All Forum Posts by: Ken M.

You've raised some valid concerns about California, and it's true that the state faces significant challenges. However, dismissing it entirely based on these issues overlooks several factors that continue to attract people and investment:

Diverse Economy: California boasts a massive and diverse economy, far beyond just Hollywood. It's a global leader in technology (Silicon Valley), agriculture (Central Valley), international trade (ports of Los Angeles and Long Beach), and tourism. This economic strength creates job opportunities and attracts talent from around the world.
Innovation and Entrepreneurship: California has a deeply ingrained culture of innovation and entrepreneurship. It's a hub for startups, venture capital, and cutting-edge research. This attracts ambitious individuals seeking to build the next big thing.
World-Class Universities: California is home to some of the world's most prestigious universities, including Stanford, UC Berkeley, UCLA, and Caltech. These institutions attract top students and faculty, contributing to the state's intellectual capital and driving innovation.
Natural Beauty and Diversity: While you mentioned the weather (which is undeniably a major draw for many), California's natural beauty extends far beyond sunny beaches. It encompasses diverse landscapes, including mountains (Sierra Nevada), forests (Redwoods), deserts (Death Valley), and national parks (Yosemite, Sequoia). This offers a wide range of outdoor activities and recreational opportunities.
Cultural Hubs: Cities like Los Angeles and San Francisco are major cultural centers, offering world-class museums, theaters, music venues, and diverse culinary scenes. They attract artists, creatives, and people who appreciate a vibrant urban lifestyle.
Real Estate Appreciation (Historically): @Dan H. points this out with his bathroom addition. While recent years have presented challenges, California real estate has historically seen significant appreciation, particularly in desirable coastal areas. This has made it an attractive investment for some, though high prices and increasing interest rates are currently impacting affordability.

Addressing your specific points:

High Taxes: Yes, California has high taxes, particularly income tax. However, many high-income earners are willing to pay these taxes for the perceived benefits of living and working in California, such as access to opportunities, infrastructure, and services.
Crime and Homelessness: These are serious issues in some parts of California, particularly in major cities. However, it's important to avoid generalizations. Crime rates vary significantly by neighborhood and city. While the homelessness crisis is a complex problem, it's not unique to California and is being addressed through various initiatives.

In summary: While California has its problems, it's not a simple case of "everything else sucks." The state's economic dynamism, natural beauty, cultural attractions, and educational institutions continue to draw people and investment. Whether these factors outweigh the challenges is a personal decision.

San diego, los angeles, and san Francisco violent crime rate is low compared to most large cities outside california. The 3 of them are below Cincinnati, cleveland, and toledo.

The lowest city on the list on wikipedia for violent crime is irvine, CA

https://en.m.wikipedia.org/wiki/List_of_United_States_cities...

Any violent crime is too high but i travel a bit. I feel far safer in the roughest parts of San Diego than i do in many large cities outside CA.

People seldom look at actual crime numbers. What they see is what their media presents to them. A crime in a low crime area may be media worthy but the same crime in a high crime area may be just another day.

in my neighborhood (poway), kids playing doorbell ditch or riding 3 on an electric bike warrants posting on social media and dozens of comments (no exaggeration). Must be nice that those “crimes” deserve so much attention.

It is my belief that most RE investors are best served initially investing near their home. After they have some experience they can decide if other markets are likely to suit them better. I believe this is true for high price san Francisco and lower priced detroit and most markets in between.

Best wishes

San Diego, Los Angeles, and San Francisco having a lower violent crime rate than Cincinnati, Cleveland, and Toledo is not an accomplishment by any means. You are comparing 3 cities where you pay one of the highest premiums in the USA to live to 3 of the cheapest cities in the USA. This would be like me telling you my Escalade drives better than your KIA. Duhhhh, of course it does.

