All Forum Posts by: Kenny Simpson

According to a recent study by the Federal Reserve, the median net worth of U.S. homeowners is 40x higher than the median net worth of renters. 

What if you rent and buy investment properties?

I know people that LOVE to rent and buy investment properties and have done well this way too. I know that MOST people would love to own their own home, put their own stamp on the home, not worry about getting kicked out, rent raises and building equity for the future. The flip side is just RENT, renters can move when they want, no capital in the home, call landlord to fix issues and it could potentially cost less.

Should everyone buy a home? Interesting DATA below about Renters and Homeowners

Quote from @Sarah Hatton:

As of recently the institutions I've partnered with on DSCR STR loans have stopped offering them, can anyone refer my to lenders who are still financing these projects? I have a client who I did a fix and flip loan for and is now looking to refi and hold. Project is in Joshua Tree/Yucca Valley.

Thanks!

 Hi Sarah,

I have done a few STR loans in Joshua Tree for clients and I can help with this on DSCR. 6193022020

Quote from @Chris Seveney:

I am sure many of you will disagree with me, but I am seeing a lot of posts talk about “today’s high interest rates”

I believe there are many of us who view today’s rates to be more of the norm versus the outlier.

If you look at the current data, interest rates are not going to be dropping significantly in the near future. Could interest rates get back potentially into the 4’s, yes.

But I believe the days of the federal rate being at 0% and mortgage interest rates in the 2’s and low 3’s is not something people should bank on in the near future.

It’s not only goes for acquiring property, but for those who have invested in syndications where the exit was a refinance at a low rate.

Let the fireworks begin

 100% agree, if rates do get back to 2's or 3's that means there is something BAD going on with the economy.  Rates landing in the 4's is more realistic.  

Quote from @Steve Meyers:

Hi All,

I've been getting a lot of questions regarding the San Diego market in particular and where prices are going etc so I wanted to pull the most recent data to compare last year's January to this one.

All properties saw an increase of 9.5% in prices from January 22 to January 23 which is displayed on the graph below.  

I also pulled inventory numbers by price point in the second graph below.  The average home price in San Diego is about $840K which currently has about a .9 month supply up .3 from last year.  

I'm going to be watching this month over month to see where inventory numbers go but I wanted to post about this because there have been a lot of media companies (Goldman Sachs) out there that put San Diego in their headlines as one of the markets to take a hit in prices, but I don't see it happening anytime soon unless we really see an increase in our inventory supply.  A lot of these media companies are just putting headlines out there for click bait and not actually looking at the data.

Demand for San Diego housing has and will continue to be one of the most desirable and competitive markets in the US.

 Hi Steve,

There is lots of these Goldman type articles and people coming out and saying there is going to be a CRASH or correction.  We cannot see the future but we can sure READ data.  What I have found is that NONE of these DOOM and GLOOM media pieces are ever backed by DATA to support.  It always comes down to supply and demand, before the last crash in 2008 go look up how many homes were on the market in SD, 27K I believe and now there is less than 3K.  Yes the FEDS pushed rates down, the 30 year hit 7.5% and the market STOPPED, now the 30 year fixed is high 5's and tons of offers on properties.  We also did NOT build enough here or anywhere since 2009.  We will keep watching but we would need a massive increase in supply or the 30 year fix to go to 7.5% again to slow things down.  Demand can change quickly, but supply is the challenge and when lots of people are sitting on sub 4%, 3% fixed rates, they are NOT very motivated to do anything.

Quote from @Josh Yame:

Hi BiggerPockets! 

I'm both new here, and new to the RE investing game. I had a question about how to estimate rents for a home with a garage ADU conversion.

I'm using Rentometer to plug in rents for my area and using the median rent to estimate revenue for properties I'm looking at.

It seemed slightly implausible to assume renters would pay the same for a 3/2 SFH without a garage (as it's been converted to an ADU) as they would for a 3/2 with a garage. Similarly, for the garage-ADU dweller, I'm not sure they would value a garage 1/1 the same as a more traditional 1/1 apartment. In your experience, is there a significant discount factor for ADUs and homes with garage ADUs, or do they rent for roughly rentometer rates all things being equal?

I don't want to over-estimate rents and end up on the wrong side of the cashflow math, and figured you experts would have a ton of experience here and know whether homes with garage ADUs rent for close to median rates, or if there's a big discount do to the loss of garage space and having to share the house with another tenant.

I'm looking to buy in San Diego, in case that's relevant.

Thanks in advance for the help!

