All Forum Posts by: Nathan Yee

@Kevin Hassold - CapEx is not part of Operating Expenses. Why? Because These generally prolong the life of a property. It's different from a repair, which maintains, rather than increases, the life expectancy. Although this cost impacts your cash flow as soon as you spend the money, you can write it off over 27.5 years (if it's a residential property).

Here's an example:

Gross Scheduled Income

less Vacancy Allowance

Gross Operating Income

less Operating Expenses

Insurance

Repairs

Taxes

Utilities (Electricity, Gas, Water/Sewer)

Total Operating Expenses

Net Operating Income

less Debt Service

less Capital Additions 

plus Loan Proceeds

plus Interest Earned

Cash Flow Before Taxes

less Tax Liability

Cash Flow After Taxes

@Al Williamson - this is an old thread, but I figured you may be able to shed some light on this - since I'm told you have some experience in this arena and you're from CA. 

Do similar rules exist in CA for renting SFH to unrelated persons as they do in Denver (2 people +1 via home occupation permit, for 3 people max)? I can't seem to find information on internet specifically pointing this out. I appreciate any insight you or anyone else can provide.

@Ben Leybovich - Thank you for clarifying. Your example assumes that the owner can rent units at market, but how does the luxury house hack strategy work if you inherit tenants that pay below market rental rates? Generally, most multi-families in LA do not come fully vacated. My understanding of LA's Rent Stabilization Ordinance is that tenants are protected from no-fault evictions, so I wouldn't be able to force market rental rates at will. What's worse, I'd only be able to raise rents 3%/year.

@Ben Leybovich

Thanks for the feedback everyone!

@Derrick Dill - this is what my house hack scenario looked like...but at a much higher purchase price.

@Ben Leybovich - I've read two of your three part(?) blog series on Luxury House Hacking. Not quite sure what Luxury House Hacking is, but I am eagerly anticipating more details which you mentioned would come next (is it Airbnb based on what @Matt R. mentioned?). Thanks for keeping me in suspense.

@Ali Boone - I attended the 8/12 BP event in Santa Monica, but didn't get a chance to introduce myself after the meeting - you were in a couple of simultaneous conversations that I didn't want to interrupt. I'm definitely interested to see what numbers you're working with on your out-of-state, turnkey rentals as a point of comparison.  It's worth mentioning-especially being new-I am favoring more value-add versus yield-based opportunities so I can see what kinds of mistakes I'll make. Let's chat!

@Ray Lai - Thanks for the response. The more I research FHA, the more off-putting it seems especially with requirements including a monthly lifetime MIP and upfront 1.75% MIP. Plus I want to take advantage of the good credit score I have. Perhaps a lender would be able to steer me in the right direction here. It's funny that you mentioned dipping into retirement accounts for the down payment, since this is something I've considered. I do have access to more funds via 401k and ROTH IRA, but, ideally, I'd like to not go there.

@Tim Ryan - Sent you an email and am interested to learn more.

@Brian Ploszay - House hacking is a BP-coined term. In sum, you owner-occupy a property, while renting out rooms/units (depending on the property type). In the ideal scenario, your tenants pay your operating expenses and debt service while you "live for free". I get the boarding house perception, which I'd like to avoid via quality tenants. 

Of course, my desire to invest out-of-state is not without proper due diligence first. This would be contingent on having reliable contacts in the sub-markets I'm evaluating, which would include PMs, GCs, and local banks..and ideally other BP investors.

@Chris Nance- communicating shared goals really helps here and I believe your scenario may come down to having a strong why.  A couple people mentioned books, which can help shift your mindset (and your wife's) and enable more meaningful action. Here are some book recommendations to get you started that have had a huge impact on me:

◾The Millionaire Next Door by Thomas Stanley

◾Rich Dad, Poor Dad by Robert Kiyosaki

◾Retire Young, Retire Rich by Robert Kiyosaki

◾The Millionaire Real-Estate Investor by Gary Keller
◾The One Thing by Gary Keller

Hello BP Community! I'm based in Los Angeles and am looking to purchase my first investment property with about $50K allocated. After attending local BP events and REI clubs, it seems overwhelmingly apparent that investing in out-of-state markets is  a good way to put my dollars to work when it comes to cash flow/appreciation, etc. I believe in the long run this is something I should strongly consider/do.

Currently, I'm battling the idea of whether I should rent in Los Angeles and invest out-of-state or if I should house hack in my local market (where I'd take a negative cash flow hit due to higher purchase prices, but may be able to benefit from appreciation). What would you do?

All feedback is welcomed and appreciated!

@Thomas Jonsson- Found a great podcast episode for this. Refer to Old Dawg's REI Network with @Bill Manassero episode 126. It talks about the top 15 sub-markets to invest, but the underlying point is to focus on tertiary markets near where you live. Texas has great markets. Understand the path of progress via job growth (look at 5 year trends), business development (through biz journals, chamber of commerce, etc), know if market is owner friendly versus tenant friendly, and talk to property managers in the sub-market to understand rentability (is a PM confident in their ability to rent out a unit and quickly). Hope this helps! I received all of this information by attending a local BP event and engaging in a dialogue with the group. Everyone wants to help each other out, so feel free to ask if you have questions.

Old Dawg's REI Network with @Bill Manassero. He's a BP Pro member. Caters to "Seniors", but has tons of good nuggets for all audiences.