All Forum Posts by: Marshall Leipprandt

@Amanda Jacobellis My wife Christy and I will plan to be there! We split time between the South Bay and Florida - looking forward to meeting others in the real estate investing space. 

@Maxwell MacVeety Check it out, if you and your wife aren't busy!

@Heath Shepard Great insights Heath. My wife and I also have an LTR on the Peninsula, but in RPV. I really like the feel that the whole PV area provides. Super family friendly, great schools, and never too far from the beach, city life, and every other amenity that LA has to offer.

I think that in general, our experience as landlords in the PV area should be slightly less negative over the long-term with unruly tenants being the exception instead of the rule. Would you agree? 

Do you self-manage this property? If so, which tools/systems do you use for tenant screening and overall rental management? We've really liked Avail.co so far and we've been using it for about 18 months now for our LTR.

@Juwan Parker Hey Juwan, when I raised the rent on my tenant most recently, I wrote a concise and respectful email to them explaining how I've appreciated them being a great tenant, but have decided to raise rent X amount because of market conditions and increased costs.

As a landlord, I was faced with new property tax adjustments, increased internet bill (which I cover), and an increase in lawn maintenance services. In my rent increase, I covered the costs of these increases as well as a little on top to factor for market rent increases.

After their one year lease was up, market rents had increased roughly 7-8% in our area, and I provided that data source(s) to them in my email for corroboration. I ended up raising the rent just around 4% and justified that although I was increasing their rent, I really did value them as a tenant and did not want them to think that I was taking advantage of them by trying to raise rent egregiously high. In my mind of course, I knew that if they chose to leave, I would have to do the work to fill the unit with a new tenant which would take time and energy, but if that is the route I had to go, I could likely have increased rents at that time the full 7-8% and have no issue filling the vacancy.

The email is just to notify the tenant. If they agree verbally, you can then send over the actual new lease agreement for their signature.

@Lori Goldsmith Where exactly in the CA desert is the home? Typically 55+ communities require at least one of the buyers/occupants to be 55+, so generally, investors can't buy these places up and simply rent them to 55+ tenants. At least this is the case in all of the 55+ communities I've researched.

@Maxwell MacVeety I haven't been to any yet but would love to see one started somewhere between Long Beach and the South Bay. I was going to go to one last week but it was NE of downtown LA and would have taken me 90 minutes one way...

I travel a lot back and forth between FL and CA, but would be down to try organize something in our neck of the woods when I'm in CA. My wife and I are both RE investors and would love to meet up with other investors in the area. Torrance or San Pedro could be a good place to organize a meetup. Thoughts?

@Chrissi B. Welcome to BP! How have you settled on those three markets? Do you have any friends/connections in any of those markets? 

With your desired price point, the Midwest is going to be your best bet. However, I would urge some caution in jumping into anything serious out-of-state unless you have been to the market personally, have a connection (friend, family, colleague) that you can trust to give you the scoop on those areas, and have some sort of team built out.

A lot of the Midwest city markets can be highly appealing for us out-of-state investors, but the reality of what some of those markets have to offer in those price points may be less appealing than what you're envisioning. For example, the Midwest is FULL of old properties that will have high maintenance and cap-ex costs. It's not conjecture, its fact. Properties built in the early 1900s with deferred maintenance need more work. They'll look decent when you run the numbers in a spreadsheet to produce an estimated ROI, but they may not be the type of asset you want to own for the long-term. I am from Mid-Michigan and grew up near many of these cities so I know what they look like first hand.

You'll have no shortage of people responding to you on BP saying why Cleveland, Detroit, Cincinnati, etc. are the best rental markets in the country, but just know that with every pro there is a con. More cash flow usually means you'll sacrifice appreciation and vice versa. I'm not saying there is no money to be made in some of those Midwest markets, just be wary because you're an out-of-state investor and you'll no doubt get the pitch from lots of folks on how they've never lost money in a deal and how finding good investments is a piece of cake. 