 Hi Josh,

Everyone has great comments on here and feedback. I work with ton of real estate investors that have done every type of ADU conversion or new built. The rents have NOT been an issue and also keep in mind you are building/bringing a new unit to the market. Make it nice, clean, put all the amenities you can and getting rents close to a NON- ADU unit have not really been an issue. Maybe this unit is smaller than the normal but there is a lot of ADU's that are small and getting great rents. Looking at comps, maybe even driving competition that is listed on the market so you can understand the type of finishes, quality and what type of product you need bring to the market will help you understand what you need to do to maximize rents. If you want to chat let me know, I am local here in SD 619 302 2020 :)

Quote from @Lindsay Bowman:

My offer just got accepted on a 3 unit place. After looking closer I realize there’s only 2 addresses and Redfin has it listed as a single family. Im told all units are permitted and the “unit” that doesn’t have an address is attached to the original construction. My question is, is it legal to rent that as a unit even though it doesn’t have its own address? Im assuming it’s permitted as an addition not as an adu or else it would have an address right? 

Thank you in advance!

 Hi Lindsay,

Is your lender able to get this through for you?  If you want to chat let me know, I work with a ton if RE investors and I am one my self and have ton of experience with this.  This is more of a conversation.  Call me if you want to chat, I am here in San Diego and been doing loans for 19 years.  If you can get it permitted the risk is less but there is risk.  Remember San Diego needs units but it does take time to get approval.  

Kenny 619 302 2020

Quote from @Ronalyn Recaido:

Hi everyone, my name is Ronalyn, I am a 26-year-old in San Diego looking to purchase my first home in the next 2-3 years.  

I'm looking to house hack and I want to find a lender who will allow me to add rental income to my DTI. Ideally, I'd also want to use an FHA loan. Has anyone gone through something similar and if so, do they have a lender they could recommend to help me with this process?

Looking forward to hearing from you all with any tips and resources. Thanks so much!

Hi Ronalyn,

I am a local mortgage broker in San Diego, I work with a TON of house HACK buyers and can walk you through the process.  I would love to help you out and walk you through the process.  Let me know a good time to chat! :)

Quote from @Minna Reid:

These denial type posts were also very popular in 2007. 

There's a lot more at play here than just the quality of mortgages, which by the way is not all that anyway. 

 Hi Minna, my post are looking at DATA, no guessing here or denial.  Go look at my other post that go through the DATA.  The people that are in denial are the ones that guess and don't look at the data.  I just keep looking at all the future and current data to see what is changing to cause a BIG housing correction.  No one knows the future BUT looking at what is happening week/month over month tell the real time story.  

Residential lending standards have come a LONG way since the 2008 GREAT recession. It is much harder to qualify for a mortgage today than it was before the 2008 recession. Today 95% + of loans qualify show income in the form of tax returns, w-2, retirement income and reported self-employed income. There are alternatives to this, 12/24-month bank statements or maybe a DSCR loan on an investment property but those loans make up such a small percentage of the overall loans. Prior to 2008, the JOKE was “all you needed was a heartbeat and pen” to get a loan and unfortunately it was that easy to get a loan.

Today the average credit score, profile of the borrower, ability to repay, type of loan products and down payments are the BIG difference. The days of the options ARMS, teaser ARMS and basically the loans set to make a borrower fail have gone away.

85% of Americans have an interest rate of 5% of less and out of those mortgages about 95% of those are a fixed rate mortgage. Over 50% of those fixed rate mortgages are under 3%. Borrowers took advantage of the low rates and locked in low fixed payments and are sitting in a really good position.

Do you think this is helping the housing market avoid another CRASH?

Below I provided charts to show that lending standards are about 80% better.

The chart below what I wanted to point out was the private securitization loans, if you notice how they are such a small % today compared to back before 2008? Those are the loans that are created and sold on the secondary market, think of NON-QM loans today and before 2008 well those were ALL the loans that were very easy to get and had a BIG impact on hurting the housing market when the market had a correction.

The chart below shows a massive drop in ARM loans after 2008.

The chart below you can see the average credit score go UP since 2008 for mortgages.

Quote from @Breanna Wethey:

Hello! I’m excited to learn more about real estate investing, and to see what the Bigger Pockets community has in store. I would like to find advice and resources in the North County San Diego, CA market. I’m interested in house hacking within the next year or 2, but I am not sure if it is possible for me in the expensive San Diego market.

Thanks !

Bree

Hi Bree nice to meet you and welcome to the real estate game.  I have helped so many clients house HACK in San Diego.  Please reach out, would love to have a chat, learn about your goals and see how I can help.  Been in the RE game for almost 20 years :)