All Forum Posts by: Matt Mason

Originally posted by @Michael King:

Originally posted by @Matt Mason:

@Michael King

Except you pay taxes twice on the same money. Combine that with losing the value of compounding, usually makes 401k/IRA loans a losing proposition.

 No, there were no tax penalties. It is a loan that I'm paying back, rather than a withdrawal. 

 You are going to pay the 401k loan back with money you already paid taxes on.  When you ultimately take out money out of the 401k when you are retired you will pay taxes again on those withdrawals.

@Michael King

Except you pay taxes twice on the same money. Combine that with losing the value of compounding, usually makes 401k/IRA loans a losing proposition.

Originally posted by @Brian Bradley:

@Alan M. pretty good. Media driven panic. The prediction is from doctors and the CDC. Not my own words. Hence the quotes and names of sources.  Just passing along useful information in a panic. But how is ur lack of character doing for u based off your reply? I’m perfectly fine, everyone in my family and community and town are. We are not panicking and just taking it with the severity of any virus. Washing our hands and common sense. Trying to get some supplies not because of the concern of the virus but the mass rush on the stores. We need toilet paper.  No point in hysteria or panic. I suggest you look urself in the mirror and ask what the point of a comment like urs was? The numbers still r the number. They have not changed and still a media driven hysteria that if people just exercise precaution and cleanliness we will get through just fine. It’s a respiratory virus that the elderly or those with underlying immune system issues are most vulnerable as they already are with other viruses.  Where was the mass hysteria with the seine flue in 2009-2010?, Barack Obama, first year as president, 60 million Americans infected in a 10-month period, 300,000 hospitalized. 18,000 deaths. This is just 10 years ago now. 1,000 Americans had died, when Obama finally declared a national emergency after a thousand deaths. The media coverage was different. So ask your self how do you feel with your comment. I just see what the cdc and doctors and other med professionals say. Don’t over panic. Don’t touch your face. Wash you hands. Get fresh air.  China has already reported they r in the downside and have almost zero new cases. It will pass. No need for panic, or hysteria, or rude smart %#* comments to strangers to make urself feel better about yourself. Relax and be with your family and friends and maybe do some meditation and inner work on yourself and character if that’s how you talk to people with a different view then you. 

Coronavirus has much much higher rates of hospitalization and death than Swine Flu.  Not even remotely comparable.

Even people who said this was nothing a week or 10 days ago now realize at a minimum that there will be significant economic impacts from this.

Originally posted by @Russell Brazil:

You are thinking 2 dimensionally, here and now, as opposed to 4 dimensionally,...what do things look like over time.  Often areas with high demand that are driving prices higher are also driving rents higher.  Im 10 years into 1 particular rental here in the DC area that when I bought it rented for $1900, today it rents for $2900. 

Exactly.

Even the difference between 3% yearly rental increases vs. 4% becomes very significant over a 10 year period.  Now model out that difference between 2% and 5% and it is beyond huge.  However, people on BP seemed to be obsessed with initial cash flow only because it is easy to measure and don't really consider how they are going to asset manage their properties, grow rents, keep expenses down, and avoid troubled tenants.

Originally posted by @Alonso Escalante:

@Matt Mason

Thank you for your feedback! Would you mind sharing what was your CoC return your first years and what would be a realistic CoC in LA right now?

As stated in the thread, I also wonder how investors are making money in this market as nothing seems to cashflow.

Looking forward to your reply, thanks!

 Like I said it was a trickle at first.  Prob. 2% the first year or so and that was in 2011 and 2013 when pricing was much more favorable.  However, if you just want to buy and sit and do nothing and collect a bunch of cash flow right away then LA is prob not for you.  The cash flow does come, but it can take a few years and some work.

Some people are happy with a few out of state units and a $1k or $2k in monthly cash flow.  That doesn’t work for me as my career keeps me busy and the last thing I want to do is jump on a plane to go half way across the country worrying about a few properties.  I also hate relying on people I can’t meet with easily face to face and neighborhoods i don know and can’t monitor.

I think most people on BP will tell you to go for turnkey or out of state props. as that is what most would have said to me back earlier in the decade. To each their own though.

