All Forum Posts by: Casey Coffey

@Joshua Sinatra Reach out to Josh, he may be able to assist. He is a local investor friendly real estate agent based out of Santa Clarita. 

Quote from @Drew Sygit:

Way to negotiate!

If you're not embarrassed by your offer - it isn't low enough:)

 @Drew Sygit ha! Aint that the truth. 

Quote from @Tim Ryan:

A deal like that is SoCal is good! Congrats Casey.

 @Tim Ryan Thanks man! 

Quote from @Joe Villeneuve:

OK.  First, if you're getting $75/month in CF ($9k/yr), and you put $110k in cash in, your CoCR is 9%, not 9.5%.

Second, and this is the number that counts (% mean nothing, and will lead you to illusions), if you're getting $9k in cash back/year, and you put in $100k in cash, it will take you (if all goes perfect) over 11 years to recover your cost (cash). This assumes there or no CAPEX during those 11 years, which would make that recover of cash take even longer.

Third, your equity is great, but it only has true value when you access it.  Until then. it's virtual money.  The house owns it, you own the  house.  Not the same thing.

Joe thanks for the reply. I was using rough numbers in the original post. If you want to be exact, my CoC is 9.8% after everything was finalized. my plan is to do a cash out refi in the near future to increase my CoC and recycle my funds to put into another property. 

Your 11 year estimate on how long it will take to recover my capital does not take into consideration an average 5% increase of rents per year. Of course capex does come into play, but I have a lot of factors on my side including most major components of the property have been replaced already, including roof replaced 2 years ago, water heater replaced 3 years ago, full house was just repiped, septic system is 5 years old, HVAC system replaced in last 7 years, i do not cover appliances with warranty in my rentals, and the tenant I placed in the property is a single dude who works 60 hours a week and just needs a place to sleep. Not to mention he is very handy so will likely handle most small repairs himself. He moved in this weekend and is already adding value to my property as he paid somebody to paint the garage and wants to install lighting in the garage that he will leave behind. 

The house does not own my equity.. lol. I know where you are coming from when you say that but i am a season investor and know how to tap into and access that equity. As previously mentioned my plan is to do a cash out refi, but if I cant for whatever reason, i will do a heloc for 80% of my LTV at a rate of prime + 2% which I can then use to fund other deals. Additionally, the tenant has expressed interest in purchasing the property and if i did allow him to do that it would only be via seller finance, yes i would seller finance to him while still holding my existing mortgage. 

Investment Info:

Single-family residence buy & hold investment in Elizabeth Lake.

Purchase price: $290,000
Cash invested: $100,000

Elizabeth Lake Property that was initial just a base hit property ended up being a huge win.

Original list price: $420k
Original offer accepted at $350k
Closed at $290k after negotiations
Rehab: $20k

What made you interested in investing in this type of deal?

Original plan was to turn it into two units as it has and upstairs and downstairs entrance as well as a master bedroom upstairs and downstairs. This plan was going to allow me to cash flow but was going to take more capital to complete. After getting the price down to $290k i decided to leave it one unit as was still able to cash flow with less capital needed

How did you find this deal and how did you negotiate it?

This was an on market deal. Listed for $420,000. After 2 weeks on market price was dropped to $400,000 which showed me they were eager to sell. The agent let me know the owner passed away and the seller has no blood relationship to the previous seller and knew nothing about the property. With this information i knew they didn't have any attachments to the property so i offered 350k knowing the home was worth 430k ARV. After home inspection i was able to negotiate the price down to 290k.

How did you finance this deal?

25% down conventional loan. 6.499% rate on investment property, happened to lock rate at the best time of the year a couple days before rates started to go back up.

How did you add value to the deal?

Although it was determined to not be needed, i did a repipe on the property, and performed cosmetic upgrades.

What was the outcome?

Purchased for $290,000, put 25% and put $20,000 in repairs.

ARV: $430,000

PITI: $1950

Rent: $2700

Cashflow: $750

Equity: $217,500

Cash on Cash return: 9.5%

ROI: 150% year 1!

Lastly, .9% rent to value ratio in Los Angeles County which is unheard of.

Property was rented before first mortgage payment so 0% vacancy.

Lessons learned? Challenges?

It never hurts to try. My agent did not want to submit new offer at 290k as she thought it was a slap in the face to the seller and agent. To both of our surprise, they didn't bat an eye, they immediately accepted our 290k offer. Sometimes you have to go with your gut, even your professional agent doesn't have all the answers.

Did you work with any real estate professionals (agents, lenders, etc.) that you'd recommend to others?

Leasing Alert Property Management based out of Los Angeles County is managing this property.

I am looking to connect with sober living operators who can provide references and proof of running a successful sober living business in Los Angeles County, California. I currently manage properties throughout Los Angeles County, and occasionally come across properties that aren’t ideal for long-term standard rentals. Short-term rentals would be a solution, but due to strict short-term rental laws in rent-controlled areas of Los Angeles, options like Airbnb are typically not feasible.

