All Forum Posts by: Max Gradowitz

Very small and mostly lower-than-average income population = lower rents and longer vacancies.  I made this mistake myself buying a 5 unit property in a very small rural town in CA (not Barstow but similar).  I would not recommend it.

It's best to choose an area and then get in contact with an investor-friendly agent in that area. You seem to want to do the latter before the former. The problem with that is that each MLS is location specific, so you can't just view MLS listings from all over CA. You decide you want to find a multi-unit property in a certain city, say Tulare, and then you find an investor-friendly agent in Tulare with access to the Tulare MLS so they can send you listings that fit your criteria.

Find the area first.  Research first, friend.  Research.

I only use Rentometer for accurate rent estimates.  If you scour Craigslist or Zillow or whatever, they are showing units that are for rent.  Landlords can ask whatever they want for rent, it doesn't mean it's fair or on par with the market.  Hell, they may list their unit for rent on Craigslist for weeks before eventually dropping the price later because it's too expensive and they aren't getting applications.

Rentometer, as far as I understand, uses data from rented units.  And it gives a range and median, so if your unit is particularly remodeled and nice you can use the upper end of that range as an estimate, or if your unit is particularly small or a little rough around the edges you can use the lower end of that range to estimate market rent for that unit.

MLS could be useful too because you can view the non-active (presumably rented) listings as opposed to the active ones, but you'll need to network with a licensed agent who has MLS access in that market and have them run those numbers for you.

I practice real estate in Bakersfield and most of my clients are investors.  It really depends on whether you want the house purely for yourself, or if you want to make it a rental property later.  If you want it purely for yourself, the difference between $350k and $200k will be big in terms of neighborhoods, square footage, and amenities.  I'd say it's worth it to go on the upper end of that range for yourself, assuming your lender has told you that you do in fact qualify for up to $350k.

If you want to rent it out later, it's best to stick to the lower end of that price range.  Most of my investor clients buy rental properties in the "sweet spot" for single family home rentals, which seems to be in the $150k to $250k range.  Anything over $300k will be a really nice house but there is less cash flow and it will likely make a less desirable rental for several reasons.  Feel free to PM me if you'd like more details.  That being said, I know people that rent out pricey homes sometimes, I'm just telling you what I generally see.

Contact a real estate attorney for the required documents for a wholesale (PSA + assignment).

Contact a real estate / business lawyer.  Operating agreements are complex and are usually very specifically drafted for your specific type of business arrangement. 

It is best to form the LLC first so you can purchase the property in the name of the LLC. However, this limits your financing to commercial loans, because lenders won't give you a typical conventional residential loan under an LLCs name.

Some people prefer buying SFRs and 2-4 units using residential financing, so they get a loan and buy in their own personal name then transferring to their LLC later. However, it's technically a breach of your loan agreement because residential loan agreements have a clause in them that says if you sell or transfer title, the lender can call the entire loan amount due to be paid in full immediately. Google "due on sale clause" to look up the risks. That's why it's preferable to form the LLC and take title in the name of the LLC first. You don't run the due on sale clause risk. But your financing is limited to commercial financing.

Also, if/when you go the LLC route, you MUST keep rental profits and losses separate from your personal accounts. I'm glad you prefer to do it that way anyway, but keep in mind it's not about preference, its important so your LLC remains legitimate in the eyes of the courts and you will retain your liability protection.

Ha!  Ok, man.  Send those best qualified tenants my way, because I'll gladly take them.

I wouldn't put it in my lease personally.  I prefer to be as competitive as possible.  I want a large stack of applications so I can skim the top of the stack for the best applications.  I want the best tenants, period.  Why would I restrict my ability to get as many applications as possible so that I can pick the most qualified tenant?  What if the best qualified tenant is a police officer that owns a gun personally?  I am not going to pick a less qualified tenant just because they own a gun.

Have you talked to a lender and gotten prequalified yet?  That's what you should do first, so you know what your financing options (if any) are .  If no good financing options are available for you, then consider partnering with someone as a last resort.