@Eric Ippolito

When I first bought my buildings I was getting very little cash flow. It was positive after management and reserves, but just a trickle. The good thing about LA properties is that they are always rented (unless you overprice badly). You can turn a unit in a few days unless it is X-Mas.

Fast forward 7 years and rents have increased so much that the increase covers the entire mortgage plus the increase in expenses. Since property tax increases are capped in CA, that is a big deal for keeping expenses from growing. Unfortunately, i don’t think we’ll see the same metrics in the next 7 years, so the timeline will be stretched by quite a bit.

The real money in LA, is finding a neighborhood that is on the verge of gentrifying and fixing up the property appropriately. Strategy takes some money and a little patience but the rewards are huge.

Originally posted by @Caleb Heimsoth:

@Ryan D. I wish all the recession stuff nonsense talk would stop. People have have been crying wolf for 5 plus years now. None of them know anything about economic policy or how this stuff works. They’re just guessing or saying the same thing some other guru is saying.

And @Russell Brazil had my favorite quote on this topic recently (paraphrasing) “if you don’t buy in the good times, how do you think you’ll buy in the bad times?” Answer is you likely won’t because that same fear of a recession now will be a lot worse when we’re actually in one. (Nothing I see indicates we’re currently in one).

This is true.  A lot of people in 2010 and 2011 thought things were going to get worse and never pulled the trigger.  When a downturn does come, it won't be crystal clear as to when things bottom out.

• Do you live in California? Yes - City of Los Angeles
• Have you lived in California in the past 5 years? Yes
• If so, where?  Westside LA
• Will you be staying or leaving? Staying
• Why? Family and lifestyle
• What is your full time income producing job?  Finance for an Investment Manager

I've seen these headlines that everyone is leaving CA, but at least where I live there is really no sign of that at all.  In fact, it is the opposite.  More and more people.  It is just that there is almost no place left to build here except high rise, which is expensive.  Kind of reminds me of Yogi Berra saying "no one goes there anymore because it is too crowded".

As for me, I kind of feel like someone who is observing from the outside.  Once you buy a residence things don't really become much more expensive, especially with Prop. 13 on RE taxes.  The people that do leave here do so because of the cost of living almost exclusively, but I bought my place in 1998 when I was quite young and used roommates to help afford it.  LA was much cheaper back then but had bigger problems IMHO.  Much better city now, but more crowded and more expensive.  

Now as I get older and look forward to retiring in the next few years, I'll look to go somewhere not so urban.  Job market won't be important to me and even on the Coast I can get more for my money as long as not super close to a Downtown.  I can take occasional trips into the City at that point.

I do think some days I could be retired in much of the rest of the country.  Only time zone I haven't lived is Mountain so that is where I'd end up.  I can't deal with the weather of the Midwest any more and the East Coast is just too far from family at this point in my life.  I'd need at least mountains or the beach (preferably both), but could probably live with just one.

Originally posted by @Jennifer Stutland:

I would research a bit more. Many areas in Torrance are rent controlled. What do you mean in terms of potential? Appreciation? Cash flow?  What type of investment are you interested in, and what kind of financing are you talking about? Financing is is a big determinant of the degree of profitability. Personally, I think South Gardena, North Torrance, Old Torrance have the highest potential for future appreciation. But, if you’re looking for longer term stability I’d look in Walteria and West Torrance. 

This is incorrect.  Torrance does not have rent control.  A city either has rent control or it does not.  You must be thinking of the little strip of land of the City of Los Angeles called Harbor Gateway that connects the Port area to South Los Angeles.  Sometimes, a Torrance post office is used for this area since Harbor Gateway is too narrow to have its own.

Depends on what you are trying to do. If you live in CA you are going to pay CA income tax on it no matter where your property is. If you have a property in Texas you are going to pay Texas property taxes no matter where you live, which is why living in CA and owning property in no income tax but high property tax states like Texas is basically the worst of both worlds. If you own property in CA at least you get Prop 13 benefits where your taxes are capped at an increase of inflation or 2%, whichever is less. This is a huge benefit for long time owners of property. For example I’ve owned my primary residence for 19 years as I bought young and the value has increased about 325% but the taxes haven’t even gone up 50% in that time.