At present, I have a $5 million property in Encino with two units that we cannot rent out short-term due to rent control regulations, and the numbers don’t work for a long-term rental either. I would like to offer my client alternative solutions, and sober living may be a viable option to make this property cash flow.

If you are a sober living operator in Los Angeles County or know someone I can connect with, please feel free to reach out!

@Donnie Tucker I knew the property was a rental because my buddy was friends with the old tenants. He had seen, maybe met the owner before, so he knew it was him doing the work on the property himself. My intent in going over to the property was to see if he was interested in selling it. To my surprise, he was, and even better, he wanted to do a 1031 exchange for a duplex in North Carolina, so I knew he needed help with his timeline in finding a home.

On the title, the property was listed as a 2-bedroom, but at some point, the owner had put up one wall and a closet to create a 3rd bedroom. I made him an offer based on the title showing the property as a 2-bedroom home. Originally, I offered him $300k. He didn’t say much in response to my offer other than he would let me know. A couple of weeks went by, and I followed up with him, leaving him a voicemail. A couple of days after that, he called me and said he was ready to sell but countered me at $310,000. He was also valuing the property based on 2 bedrooms but was "giving a discount" for not using an agent. I agreed without batting an eye. Looking back I probably could said no, 300k final offer and he woulda took it, but losing this deal over 10k would have been stupid. We didn't have a contract; we just both opened escrow.

The only thing it needed was floors, as he had torn all the floors out. He let me put floors in during escrow so I could get the property appraised (this was risky without a contract), but he seemed like an honest guy. I put the floors in, got the appraisal, and they appraised it based on 3 bedrooms, and the value came in at $380k (I did not share this with him). This is how I was able to secure a 10% loan for my additional down payment. Which at the time I didn’t know was possible but I asked my lender and they said it could be done. Additionally, before closing I painted the kitchen cabinets and began marketing the property for rent; Again this was risky, and I was a bit nervous he would back out after I putting time and money into the property without owning it, but I knew he wanted to sell all his California properties so I did it anyways. By the time I closed, I had tenants moving in that same week at positive cash flow. I did not have a mortgage payment for the first 30 days so I got $2400 back in my pocket to use as reserves for this property. This property has (knock on wood) very little maintenance, I have the original tenants still living there and they just asked to renew for another year, so property as been occupied since I purchased it and will be at least for another 14 months.

Also, just for everyone to know, this is in Los Angeles County, along with all the properties I currently own.

@James Hamling thanks James, “Your network is your net worth." If I hadn't ingrained in every person I meet that I am a real estate investor and I buy properties, I would have never found these deals. For these deals and many others I have done, they came from relationships I have created with others. The single-family residence I spoke about came from my best friend, who is not a real estate investor. He let me know the house across the street from him appeared to be being fixed up, so I went and knocked on the door and spoke to the owner. That turned out to be a fantastic opportunity, to which I kicked my best friend a couple of grand and hired my him to finish up the rehab, which by the way, was only about $10k in work, for floors and paint.

The triplex was from a client of mine whose friend was dying of cancer and wanted out of the triplex so once he died, his wife didn’t have to manage the property. I offered him seller financing so his wife could have guaranteed income without the hassle of dealing with tenants. He loved the idea and was open to working with me on payment as I gave him the purchase price he was looking for, so I was able to structure it with cash flow from day one, at the time rents were 40% below market value. Within 2 years, I have raised rents to just under market and placed all utilities into tenants' names (the previous owner was paying utilities), and this property is now a cash king. It was a win-win for both parties. Again, it’s not always about what you know, but who you know. Make it a point to put yourself out there and let everybody you know, know that you invest in real estate. If you do just that one thing, which is absolutely free, you will 100% have a deal come across your desk.

@Ken M. It can absolutely be done in California, and although California makes it very difficult to manage properties due to tenant-friendly laws, if you know what you're doing or have a great property manager, California is an excellent place to invest due to high appreciation. I purchased an off-market triplex that I was able to negotiate seller financing on with only $18k down. I have owned this property for just over two years now, and after stabilizing rents, I am nearly cash flowing $1000 per month on this property. I have purchased many off-market deals in California, but one other that was a great deal: I purchased a single-family residence off-market, negotiated the owner down to $310k, and the property appraised for $380k. Due to the appraisal, instead of the standard 20% down on an investment property, I was able to only put down 10% and get a second loan for the additional 10% down payment. All of this happened at closing, so I currently have two mortgages on this property and am still cash flowing. Cash flow is about $250 per month, but I currently have about $140k in trapped equity in the property. I am going to give it another 12 months to see if rates come down, as my first mortgage has a 6.25% rate and my second has an 8.125% rate. If I can refinance to combine loans and lower rates, my cash flow will significantly go up. If rates don’t go down, I will 1031 exchange so I can utilize my equity.

@Wesley Myers if there is nothing you can do from a legal standpoint, you can take matters into your own hands by putting some sort of block directly in front of the camera, of course, on your own side of the property. I.e plants, small area fence, extension to your wall, piece of wood etc.