The post i was replying to implied a serious crime rate in CA cities. That is not true.

i also do not associate crime rate with cost of living and find it interesting that you do. If you look at the list, there is not a strong correlation between price and violent crime rate but more important, the large california cities are lower than most large cities in other states. The stats seem to indicate there is not a violent crime issue in large CA cities that some people believe exists. They have that belief in large part due to media sensationalizing certain crimes. The violent crime stats tell a different story.

best wishes

What kind of person doesn't associate crime rate with cost of living? Of course one would and should assume that the cost of a property in a "safe neighborhood" would be more than the cost of a similar property in a "dangerous neighborhood." That's common sense.

I agree on a neighborhood basis. In general higher cost neighborhoods are safer than lower cost neighborhoods. Howevr, look at the stats on a city basis. There are LCOL cities with low crime rates and HCOL cities with high crime rates. There is not a tight coupling between price and violent crime rates. for example denton texas has one of the lowest violent crime rates. I highly suspect few people consider it a HCOL city. As indicated the correlation of LCOL cities having high crime rates and HCOL cities having low crime rates appears to not be strong.

Ca large cities have lower violent crime rates than many cities in other states that are a similar size.

California has the highest rate of investor homes in the nation because of the returns that can be achieved. There is nothing that trumps the return on why it has so many investor owned homes. Great appreciation, great cash flow on long holds, great value add opportunities, good tenants in most areas (my city delinquency and eviction rates are near the lowest in the country). There are lots of ways to make money in CA real estate for those that know what they are doing.

However, i recommend newbies start in or close to their home market. They need to identify the possibilities in their market. After that if they believe CA is the right market for them, they can join the plethora of investors that invest from all over the world in CA RE.

good luck

Hmm, me thinks a strong case can be made for "confirmation bias" here. "Since I invest here, there must not be any problems". ;-)

Let’s look at my claims:

- there is not a strong correlation between safety and cost of living of the city. Not sure how that is biased, but I also provided the link and an example of one of the safer cities on the list not having a high cost of living.
- California has highest investor ownership rate and I provided the link to the source.

- California has higher rate of return for the large coastal cities matches the stats case Shiller used to provide for total residential return for this century. The 3 top cities where all coastal CA cities but CA cities made up a majority of top 10 cities on the list with my market at number 3 for total return for this century. I will challenge you to find a single reputable source that does not show San Diego to have achieved outstanding long term return.

- I posted a recent rehab that I added half a bathroom out of existing space and the comps showed that half bathroom added $50k of value. Good luck getting such significant value add in a low cost market. This was in a property where the psf is over $1k.
- I pointed out that my market (San Diego) has one of the lowest eviction and delinquent rates in the country. I challenge you to find a single reputable source that shows otherwise.

I then advocated for all newbies start close to their home market.

I stand by my remarks and challenge you to show one statement to not be factual. Facts, no need for confirmation bias. In addition, I do not need to make more money so I am not needing to push CA RE. Not a realtor, not a mortgage broker, not selling any mentorships (my protégés do not pay but are a very limited group). I do not need to push CA RE and have little to gain which places me in a different category than many of the people who have posted on this thread including the OP who is a realtor, property manager, and sells mentoring (at what appears a reasonable price) in his Ohio markets.

I simply notice that L.A. is burning because the mayor cut fire support by $17 million dollars, she wanted to cut it more. It's fire season and she fled the state. The fire hydrants don't work, the "water lady" who gets paid $750,000 a year to turn the tap on didn't do that, and on and on and on. (I feel sorry for those firemen trying to handle the chaos, they weren't told by the reservoir people they had drained the water) The money was diverted to DEI programs of which these characters directly benefited. Just watching the news.

That does not build confidence in investing in an area no matter how many friendly seals bark at you.

Do L.A. and California lose carbon credits for all the noxious smoke? (I know, San Diego is considerably south of L.A., been there, done that, nice place, but to most people in the U.S. and the world, L.A. / San Diego distinction is lost on them.

