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All Forum Posts by: Kristina Heimstaedt

Kristina Heimstaedt has started 6 posts and replied 256 times.

Post: Advice on Rental Appliances

Kristina HeimstaedtPosted
  • Real Estate Agent
  • Newport Beach, CA
  • Posts 259
  • Votes 293

To @JD Martin's point, I think it's a matter of "if it ain't broke, don't try to fix it". I 100% agree when taking possession of a property. The exception to that would be for a property that rents for more than x. 

I leave the number blank because to @Account Closed. Maybe it's a California thing, but no one out here uses black appliances. Black appliances scream 90's Fraiser era. Everything here is white and bright or stainless steel at least when it comes to appliances. I'm sure it's market specific though.

Post: Making the move from single family to multifamily - why do it?

Kristina HeimstaedtPosted
  • Real Estate Agent
  • Newport Beach, CA
  • Posts 259
  • Votes 293

We've taken a slightly different approach. As most people have noted, your pool of buyers for SFRs is significantly greater than multi families. As a result, you typically have significantly greater swings in value for the sake that there is greater demand. 

As @Filipe Pereira mentioned, multis trade based on cash flow and less on individual desirability. As a result they have less significant swings because there isn't much sense to over pay for something that is supposed to produce appropriate cash flow. This is why you hear people say "I just can't find deals". 

We invested heavily in condos in 2010-2012 that have now appreciated by nearly 100% in value. The idea is to sell and either take the tax hit or 1031 the funds into the less significantly swinging multi units. It's been quite disheartening though as most properties are over valued even in multis. 

As a result, I suspect that we will hold, sell another condo or two and then aggressively buy again when we feel that properties are cash flowing better. There is some incentive to wait because property taxes aren't necessarily something you can change. We feel that if we can control that expense, we can focus on making upgrades and force appreciation.

Not sure if this answered your question much, but hopefully it gives you an idea or alternative exit strategies.

Post: Good plan? Over-leveraged?

Kristina HeimstaedtPosted
  • Real Estate Agent
  • Newport Beach, CA
  • Posts 259
  • Votes 293

Don't box yourself in. You need to pivot with the market. If it works now, go with it. Do what you can to look for market indicators and think about potential scenarios/moves you can make if x,y,z were to happen. Essentially, come up with multiple exit plans if necessary. 

You might decide that you want to try an apartment building in which case it might be more than a year before you can afford that down payment. 

Lending changes with time. You might consider getting a HELOC. There are so many different ways to approach investing. Leverage can be scary, but that's why you find people to pay your mortgage and do what you can to increase rents. If you want to, you can refinance your loans on your properties and look at your LTV change over time.

Be free, not boxed in.

Post: Advice on Rental Appliances

Kristina HeimstaedtPosted
  • Real Estate Agent
  • Newport Beach, CA
  • Posts 259
  • Votes 293

It's tough if you need apartment sized stoves. Oftentimes those will actually be more expensive because you're looking for a unique size. I would see if you can't find an appliance exchange provider. There is a local company that I use that will take on appliances from newer homes, clean them up and re sell them with a one year warranty at a discounted rate. It's not unlike buying a car after it has been leased for a 3 year period. Best of luck!!!

Post: Timing the Market? Where are we now? Crash coming?

Kristina HeimstaedtPosted
  • Real Estate Agent
  • Newport Beach, CA
  • Posts 259
  • Votes 293

Bill McBride is the one and only way to go Bill McBride's Blog.  I 100% agree with @Kyle R. in terms of looking for indicators. There's been great job and wage growth. New home sales are doing well and Millennials appear to be moving away from expensive cities and towards suburbs. 

I've heard some developers having concerns about continuing to build as land prices have increased as well as lumber prices by nearly as much as 20%. I've heard some lenders say that they're struggling to get some loans through as a result of appraisals. However, these issues seem to be appropriate checks and balances as opposed to turning a blind eye to some major issues. 

You could argue that this up cycle is likely to be our longest because we had gone so far down the rabbit hole. If a typical cycle is 7-10 years, this one might be more like 12-15. Watch the numbers not your gut. Numbers don't lie. It's why the "Big Short" had some success stories. 

Post: how do I buy 2nd 3rd 4th houses?

