gains..