Now, if I was an investor in California, would things like L.A. fires, landslides, earth quakes, taxes, canyon fires, traffic, eviction moratoriums, etc worry me? You betcha.
I spend (not so sure how much now going forward) a fair amount of time from Santa Barbara to Laguna Beach. I love the ocean. Rarely is the beach crowded though, for such a large population. How many people pay for a gym membership that they never use. Same thing. High taxes, high rate of crime. Some violent, some not, still too much crime no matter what goes on in Detroit, Baltimore, D,C., Philadelphia and so on. Just because they have more problems doesn't make California desirable. That's called a straw man argument.

My only question is if property taxes are going to go up for the people of Pacific Palisades to cover the damage the People caused to the city. Strike, that, the damage the city caused to the people. ;-) But, the people voted for them again & again, didn't they? At some point, even the worst carpenter stops hitting his thumb on purpose, so he can experience how much better it feels when he stops.

Frankly I'm glad guys like you choose to invest where you do instead of adding yet more competition to where I invest. No harm, no foul.

0 Votes

Los Angeles County, California

Quote from @Khon Kounbandith:

The house was in good condition. Renovation cost is roughly $30K.

I guess what throws me off is that you say

Cash invested: $60

0 Votes

Quote from @Andrew Syrios:

Quote from @Walter Jones:

I always like seeing this report each year. Tennessee holding steady at #5

And of course California came in dead last. And that was last year before the fires. This year will likely be even worse.

Maybe, but so far the reports are about neighborhoods where people have real money. They can go to their second home or buy another. And if they work in Hollywood, they probably want to be close to where things are happening.

0 Votes

Memphis, Tennessee

Quote from @Michael K Gallagher:

Quote from @Account Closed:

I did a loan assumption that is currently a GIANT pain in the ***. I’m here to share my story for whatever that’s worth.

Over a year ago I did a wrap around mortgage on a place here in Phoenix at 3.5% over 27 years. Everything was smooth until it wasn’t. 6 months into it the tenant called and the toilet had failed in an upstairs bathroom. The house was flooded to the tune of $70,000 in repairs.

No big deal, I worked with insurance and contractors to get the repairs done. Six months later my insurance dropped me and here is where it gets sticky. I got a new insurance policy at a higher rate. I let the original borrower know they needed to update the lender on the new insurance policy.

The higher insurance premium required a higher escrow payment which the original borrower didn’t let me know. A few months go by and unbeknownst to me the escrow account had now drawn negative which triggers the lender to no longer apply what’s considered a “partial” payment to them, given that I’m now paying less that what’s due given the escrow increase required but not relayed to me even though I expected it at some point.

Last month I’m on Zillow looking at the value of my properties. One of my properties says it’s going to auction in March because it’s being foreclosed on. My heart rate goes through the roof as I have about $90k in equity in that house. I reach out to the original borrower and ask them what’s going on. They weren’t paying attention to it, and why would they, it’s not their house anymore.

They send over 3 months of notices from the bank. $10,000 has been collected by the lender and is in an “unapplied” status due to the short payments. They are foreclosing and are not open to discuss it. I call them, they won’t speak to me about the loan at all BECAUSE ITS NOT IN MY NAME.

I have to sell it, but guess who has to request the payoff amount from the lender….thats right, the ORIGINAL borrower. So I am at the mercy of that person for basically EVERYTHING.

I am still waiting on that payoff amount 9 days later and am up against a clock where they have scheduled the home for sale at auction come March.

Take it all for what it's worth, I've learned plenty of lessons and made my share of mistakes. One thing is for sure, if I ever wrap another mortgage I am getting a POA to access the docs on the original loan so that I am never again at the mercy of that borrower to relay information. If it wasn't the insurance it would have been the property taxes. FFS

THE END.

Let me know what you would have done differently?!

Thanks for sharing, the POA to access the original docs is a great idea, and I'm totally stealing it for the future. also curious if its best practices when assuming a loan to forgo the escrow and just pay the taxes and ins out of pocket when needed....but perhaps that triggers something else? just spit ballin here.

