All Forum Posts by: Juan Pardo

@Michael Hyun and @Johnny Hoang

You guys have the right approach imo. As someone with 20+ years experience who has done similar (with 2-4 units in SF, not SFH house hacking) I urge you to focus on the long term, which is more than 5-7 years imo.

First you need to account for the fact that we’re at top of market, in a recession And corona (of course). You’ll need to make a determination of when you want to buy, either soon, or after things seem to stabilize. Of course rates are great now. 

But more importantly, if you believe that prime Bay Area will continue its appreciation trajectory *long term*, you stand a good chance to benefit from it in the next 10 years. There is also the unknown of eventual inflation (3-5 years from now), which may benefit those with fixed 30 year loans big time. 

Basically what I did was buy, add value, wait, and pull equity out to buy the next property. I avoided selling, so I could expand my portfolio. What you will realize, is that appreciation moves erratically. It can be flat or even trending down for a few years, and it can kind of suck owing RE then. But hang in there! Then you will have those crazy years where you do nothing and values go up 10-15% in one year!  (Rents also go up, so what was middling cash flow becomes great.) you want to own property during those golden years. Bottom line: that is where you will make the big bucks. You must focus on the long term for this to work, 10+ years. Think of it this way, how many people do you know that have sold prime Bay Area RE 10 years ago and don’t regret it now? (crickets...)

best of luck!

I’ll leave you with my fave chart:

@Benjamin A Ersing

At least Portuguese, Spanish, Italian and Greek banks lend to foreigners. Only residential, meaning you have to qualify based on your salary, not the potential income of a property. There could be restrictions like a limitation to a second residence, whereby you might not be able to get loans for multiple properties.

 Yea, growing up in bay area during the 80s and 90s I never had the impression it was prime real estate. We lived in redwood shores and we checked our 1400 sqft home and even that is worth 1.8 million now.

@Shay Yehuda, as a foreign national, there will be a lot more due diligence on the part of the bank. The Know Your Customer (KYC) process will be pretty intense. They will want to ensure that the beneficial owner is actually you and not someone else. They will want to ensure that you or any close family member is not a Politically Exposed Person (PEP). They will need to ensure that there is no potential money laundering taking place. A foreign national buying cash and then trying to get delayed financing is a HUGE red flag. All banks have a duty to comply with the U.S. AML / BSA act. For a small / regional bank or CU, it may not worth the hassle to do that kind of work to vet one (relatively small) customer. In fact, they may not even have the infrastructure to do so. You'll probably have to go with either a national bank or very large regional one. I'm not sure if non-bank lenders will (would be able to) work with you or not. May be case-by-case.

1. Start by talking with some banks. Be right up front with your situation.
2. You should expect rates in the 4s. Maybe higher due to the complications.
3. You will likely be able to borrow ~75% of appraised value, assuming you've owned the property for at least 6 months.

I have been watching the last 4 months in absolute awe. Unemployment is through the roof, businesses are going bankrupt, most people are staying home not spending money yet the stock market and Real Estate market are doing great. The US government has done a lot to try and curb the effects that Covid has had on the economy but can it last? The housing market in my local market, Richmond, VA, is red hot. Interest rates are super low and the inventory is low so I feel those two factors are carrying the market for now but how long can that last? We have already seen a steep decline in higher end properties across the nation. I fear people are being lured into a false sense of security with the current market conditions and are not preparing themselves for the fall out. Thoughts?

You cannot have a discussion about the money supply without taking into account the velocity of that cash (how quickly it is spent and recirculated throughout the economy).  We are in a situation right now where M2 is expanding rapidly but velocity is cratering.  The Fed is printing trillions, but that money is not making its way into the real economy.... i.e. the lower and middle class pocket books where it gets spent and recirculated.  The newly created trillions are (a) papering over previous speculative losses and (b) going onto the balance sheets of companies/individuals that simply add another digit to their net worth.  That money will never see the light of day if/until the people/companies holding it perceive that it is necessary to "use it or lose it."  

Word of caution.... Even with all of the money printing that you have seen, it is still entirely possible to see deflation in real estate.  The Fed can go wild, but if the banks don't lend it, you will see deflation.  Imagine if all banks immediately required a 50% down payment on all properties, or 800 credit scores for any loan, etc.  Look out below.  