Kristina HeimstaedtPosted
  • Real Estate Agent
  • Newport Beach, CA
  • Posts 259
  • Votes 293

Collect rent, keep working, build up equity, go do it again. As banks begin to see that you are a successful landlord, they should be able to contribute the income from your property as overall income. You can also work to pay down your mortgage on your first property and eventually 1031 into a duplex or 4 plex. It's less about how much you're approved for and more about how much money do you have flowing. Especially once you get to 5+ units, the banks care less about you as a borrower and more about the cash flow of the property. Be patient, you'll get it.

Post: Duplex Purchase - Wanting Feedback

Kristina HeimstaedtPosted
  • Real Estate Agent
  • Newport Beach, CA
  • Posts 259
  • Votes 293

Seems fine. Any idea how long the tenants have been there and do those rents seem reasonable for the neighborhood?

If nothing significant has been done since 1986, I would suppose that would be the majority of your upcoming expenses over the course of the next 5-10 years. I might try to negotiate that a bit through the inspection period. 

Seems good so far though.

This situation can be complicated for several reasons, the first of which you've already mentioned. 

1. Eviction - It can be exceptionally difficult to evict someone if you have no direct contact with them nor know their name or who they really are. We didn't necessarily need to evict someone, but even trying to tell someone that we will not be renewing the lease because we plan on remodeling the property is difficult. 

2. Displacement of tenants - Let's say for instance that your tenant who's boyfriend has appeared to move in, does actually live there and you are inadvertently accepting funds from the boyfriend. If for whatever reason the two have a falling out and your tenant decides to move, you technically do not have an existing financial contract with the boyfriend. 

3. Last and most potentially risky are legal issues - This is true for friends visiting the property as well, but there are sometimes greater legal risks with more wear and tear on the property. Let me unpack that. What I mean is along the lines of you will more than likely finish a puzzle faster with more eyes on the puzzle. More time, more bodies, more everything on a property opens more possibilities for risk/exposure. For example, we have a tenant who moved her boyfriend in without telling anyone and works from home and washes down the stairs every day after taking her dog for a walk. I have heard more from this single tenant than every other tenant combined. She has issues with bird poop outside, stairs chipping due to water and impact, puddle in the garage from sprinklers (it's the size of my cell phone and not always there). Don't get me wrong. This tenant is unique that way, but if you can eliminate the risk, it's nice to sleep well at night. 

I think it is several minor "gray" issues that could lead to far more significant black or white concerns. I typically have a clause in the lease indicating that if someone has been staying/living in the property for more than 3 weeks, I need to know otherwise there is a financial hit to the rent totaling roughly a late fee. To me, land lording is all about hoping for the best and preparing for the worst. The next tenant will always bear your burdens of your last tenant because of the lesson you learned the hard way. Up to you and how you choose to handle it.

Post: how to handle the existing tenants

Kristina HeimstaedtPosted
  • Real Estate Agent
  • Newport Beach, CA
  • Posts 259
  • Votes 293

Hi @Dong Yan aka Stella. In Orange County, rents have gone up by about 5% year over year. I personally increase all of my tenants by about 2-5% per year. I would first check the leases. Know exactly when you can increase the rents with that. In the state of California, you can raise rents by as much as 10% with 30 days notice. I would give that a shot across the board and see who buckles. Chances are it won't displace all of the tenants. I would prepare to do it again the following year until you feel that they are at market. 

If they moved in 4 years ago, I agree that they are probably under market, but they might be closer to market than you think given that it was only 4 years ago as opposed to 15 years ago. Definitely try the 10% and go from there. Best of luck!!!

Post: When the bones are good but the tenants are not...

Kristina HeimstaedtPosted
  • Real Estate Agent
  • Newport Beach, CA
  • Posts 259
  • Votes 293

I'm going to echo @Jacob Perez's comment that if you feel uncomfortable in the house, so do other people. You just need to do the math and love the numbers more than you care about the queasiness in your stomach.

It sounds like Ontario might be a little different. We have been in similar situations in the past and we mitigated the issue by offering to return the entire security deposit, no questions asked if they moved by a certain day. You'd be surprised how quickly people are willing to move for that. Also, if you plan on remodeling that unit, you don't necessarily care about the condition that the previous tenant leaves the property. You're going to more than likely gut the kitchen, bathrooms and floors and paint. That just about covers every inch of a property. Expediting access to your property is more valuable than dealing with an eviction or otherwise. 

Side note, if a thread doesn't already exist, there should be one for the scariest things you've ever seen when shopping for real estate. I think that would help people get past the queasiness and focussed on the numbers especially if someone bought the property.

Best of luck, I'm sure you'll do great!!!