All Forum Posts by: Account Closed

Jay,

Not quite the same, but we recently bought a SFH in Oakland with an inherit paying tenant at a good discount. The seller was having a tough time selling it as-is with the in-place tenant. It fell out of contract a few times.

During the due diligence process, we had a talk with the tenant and understood their situation. He helped them find a new house to rent, gave the new landlord first month rent plus deposit, and also gave the tenant $10k in moving expenses. Voila!

Everything in life has a price. We get paid to be a problem solver in this biz. 

Try meetups dot com Brandon. Due to covid, all meetups are being hosted online the last few months. My friend @Account Closed hosts an online meetup regularly. I believe it's called Everything REI.

Good luck. 

Look up your property tax bill. A portion of it is allocated for land, and a portion is for improvements. Depreciation the improvements over 27.5 years.

If you rent out the condo say October 1st, your depreciation for this year is only 3 months. Then it will be the full year next year. Your CPA should know this if you have one. 

Good luck. 

Stephanie,

I asked you to go and check out this flip while we were working on it a few months ago. Not sure if you had a chance to. Anyways, we did well with it. It was an MLS deal, and it was on the market forever too.

@Jerry Chan, we borrowed 85% LTV + 100% rehab loan from Lending Home on this flip. Just be creative in your thinking. It's possible

https://www.redfin.com/CA/Oakl...

We made a run on a fixer-upper in Castro Valley recently. It was listed at $400k.

@DG A., Juan Diaz got it at $625k. I hope he’ll do well. Too aggressive of a pricing for us to chase. 

However, we’re in contract on another house. We’ll share when done if anyone is interested. 

Susan,

We cash flow all day, everyday just like other investments. My group of friends, about 10 of us, own investment properties from San Jose to Mountain View, Redwood City, San Mateo, San Francisco and all the way to the East Bay like Hayward, San Leandro and Oakland. Some of them actually post on BP, but they don't raise their hand and say "here I am."

Investing in high COLA is a competitive sport. It's not for the weak. My neighbor, a hi-tech couple, accidentally found out I invest in real estate here at home. They own a handful rentals in AZ before they know this. They hung out with me to learn the rope. I do volunteer work with the husband. Shortly after, they bought two buildings, totaling 16 units. Within a couple years, they're looking at a minimum of $1M in equity. $1M in equity at a 4 cap rate = $40k/year in income, not including their ROI. The deals they did were just slightly below market value. In fact, I passed one of the deals to them. Within a year, their cash flow has more than doubled. After 3 years of ownership, their cash flow has tripled. Lol! So much for no cash flow in the Bay Area and speculation, blah blah blah.

Another friend bought an 8-unit building in Oakland for $1.25M late last year. Appraisal came in at $1.6M. When he's done stabilizing it, we're looking at a $2.3-$2.4M value. How many rentals do we have to buy OOS and cash flow to get this kind of equity? The kicker is he will cash flow it massively. I used to invest OOS too and learned it the hard way. Then he sold all of his OOS rentals. 

Don't listen to the people who haven't done it, or don't know how to do it. If you want to be part of the 1%, start to think like the 1%. 

Have fun figuring it all out. It's a rewarding journey.

Best of luck. 

Khushbu,

I'm saddened to hear this false narrative being repeated over and over again on BP while the turnkey marketers/providers keep piling on and selling crap rentals for the "perceived" price of gold with their OOS stuff to CA suckers, I mean CA investors. 

To answer your question, it's more profitable to invest in California for the same amount of efforts. Rent control can be a blessing in disguise if you're willing to put in the effort to understand and navigate the regulations. Higher property cost is due to higher demand and desirability. Everything in life has a price. Something is cheap for a reason so is something expensive. 

I don't discriminate whether or not a property needs rehab. If someone wants to sell me a turnkey property at 70-80 cents on the dollar, I'll buy it. I don't have to wait for any market correction. At the same time, if I have to put in the effort to rehab a property to get my 20-30 equity, I'll do it. No one is going to give us their equity. We have to earn or pay for it one way or another. Of course, equity can be had under the right acquisition circumstance such as "distressed or inherited sellers".

