All Forum Posts by: Max Valdes

@Shawn Ackerman I am of the opinion that this is a major pass. Too many warning signs. 

@Bigger Pockets Community - i'm really looking for someone who thinks this a good deal. What my business partner has mentioned hasn't swayed me from passing on this. 

@Tim Jones Thanks for the input. I agree. Making a crazy lowball offer is the only sound route. But, the seller tried to sell this same property in late 2009 for $499,000 - thus I highly doubt that he would accept anything that low. 

You also mention 'impending market correction is over', I am curious as to why you think there is a market correction coming/in progress. 

@Alex J. Thanks for the input. The numbers used for FHA assumed we would be living in it. Hence the higher out of pocket cost, lower income so forth.

Based on current condition from an exterior walk-through, it does look like the property would need some updating/renovating/repairs. 

@Samantha Klein Rents are within range of market price. Since we have not seen the inside of the property, I could not speak to the condition of them. 

@Paul Krause Interesting approach. My partner nor myself had considered that.  

Be it as it is, the price is much to high. IF an offer were to be made, it would be a very low ball offer as the seller has had it on the market since 04/20/2016. Also just an interesting note, the seller tried to sell the property in late 2009 for 500,000. That is completely absurd, especially considering how property in this part of town tanked. 

@Samantha Klein 1 percent rule property are unicorns in greater los angeles area. The mentioned property has been listed for 190 days. So offering full price would not happen. We have a number in mind for what we think this property could go for, but curious to hear some more thoughts. 

Thanks for the reply!

Hello - currently me and a partner are having discussions over a property that is for sale in the area of Compton, CA.

I will provide the numbers about as accurate as I have them. 

The units are on a main street, sits on about .5 an acre.

Asking price is 575,000 

4 units

Unit A: 3 bedroom/1bath -- Rent is 1400 per month

Unit B: 2 bedroom/1bath -- Rent is 1150 per month

Unit C: 1 bedroom/1bath -- Rent is 840 per month

Unit D: Studio w/kitchen & Bath -- Rent is 675 per month

all units have their own gas/electric meter.

Additional costs:

Insurance per year ~ 1200 per year

Trash per year ~ 4300 per year

Water ~ 4300 per year

Taxes ~ 7000 per year 

Gross income: 4065 per month

insurance + trash + water+ taxes ~ 1400 per month

gross income - (insurance + trash + water + taxes) ~ 2665$ left over per month. 

Assuming we do 20% down (115,000$) - principal and interest come out to be ~ 2300 per month.

So assuming no repairs, no vacancy 2665 - 2300 = 365 left over. ( Yes, assuming no vacancy, no repairs is outright stupid).  

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Now, doing conventional 20% down is absurd. 

FHA 3.5% down -- number looks as follows. If we were to get it, we would likely get the 2 bedroom 1 bathroom spot delivered vacant ( Lets assume for arguments sake that the place passed FHA inspection)

Principal + Interest + PMI ~ 3100 per month

Since we would occupy the 2bedroom/1 bathroom spot...

Gross income would be ~2915

Gross income - (Principal + Interest + PMI) = -185$ Since we are each living in one bedroom this cost would be split 50/50. No problem there. 

Now, we also have to cover insurance + trash + water + taxes -- which from before is about 1400 per month.  Now we have to cover ~1600 per month. Same as before, this would be split between both of us, 800 each. 

( Yes, I know, this also assumes all tenants never vacate, always pay -- and this situation does not occur.)

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Intangibles: 

Just some things to note, both the property on the left and right ( east and west) are same/similar sized lots that are apartment complexes. In the future, this property could be torn down and eventually build a 10 unit complex in its place. (Just an observation)

Very close to public transportation light rail line. 

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My partner and myself have completely different views on this property. One of us believes this is a deal. The other believes that this is a pass. 

I am curious to see what fellow BP people think about this. I would like to give my impression of the property and I will give my partners impression of the property - but I do not want either of our views to influence your thoughts. (EDIT) We have walked the property, but did not see the inside of the units.Will gladly provide his and my opinion on it once this post gets some traction.Will gladly provide his and my opinion on it once this post gets some traction. 

Thank you very much! 

( and if you are in the south bay, LA area -- Private message me, we would love to pick your brain/have a coffee/drink) 

@Steven Gesis and @Edward Casano thank you! 

My plan is to buy a mfr in the Los Angeles area then as time goes renovate it. (a house hack - live in flip) I know it wouldn't cash flow in 99.9% of the situations but in some cases I would be paying less than an apartment. The out of pocket cost would be some cash for covering the mortgage/repairs/water/vacancies. Once again, thank you for your input!

New to BP and I'm curious to hear people's good and bad stories and things to look out for when going the FHA 203 K route.

Another question that I have is, say I personally feel comfortable doing most/some of the renovation work. Can I just pay for the material/tools needed and do it myself - or do I absolutely need a contractor?

Thanks!

Hello Peeps,

Noob here,

I'm looking to purchase my first property soon. I am well aware that properties in general (99.9%) of the time don't cash-flow when purchased in the LBC/LA area (at least at current prices). I'm not playing the 'buy now and wait 5 years and sell at a gain or rent prices will increase game.' I'm seeking to buy and hold. I am considering house-hacking a multifamily since I do need a place to live and I no longer wish to live in the 'parents basement'. Since this is an overheated market, what is peoples consensus on the idea of buy now with the FHA 203 loan program. I would be putting some money out of pocket per month, but on average - it would be less than if it was an apartment. - Yes, I know -- opportunity cost/depends on how long I plan on living in the house-hack and so forth....

I'm also looking at purchasing property out of state as well. Are there any thoughts on this general plan? Bad idea? Good idea? 

Thanks!