"just spit ballin here." Very funny. You're like the boat builder who doesn't know to seal the planks. Lol

I've said enough. Oh, the surprises that await you. ;-)

0 Votes

Phoenix, Arizona

Quote from @Tom Gimer:

Quote from @Ken M.:

Quote from @Kevin Sobilo:

Quote from @Jay Hinrichs:

Quote from @Tom Gimer:

Quote from @Jay Hinrichs:

Quote from @Eyal Goren:

Quote from @Mitch Messer:

Quote from @Eyal Goren:

I read that every mortgage has a Due on Sale clause, which means you have to notify the lender when you sale the property and pay the entirety of the loan when you sell the property.

How do people work with the clause and make these kinds of deals?

First, let's be very clear here.

The mortgage your speaking of is a private agreement between the seller and the lender. The "due on sale" clause (DoSC) obligates the seller to notify the lender if the property is sold.

Failing to do so would place the seller in violation of this agreement, giving the lender the right to accelerate the loan.

But no laws are being broken here.

So, subto is neither legal nor illegal.

Second, it only works because most lenders are more interested in receiving payments than in invoking the DoSC clause and foreclosing on the property.

But, it can work, provided seller and buyer are both on board and the proper process is followed.

Thanks for the clarification. What happens if the lender does accelerate the loan? I guess the seller would like to address that in the agreement.

If you dont pay the loan off it goes to foreclosure and the original owner gets their fico CRUSHED. its highly risky for most mom and pops to sell on sub to.. and its simply not a way for those without substantial wherewithal to buy property and keep the seller safe.. Lots of absolute nightmares come out of sub to when folks get into title but dont have the money to pay the loan off or the ability to refi.

Short term, leaving financing in place during rehab prior to resale — great strategy with limited risk to either party.

Long term hold, with buyer planning on carrying existing financing to term without the ability to quickly cure default — terrible strategy with huge risk for both parties.

Exactly Tom all of my sub to over the years have been deals were we got the assets for far below market did rehab and resold generally within 9 to 12 months we never bought them to keep as rentals. Its a very poor situation for the original owner to be on the mortgage for years and years without the benefits of ownership and the control.

Why do you say its bad for the original owner long term? I would think in most situations the original owner is in financial trouble, probably delinquent on their mortgage and facing foreclosure. So, selling sub-to, the mortgage is brought current and timely payments are made by the new owner helping the original owner's credit CONSIDERABLY!

Also, I believe I saw somewhere that the mortgage won't count against the original owners DTI after a period of time if they show someone else is paying the mortgage. So, they could potentially buy another house later on.

I do agree the lack of control is a potential issue.

.
People recover over time and they want their name off of the loan.

They have no way to force removal, other than to pay off the loan on a home they no longer own.

So they contact the lender and tell the lender they no longer own the property and want to be removed. The lender at that point can exercise the Due On Sale and it becomes a problem for the subto buyer, who now has to find new financing or lose the house to foreclosure. This destroys the credit of the original owner who can then sue the subto buyer.

Another issue is if the subto seller claims they were taken advantage of by the subto buyer at a vulnerable time (pre-foreclosure) and an attorney or regulator raises the question of equity skimming. Bank related issues can be prosecuted for 10 years. Serious punishments.

With all of that, Subject To is legal. Just make sure you do it the legal way. Driving a car is legal, as long as you follow the rules. It's the same idea.

FYI I've seen subto contracts which provide for ~$50,000 in liquidated damages against a seller that reports the sale to the lender and that results in the loan being called. How do you think that provision would fly in a deal that goes sideways and ends up in court?

Hilarious. There just are no boundaries for some people.

1 Vote

Quote from @Account Closed:

Quote from @Ken M.:

Quote from @Account Closed:

I did a loan assumption that is currently a GIANT pain in the ***. I’m here to share my story for whatever that’s worth.

I have to sell it, but guess who has to request the payoff amount from the lender….thats right, the ORIGINAL borrower. So I am at the mercy of that person for basically EVERYTHING.

I am still waiting on that payoff amount 9 days later and am up against a clock where they have scheduled the home for sale at auction come March.

THE END.

Let me know what you would have done differently?!

Quick question, which Guru did you learn SubTo from?