I'm not claiming to be a monetary expert, but I would caution everyone out there with the "refi until you die," mentality.
  
 

Hello Bigger Pockets! 

I live in the Bay Area and I'm looking to move out of my parent's place soon. I've saved about 2 years of wages, roughly 120k, and for my first step into real estate investing, I've been thinking about house hacking in the Bay Area. Before starting this discussion, I want to share my main goal after 20 hypothetical years of REI:

1. Have a net income of $10,000 per month from rental properties.

With the context of this goal in mind, I'm thinking about starting off my REI journey by house hacking in the Bay Area. I've been looking for a SFR around the 750k-950k range, 3b+/2ba+, and at least 1400sqft+. The reason I'm looking for a 1400sqft+ SFR is because I am looking for SFRs that have an "extra room" that I can convert into an extra bedroom. The perfect property would have this feature as well as a garage conversion opportunity. I know at this price range, I'm not going to find anything in Cupertino or Sunnyvale, but maybe someplace like Newark or East San Jose.

If I bought a home at 900k (the mortgage would be something like $4500), and was able to "add a bedroom", then I could rent 3 bedrooms out for roughly $1200 each (rough estimate). My total rent would be $4500-3600 = $900 per month. I hope to live there roughly two/three years, at which time I feel like I'd most likely get married and buy another home with my spouse, and rent out my room to someone else, leaving me with both the home I first purchased (which would now break-even or even possibly cashflow) and the house that I live in with my spouse (most likely not cashflowing). 

Yes, this is not a cashflowing property, this is a capital gains play. If things go well, my first home purchase could increase in equity by $100k in 5 years (how long would this take if I spent my initial 120k on OOS rental properties?..), which I can EITHER (a) 1031 exchange into actual cashflowing properties somewhere else. (somewhere that actually cashflows). (b) Take out a HELOC to put a downpayment on another bay area home along with the money that I saved in the three years after moving out of the first home.

Worst case scenario, my property doesn't increase in value, but at least it's not negatively cashflowing. Now before anyone says that a capital gains play is a roll of the dice, I'd say I'm young and willing to take the risk, especially after seeing the bay area growth trend in the past 50 years.

So that is my 5-year plan as of now, I'd love to get some feedback or start a conversation around this strategy, to see what other people's 5 year strategies look like. Please let me know what you think!@Account Closed

@Bruce Lynn

Hi Bruce!

Thanks for the reply and questions. The expected monthly rent is between €2,000 and €3,000. The apartment will include partial furnishings, underground garage parking, basement storage, bike storage, and utilities included. The tenant would be responsible for phone/internet/cable.

Partial furnishings means it will have a custom built in kitchen, balcony furniture, light fixtures, and double sink/vanity with custom surround lit mirror and pendant lighting in main bath. These features are all less common in Germany, but our target tenants are Americans that are looking for a move-in ready apartment that doesn’t require extra effort to purchase all these items separately over the course of several weeks or months.

Property management cost is still to be determined. I’m still looking!!! :-) Our initial plan is to self manage since we are located nearby. We are in the process of identifying a reliable one that caters to our target tenants as we want to provide a quality, comfortable, clean, and convenient apartment that’s going to be selectively filled.

We don’t feel that troop reductions will affect rental prices for our target tenants because there are housing allowances and special leases for Americans that help keep the rents higher than they might be for a standard German lease. For example, an American lease allows shorter notice for move out and don’t require painting or thorough cleaning upon move out so so there’s higher vacancy/turnover percentage built into our calculations. We don’t see this as a significant risk and there will still be a sufficient number of potential civilian tenants even if the troops leave.

After approximately €20,000 in renovations, ARV is estimated to be €410,000 to €440,000.

We’re committed to the deal, but would love to hear people’s thoughts on the deal.

@Troy Williams

Finally got one out of the warehouse and finished.  

@Juan Pardo

We have STR's in str friendly/vacation rental areas here in Coachella Valley. I find that economies that thrive on STR revenue and tourism have some form of restrictions but there is balance. As long as you follow within those specific rules and you understand each cities regulations, it should be fine. I would prefer to have an STR in areas where regulations are defined compared to areas where they are not and cities

can easily change course on their STR policies.