All Forum Posts by: Matt Mason

Tough to watch and I totally feel for the owner/landlord. He blamed Section 8, but I don't know if there is anymore risk with Section 8. Where I live there is a long wait list for Section 8 and tenants do anything to stay in the program or they become homeless or have to move out of state. Also, that house seemed too nice for Section 8, but I suppose it is where you live. Here, Section 8 are pretty much only apartments and mostly in the roughest parts of town (some are in moderate parts of town, but still almost always apartments).

It seems to me like a lot of investors focus too much on current yield (am I getting that 1 or 2% of purchase price in rent) and not enough on future rental growth and other factors.

Of course, I know it is very dangerous to try to determine future rental growth rates, but keep in mind a property that has a monthly rent of approx. 0.75% of purchase price that has 4.5% yearly rental growth will have roughly the same NOI after 10 years as a property that has a monthly rent of just over 1% of purchase price that has a yearly rental growth of 2%. The former will also have more appreciation.

Also, the markets with a big rental increases lately are also very expensive most often (San Jose, San Francisco, etc...), but some of the Texas markets have been going up nicely too. The problem with Texas is that they have enormous building going on that sucks up that demand and the cities can sprawl out in any direction to just keep going. Also, they have high property taxes which make a 1% deal not quite as enticing as in other locales.

I guess the key is where do millenials want to go. What cities and what areas of those cities - more urban. Where will the job growth be in future industries like technology and so forth. What markets will be constrained by geography.

Any investor thoughts on the subject?

Helen W

All depends on what you plan to do with the money. I will say holding properties in CA long term makes a little more sense than other markets, because of Prop 13 (since property taxes are the next biggest expense after mortgage interest generally, this can really add up over the years).

Brandon,

Thanks. I will check out that Podcast and connect with Arthur.

Taxes are based on what you pay not what the owner paid in CA. Should be at least 1.0% in CA and probably more like 1.25%.

Call your own insurance company to get a quote. Don't rely on his numbers.

Maintenance and repairs is way too low. I'd budget at least $100 a month per unit if you include reserves replacement for major systems, which you should.

Run the numbers given this and then see what you think.

Try to take a look at comparable properties for sales to see how this stacks up if you are still interested.

Ryan, Thanks. I will try to get a list of wholesalers to potentially investigate once I am comfortable with the whole idea.

Ramon, I like Bakersfield oil and ag economy. However, it can be quite a wild ride there, so you have to be careful of the entry point.

Josh,

Thanks.

We do have a lot in common, because my two properties are in 90004 and 90016. I have done pretty well in 90004 attracting good tenants who are priced out of Silver Lake. In 90016, I'd say the same for being priced out of Culver City and Miracle Mile.

I'll let you know how I progress on the out of state thing. I am going to take it slow as I have time to investigate.

Mehran,

Thanks.

There are def. positives and negatives locally. In LA you have to screen the heck out of your tenants, but the good news is that the demand is astronomical for well located product and people can't afford to buy so the tenant pool is generally much better than in lower cost markets.

Like I said, I am ready to diversify though. Just need to make sure I can get comfortable with being out of town. I have a lot of research to do.

I have been reading the BP blog for a while and now started looking heavily at the forum discussions so I thought it was time for me to create a profile and introduce myself.

I have a tri-plex and a four-plex in Los Angeles purchased over the last several years. Initial cash on cash returns here are lower than say the Midwest, but I like my deals and feel good about the two neighborhoods continuing to gentrify and there is quite a bit of value I can add here as well, which I have started to do. Even though I have a good property manager I trust, I am pretty involved in looking after necessary details.

Anyway, given that I now have a fair amount of real estate locally (including my townhouse) and the market is even tougher here now, I want to branch out and diversify some going forward. I am pretty leery of owning real estate outside my local area, but may try to do something small initially in the future either out of state, where I'd probably have to go with a turnkey wholesaler or Bakersfield, which I like for a few reasons (and I can drive to).

Outside markets I plan to look into are Indy, Dallas, and Houston. I work a full time corporate job, but would like to network with local investors who invest either locally, Bakersfield, or out of state.