I didn’t learn it from a guru. I read about it in several different places. It’s not rocket science. There are risks and rewards like anything else in life.

It's not rocket science. Lol

Says he "I did a loan assumption that is currently a GIANT pain in the ***."

3 Votes

Phoenix, Arizona

Quote from @Tyler Magee:

Hello everyone, I’m looking to get into real estate investing. I live in Tampa Florida. I am a husband and a father to 3 children. I work 40 hours a week usually from 4pm -12am. I’m 37 and I’m wanting to do real estate full time eventually(if it takes 5-10 years, that’s fine).

So my question is, if you were in my shoes, where would you start if you had $150 cash with good credit?

I love the idea of flipping houses and I love finding good deals. I’ve been bouncing back and forth between markets like Chattanooga with higher appreciation, and markets like Birmingham with more cash flow. Im truly open to any suggestions and any markets (I chose those because of proximity to Florida).

Thank you in advance for any advice.

I'd find the guy doing what I want to do, I'd buy him a long lunch and find out all of the things I should avoid.

0 Votes

Quote from @Becca Pariser:

Looking for advice:
We just closed on our first sub-to deal as end buyers (woo hoo!). We are responsible for the mortgage as of January 1 - but it's come to our attention that they stopped paying it back In October 2024. So they are two months behind.

In this case, who is responsible for the catch-up? We already paid them a pretty sizeable entry fee ($30k) to cover some of their equity and debt in another project.

Your title report should have alerted you to the issue.

The payoff the escrow company got from the lender should have alerted you to the problem.

Your interview of the seller before you bought the house, should have alerted you to the problem.

You calculations on the numbers should have alerted you to the problem.

Check, cross check and check again. Sellers will lie to you and you have to "trust but verify"

It's your problem. You did things outside of the normal without proper knowledge. Not fun, expensive lesson, but "woo hoo" you got a subto.

Who trained you?

0 Votes

Quote from @Account Closed:

I did a loan assumption that is currently a GIANT pain in the ***. I’m here to share my story for whatever that’s worth.

I have to sell it, but guess who has to request the payoff amount from the lender….thats right, the ORIGINAL borrower. So I am at the mercy of that person for basically EVERYTHING.

I am still waiting on that payoff amount 9 days later and am up against a clock where they have scheduled the home for sale at auction come March.

THE END.

Let me know what you would have done differently?!

Quick question, which Guru did you learn SubTo from?

3 Votes

Phoenix, Arizona

Quote from @Kevin Sobilo:

Quote from @Jay Hinrichs:

Quote from @Tom Gimer:

Quote from @Jay Hinrichs:

Quote from @Eyal Goren:

Quote from @Mitch Messer:

Quote from @Eyal Goren:

First, let's be very clear here.

The mortgage your speaking of is a private agreement between the seller and the lender. The "due on sale" clause (DoSC) obligates the seller to notify the lender if the property is sold.

Failing to do so would place the seller in violation of this agreement, giving the lender the right to accelerate the loan.

But no laws are being broken here.

So, subto is neither legal nor illegal.

Second, it only works because most lenders are more interested in receiving payments than in invoking the DoSC clause and foreclosing on the property.

But, it can work, provided seller and buyer are both on board and the proper process is followed.

Thanks for the clarification. What happens if the lender does accelerate the loan? I guess the seller would like to address that in the agreement.

With all of that, Subject To is legal. Just make sure you do it the legal way. Driving a car is legal, as long as you follow the rules. It's the same idea.

3 Votes

All Forum Posts by: Ken M.

Ken M. has started 55 posts and replied 739 times.

Post: Why do people Buy Property in California

Post: Sub-To Pre-foreclosure Deal

Post: Uhaul Report - Where people moved in 2024

Post: Due On Sale Being Called!!

Post: Is Subto legal?

Post: Due On Sale Being Called!!

Post: If you had $150k where would you start?

Post: Who is responsible for back mortgage after paperwork is signed?

Post: Due On Sale Being Called!!

Post: Is Subto legal?