Let's lay out a couple of examples: 

1) A $100k OOS flip to make $20k, or a $1M flip here in NorCal or SoCal to make $200k. Very similar effort but the reward is 10x. Do you want to flip 2 properties a year to make $400k, or do you want to do 20 flips to make $400k/year?

2) Learn to scale and look at multifamily rather than single units in our market. Every $1,000/mo increase in NOI is equivalent to $300k gain in equity on a 4 cap (our market). OTOH, every $1,000/mo increase in NOI is equivalent to $120k gain in equity on a 10 cap (cheap market).

Same effort with 2.5x rewards on example 2 above. Scale it up to 10 units and you're looking at making 7 figures/year in value-add. Scale it up to 100 units and you're looking at 8 figures. 

I have done the above so I'm speaking from personal experience. I don't have a job; I don't have anything to sell; and I don't have time to meet anyone for a cup of coffee or lunch except some close friends. I've learned to value my time and share it with whom I deem worthy.

Our time on this earth is finite so the more value we put on our time, the faster it helps us to get to our destination. Then we can enjoy life while we're still young, healthy and can do adventurous stuff. Steve Jobs realized it too late. No amount of money could buy him more time when his time on this earth was up.

Have fun figuring it all out. It's a rewarding journey I promise. In the meantime, stay safe and healthy.

Jay,

We don't have to go back 35 years to find $5k/mo of equity growth. I have a SFH where I bought in 2013 for $440k with 25% down. Rent at the time was $2,600/mo. Currently in the process of doing a cash out refinance. Value is around $950k-$1M. Current rent is $3.6k/mo. When I bought it during the downturn, it was worth around $650k so I didn't care too much with the cash flow. 7 years with $500k in equity. Not too shabby just on one property. My partner and I have more than a couple handful of 6-12 unit buildings where $800k+ equity were gained within 5 years or less.

We just bought a 5-unit building in November 2019 for $1.225M. Our neighbor just sold his 5-unit building for $1.8M that is 1,000sf smaller. I understand there's no cash flow in Bay Area. Sheesh...... 

Andrey,

To steal a few lines from the 3 contributors below. These individuals summed up MY investment approach. We need some form of cash flow to service the debt while let time do the heavy lifting with rent growth, which translate to equity growth and higher cash flow on the back end. Initial negative cash flow is fine as long as we know when we can turn the corner and have the asset sustains itself. The asset doesn't have to pump out a ton of cash flow. I'd rather get $200k in equity upfront then $1k/mo of positive cash flow. 

Did some turnkey provide/marketer take you to the cleaner with a few OOS rentals? As Bill alluded to, cheap assets with the 1-2% rules aren't all they are cracked up to be. Everything in life has a price. These cheap rentals are cheap for a reason. It's unfortunate, but it seems like every wo/man has to learn his/her own lesson. 

@Joseph Cacciapaglia, Many investors are just looking at their year 1 cash flow, but if you're looking at your average cash flow over your holding period (with your expected rent growth), you will make much different decisions. Areas with lower initial cash flow, but stronger rent growth suddenly make a lot more sense.

@Natalie Schanne, both sides are correct.

@Bill F., Big takeaways, Cash Flow and Appreciation both contributed positively to total return, with Appreciation being a big larger.

The most negative contributor to Total Returns: High Rent to value ratios. ie the 1% and 2% rule aren't all they are cracked up to be.

Be greedy when others are fearful. Opportunities are abound right now. Stay safe and healthy everyone.

Now, that our governor Gavin Newsom knows landlords in general have at least 6 months in reserves, he’ll grant a 6-month rent cancellation to all tenants of our CA state. Thanks for starting this thread @Mindy Jensen. You’re exposing us for the socialist-in-charge to take advantage of the landlords. Sigh.... 🤦‍♂️

Jay, sounds like a great opportunity to pick up some properties at a great discount. Price in 2 months of loss rent or debt service plus some buffer. Be greedy when others are fearful, but that’s just me.