All Forum Posts by: Michael Hyun

Yeah - theres a really good youtube video that covers these questions(Sb9 Yotubue Video): 

The way I see it - everyone preaches cashflow, but I think its fine to have some negative if theres good outlook for appreciation. There are plenty of tax strategies to pay nothing on capital gains tax, like 1031 or 121, but you'll have to pay taxes on cash flow. 

In the past 5 years, if you bought a SFH anywhere in south bay area, your home has appreciated at LEAST 300k-800k. How long would it take to cash flow that much?? Cashflow is great, but if your home appreciates the way it does in the Bay Area, you'd be light years ahead of the person who went for $1000 cashflow per month. It's a very different style of investing that most people who aren't from the Bay Area don't understand in my opinion.

I just recently starting looking at Sacramento so I'm not sure where the good areas are. Any Sacramento investors have any good input here? 

@Mike Malyy good points. That's why I'm talking about MTR, not STR. Anything over 30 days I'm not STR you don't even need a permit.

Also, with SB9, you can build a detached duplex unit, which is not an ADU… so two MTR on the same lot. That's be pretty nice if they both cashflowed.

Plus you have to consider the fact that you have to invest about ~$6,000-$10,000 (depending on how big and how nice you want to furnish) for each unit you want to do MTR on. 

Even with furnished rentals, I wouldn't expect great cashflow in Sacramento. I'd expect something closer to break-even or just a little cashflow in higher priced neighborhoods. You have to realize the market is always fluctuating for STR or MTR (mid term rentals). If you can't afford the negative cashflow, I wouldn't risk doing MTR with a home in Sacramento. If something happens and you have to LTR (and now you negatively cashflow) then you're stuck with a negatively cash-flowing property until you sell. My mindset is more like "Even if it was a LTR and negatively cashflow, I'd still be okay. But to sweeten the deal, I'll do MTR while the market is good for it".

If you want big cash flow, then go for the major STR markets and beat the competition. Its more headache but you can cashflow really good compared to a long term investment. If you want to chill and play the appreciation game a bit (maybe you don't care about cashflow rn) then buy a home in a good area - I did a 1031 from my property in Joshua Tree into a SFH in Livermore CA - and try to hold on to it.

@Prachi Metha I would first ask what you want to do - what are you trying to achieve. I managed a STR before and its great cash flow if you find a great home. 2020 was a travel boom for non-metro areas, so places like Joshua Tree had record setting revenues for Airbnbs - That's why major STR markets are super inflated right now. I'm not sure that this will continue because the number Airbnbs popping up there is insane and prices are going to drop when travel slows down. Plus, homes are twice as expensive as they were a year before. The home in Joshua Tree I bought in Oct 2020 went from 225k to 500k in one year. (I bought an old home, I did a full renovation on it, airbnb'ed it for one year and netted 20k, and sold it as a turnkey airbnb a year later). The margins are nowhere near as good nowadays if you want to buy a home in Joshua Tree. Another thing that scares me about joshua tree is that its not a great area. If there were to be a depresssion, I feel like this is the area that would depreciate first and the most.

However, traveling nurses are getting paid even more nowadays since COVID - and they are in high demand. I left Joshua Tree to invest in somewhere more long term like Sacramento, but this is not a huge vacation area in my opinion - at least not compared to Joshua Tree or other areas near national parks. But the problem with sacramento is that I feel like the best located properties don't cashflow. However, you can rent to nurses for an increased rate, thus making cashflow while holding on to the best quality listings - the ones that are the most likely to appreciate and/or be stable in times of depression. 

@Brian Fitzgerald do you know what areas are the best for traveling nurses? I'm thinking about buying a unit with a large lot and perhaps building an ADU and renting them to nurses

@Brian Song no, I don't like San Jose or generally any metropolitan areas for short term rentals. I like purely vacation areas only. The reason is because most people traveling to San Jose are for non-vacation reasons. Work, visiting family, etc. they are looking for the cheapest bang for their buck. However, in vacation markets, people are looking for someplace awesome to spend their weekend and are willing to overspend. I rented half of a duplex in San Jose walking distance to valley fair mall and could barely charge $150 a night. I bought a 225k property in Joshua tree with a PITI of $800 and was charging $200-325 a night because that's a true cvacation market. If you do metropolitan, I'd stick to "mid term stays". However from my experience, traveling nurses won't pay much for rent either. They are also looking for a budget. So even though I am walking distance to a huge hospital, it never worked out for me to rent to nurses - even though I got plenty of requests.