All Forum Posts by: Matt Mason

@Tim G., why do you think San Diego is not stable?  I'm not in SD, but rents here in Los Angeles didn't even really dip at all in the Great Recession.  The inland areas of CA really took it on the chin though, more like Phoenix and Vegas.

Have you considered refinancing or a HELOC? Seems like a better strategy. Otherwise, you are going to have to 1031 and will really be under the gun. People seem to make a lot of mistakes doing this. The third option is to sell and pay a boatload in taxes, which will reduce the amount of money you have to play with in addition to writing some painful checks to the IRS and FTB.

I've been in your situation and done some commercial RE and oil investing out of state through syndications. You def. lose control, but I still work full time, so it is the best model for me. Besides NNN or potentially very large apartment buildings, I don't really want to own direct real estate out of state at this point in my life. Haven't taken advantage of my equity in one of my local buildings, but I will likely save that for a local opportunity when it arises.

Sorry to hear about having a difficult tenant like this.  Look on the bright side, at least he didn't pay you in pennies.

@Account Closed,

Thanks for sharing your story.  Somehow I missed you at the Summit last weekend.  Next time I am in the Bay Area, we'll have to connect as I'd like to hear more about what you have done and what you are doing.

Very good point.  When you live in a high income tax state like Hawaii, New York, California or Oregon and invest in a no income state it is actually more of a disadvantage.  That is because you are competing against people from no income tax states who don't have to pay an income tax on that investment, while you have to pay your home state income tax on that investment no matter what.

Compare this to investing in high income tax states where everyone has to pay the same income tax.

I think Grandpa was talking about having the right property just as much in terms of tenant quality and location as much as appreciation vs. cash flow.  A property in a crime ridden neighborhood with low quality tenants may have more problems as far as evictions, tenant damage, theft, tenants arguing with each other, etc... I know that would burn me out a lot quicker than a property without those issues.

 Never really looked in the Bay Area because given my philosophy, I prefer to invest locally first.  At this stage I think both the Bay Area and SoCal are much more at the top of the cycle than bottom.

Looking forward to meeting some of the Bay Area members that I have seen on the forums here as well as hearing some of the speakers that I have followed here on BP. 

In the Bay Area, you guys seem to have a more local focus up there vs. some of the BP meetings I have gone to down here where most people seem out of state oriented. 

As for me, I have been renovating my own residence and I still work a day job so that has taken my time over the last year.  I own two small apartment buildings in Los Angeles and have done some various forms of commercial investing through syndications over the years.  Starting to plan my next steps for the future and will be using things like this summit to help me plot ahead.

I'd say it depends. 

What are you going to do with the cash flow?  Is that $100 material to you?  How long before you could even raise the rents to make it cash flow neutral or positive?  I think I'd be hesitant to pay several thousand dollars to refi a loan at a higher interest rate.  

I think too many on BP think the only thing that matters is cash flow today and ignore building their balance sheets, which can easily be converted to cash flow in the future.

How about a strategy where you refinance it either today or in a few years and pull money out for a new investment?

$1200 for a 2 bedroom in Central LA?  Would have to be very rundown unit in the worst neighborhood possible and even then I would be surprised.

@Account Closed

In theory that plan to go in with a 70% LTV in a Midwestern apartment building via 1031 seems like it would solve her cash flow concerns. However, there are a lot of problems. One, is that LTV would be far too risky for someone with limited income and in their 70's. If she were to go underwater or had problems with vacancy, it seems like it would be debilitating and catastrophic.

The other is logistics.  Out of state low income apartments are not like a bond and are not mailbox money.  How is she going to asset manage these apartments?  How does she feel about flying out to wherever every year or two to check on things or if there are major problems or a management company change.  Usually as people age they are getting out of these type of investments not into them.

Triple net may be a better option, but I would advise against that if this is the only real or main source of income.  Retail tenants can go BK sometimes fairly suddenly even if the risk is mitigated and proper due diligence is taken.  There is always some risk here.

She may not be able to refinance given lack of W-2 income and it sounds like she is not accredited. I'd probably advise trying to do a limited cash out - maybe 40% LTV and using the proceeds for other investments. In any situation, you need to help her evaluate the risk of different type of investments.