My recommendation would be to find other other out-of-state investors who have experience investing out-of-state and have good systems in place. They'll probably give you a more honest answer as to which markets are attractive and which to avoid. The last thing you want to do is buy a place for $90K, but $8K into it, cash-flow $200/month for 5 years, then have to slap a new $10K roof on it or upgrade all of the appliances, then decide to sell it at $110K paying $5K-$6K commissions to Realtors and another $2K-$4K in closing costs and seller credits because it has not performed well. A lot of work to not benefit much after its all said and done. 

Of course I am not trying to discourage you from beginning your investing career, but go into things with eyes wide open and don't blindly trust the first person who tells you why their market is the best in the country and that they have a "bulletproof" strategy. If that's the case, they're likely trying to just sell you something.

@Anh Nguyen Wow, hard to beat $300/month for sure! I just sent you a message in your inbox - I'll forward the spreadsheet.

@Jason R. Besanceney Hopefully you'll get a lender to chime in here, but in my experience and in talking to my lenders, it is going to be very tough to get them to include any potential income from your roommates into your qualification - especially if it is a single family home. In the scenario you're describing, the bank is looking at you alone and your ability to make the payments which is why they want to avoid the risk of you assuming property management duties without a proven track record as a property manager. If it were a multifamily, I believe that some lenders may consider a portion of the income from the other units if you have lease agreements for those units through a property manager at closing.

Other buyers may be affording it because they might be going in on a mortgage with a partner, spouse, etc., or they have very high incomes which make their DTI more appealing in the lender's eyes.

@Anh Nguyen All good strategies with what sounds like your stable income and excellent credit. However, if your goal is low effort than having one of your units be an STR may be a little more work than what you're looking for. I manage 2 STRs and have found the work required is manageable but still far more than an LTR. Even with a PM, there are some other considerations you'd have with using a unit or units as an STR.

Overall, I like Option 3 the most because without knowing the exact location, it appears to be the least risky as you'd have the most income (and probably least amount of work) coming in from tenants while having access to the long-term appreciation and equity of a $1.2M property. 

Since you'd obviously not be close to cash-flowing, I recommend you create a sort of net worth analysis spreadsheet/tool to understand how these options would impact your overall net worth in the long-run. I've got one I use if you'd like me to share. It's at least a good starting point, you can tweak as desired for the specifics of the deal. 

If you plan to be in SD for a while, I think house-hacking even when not cash-flowing is still a good strategy since you're overall housing cost will either be reduced or similar to as if you were just renting. Add your stable job, a long-term outlook, and the fact you'll be able to see equity growth via loan pay-down and appreciation along with tax advantages of owning RE, I think you're well on your way.

@Tina Tsysh Does your area in Orange County have STR minimum stay restrictions? I ask because if your minimum stay is 30+ nights, you'd be doing a lot less guest communication/admin than if you have a turnover every 3-4 nights. There are many things you can do to decrease your time doing tedious tasks (getting keypad locks for self check-in, automate guest messages through templates, finding a cleaner that will sync with your calendar, etc). My wife and I self-managed while we were both working full-time and although sometimes things can overlap and be stressful, it was totally manageable.

However, if you feel more comfortable having someone handle all of the management so that you don't have to worry about anything, start with your network of family/friends and see if anyone would be willing to help you manage for a percent of your rental revenue. Even better if someone in your network has experience doing so or at least experience owning real estate or being a landlord themselves. There are also property management companies out there who likely offer these same services, but they'll likely take 20%+ of your gross rents.

If you're footing all of the capital for a deal, I don't think I would bring in an investor on the equity front. Maybe you can find someone interested in putting up 1/4 of the capital and fully managing, while you put up the other 3/4. People partner on these things all the time and you can get as creative as you want on the terms, but the most important part is finding someone you trust and someone you work well with - especially if you'd be mixing capital when purchasing. This is why I would generally lean towards finding someone you can "hire", particularly if you have the means to actually fund the deal yourself.