All Forum Posts by: Michael Lucero

Both Dan and Tim have valid points. You will definitely read in a lot of places to not bank on appreciation and buy for cash flow, if you're going to be renting..this is fairly obvious. However, this holds a bit more true outside of California. Historically buy and hold in Calfiornia is not a bad idea, my properties in SoCal increased 20% over the last 1.5 years. However, buying now in California is bit like buying a stock when it's hot, not exactly what you want to be doing, though it could keep going up. It's a bit riskier given the potential for a correction. 

Your choice really depends on what you want, your goals, and what you and your wife place value on. I could tell you what I would do, but that would be based on everything in my life, of which you may relate to 100% or not at all. Personally I would not make a large personal resident purchase in socal with the market like it's been lately, I simply don't value having a nice, cute, make me feel good, beautiful, my own, etc home, more than shielding myself from the potential drop in value. Yes it could go up,  but I don't like to depend on appreciation for my profit. I'd rather buy a place, maybe out of state that cash flows, under market, to have instant equity and ensure I come out ahead each month and not have to worry what the market does. 

Well with the first option you're not really losing any hard/real money upfront, it's only on paper. Yes, you may not have equity (which is something you obviously should always strive to have in a purchase), but you also don't have to pay 20k or whatever in taxes, so you're only out 10k. Furthermore, if the fourplex cash flows, it may not be that bad of a route to take. The only thing that sucks about buying possibly above market is that RE has been so hot lately it would be hard to see big appreciation upside to make up that assumed 30k gap. On the other hand, if you don't take the deal, you're actually out up to 20k in taxes instantly in real hard cash, which hurts more than an on paper loss of 10k on the first property. The other property sounds pretty good, not amazing, but renting it out for 1400 that cost 140k is not that bad. I don't see how you don't cash flow from something like that.

While a lot of people seem to bash craigslist, I've had nothing but success from it. I also use postlets which I think posts on several avenues like trulia, zillow, etc. I don't want to pay money if I don't have  by just putting in a little effort/time. I basically just use all free places to post an ad and have good screening procedures. That's a lot of money to pay someone else to do something that isn't that hard and honestly not that time consuming. I have higher quality rentals which makes my screening/interviewing a lot easier than some other people with different responses. 

The required work would heavily depend on the age and quality of the property, as well as quality of tenants. Theoretically you could have 30 properties and handle them with a few hours a week or 40+ hours a week depending on issues. On the average, to self-manage 30 units you'd either have to have a good contractor and handyman, and then possibly a lawyer and accountant. Or, not have a separate job and do it all yourself.

I think house hacking is good, if you were able to find a duplex and have the other unit pay the mortgage. Depending on the location in socal, you may be hard pressed to find a duplex where the rent fully covers the loan, but if not, at least it can help offset a large portion. That's probably not a bad idea. The other thing as Gene mentioned is, one would think that we are nearing the top and a correction may be coming, who knows though. 

On a side note, I'm also a CPA in Pasadena, so very close to you. If you ever find a deal and need help, such as driving to view the property, I'm more than willing to partner and do so. I have capital, time, and a willingness to help, feel free to connect and message me.

Taxes - you can look them up on the county assessor's website (google it) and input the address. Insurance - just call around to get some quotes, can be like .001%-.006% of house value per year.

Average rents (how would you find a place to rent out for yourself)- look at zillow.com under rent category and input the zip code, look at craigslist ads, and simply google "rent room in __city___"

Have the lease cancelled or renegotiated to market rates before you buy. You aren't running an elederly care house or nonprofit organization. Yes its a "tough" choice but you are just guna get yourself in trouble by having emotions in this case. Who cares how long she had been there, it makes zero impact on the situation. If you are for profit, you probably will or should feel bad at some point down the road for sacrificing a good deal or rental income because you couldn't be "hard". There are market rates and a person should be willing to pay them, if not they should be willing to move. Only risk you have if you dont get this solved before buying is having to evict her if she doesnt agree.

This is really a question you have to ask yourself because it is so dependent on what you feel comfortable with and impact it would have on your ability to find tenants (if you had very stringent late fees and grace periods) or keep current tenants. Im sure everyone on here has done various things and the reason is everyone and all situations are different. There isn't on size fits all. I would however suggest trying to limit your effort and not drive around to pick up rent. It's a waste of your time. You are the "boss" and can create the rules.

Overall though, with people, if you give an inch they take a mile. So my approach is dont give an inch. Make the late fees hurt, like $50-100 or some % of the rent and have it hit every 5-10 days they are late. Its not your job to float hem or be their bank, you provided a service/value and you should be paid on time, it's their responsibility to do so.

Write up a rental agreement, which you can do by scouring the internet for examples and googling required disclosures in your state. Pm me if you have questions.

Create a rental application that you can have people fill out when you show them the place. Again u can google templates or pm me. 

Also make any repairs on the property u want to before finding new tenants. Make sure to take pictures when doing a walkthrough of the property with new tenants.

Find a property management company or if you are guna rent it yourself and market it, write up an ad to post on craigslist, trulia, zillow, etc

Find a site to run background And credit checks on applicants, there are a ton online, i've used rental authority in the past, i doubt they are the "best" or most known but there are a lot out there to use.

Make multiple copies of the keys and some would suggest replacing the locks if someone else owned the property.

Yes its private money. You can use private money for anything you and if they care, your friends/family want to. You do not need an attorney, but whether or not you should get one depends on a lot of factors, especially your relationship with the people and how they would react if you lost all their money by making bad decisions.