All Forum Posts by: Matt Leonard

looking for advice:

I bought an $85k, non-warrantable condo as a cash purchase (using my heloc from my primary). There's a long-term, part-time tenant paying solid market-rate rent, and it's turnkey/updated, with low/stable HOA and moderate appreciation. The numbers pencil out great when I ballparked a 30yr note, and my plan was to refi into such a term to payoff the heloc and free that up to look for an additional property.

However, because it is non-warrantable (OO ratios), and under $100k, I'm finding lenders to be few and far between, and with really high loan costs if I were to do a cash-out refi into s longer term.

While the HELOC is a great rate, the term is 2% of balance/monthly - so I'm actually cash-flow negative currently, but building up equity, moving towards cash-flow positive (increasingly so each month, and paying off the loan) very quickly.

Any thoughts here? I'm torn on just riding it out on the heloc at this point and building equity/flow faster vs. paying the higher costs for a refi (and freeing up the HELOC to look for my next door.

Thanks!

Bob, I'm with you. There are deals to be found in California. I'm new - but just closed on my first dedicated rental (I have another, but was a conversion from a 2nd home).

$85k purchase in Sacramento, turnkey SFR that was rehabbed in the past 5 years, and grossing $1,000/month (existing tenant who has been there for 6 years and taken great care of the place). Still in the midst of refinancing it off my HELOC, but once that is sorted - I'll have a solid cash flow (north of $300/m) with minimal cash in.

Bob, the ~2007 crash wasn't a little 10% correction. It was a prolonged, multi-year devaluation that saw some parts of the state averaging a 70% loss in value. Nearly 10 years later, most areas still aren't back to their peak. 

If you are in a position to ride that volatility out over ~10 years, great. But that cycle of boom/bust of housing SALES (and typically what people refer to in valuation) is a lot of risk for most people, and the facts of the economic collapse speak for themselves.

But the RENTAL side doesn't have those same boom/bust cycles. They aren't immune to economy-wide crises, but the volatility is not nearly the same. Cash-flow properties are far better positioned to ride out volatility in housing prices than houses that are focused only on appreciation.

Good article (a few years old now) here: http://www.ppic.org/main/publication_show.asp?i=1009

Appreciation vs cash flow is the core of the debate here, but it seems that when the housing market crashed in ~2008 there are some good lessons. It impacted rental markets far less (at least in California), but appreciation didn't just stall out, it put millions underwater (including investors)

So if appreciation is your primary metric - then that's playing the riskier-but-possibly more rewarding game. Cash-flow seems to be the less-risk-and-more-predictable game. Each have their own pros/cons, and depends on lot on your personal situation.

Does it have to be a duplex? I just closed on a Sacramento condo under $100k, turnkey, tenant-in-place, with solid cash flow. While it's only one "door", it's a start.

I've got a seller who is refusing to release my EMD on a deal, despite the very clear contract violations on their end (standard CAR contract). I had sent a notice to perform, and then ultimately the contract period ended, and I formally cancelled at that point due to seller non-performance. I have since moved on to a different agent as well - and the agent who represented me is completely checked out of this, leaving me on my own.

After initially refusing to release the deposit, the seller's agent emailed me weeks later saying they would agree to release funds to avoid small claims court. But the Escrow company still hasn't gotten their instructions, and won't release until there is mutual agreement. Now, the seller's agent is simply not returning any correspondence, leaving me little option.

Per the CAR contract - it's pretty cut-and-dry about pursuing small claims court, and without good faith reasons -they can be liable for treble (triple) damages as well as legal fees incurred on my end.

It's not a huge sum of money, but given that it's mine, and that the seller will be liable for legal fees associated - I'd like to talk to a lawyer to make sure I'm proceeding correctly. Anyone suggest a RE lawyer in Sacramento for a simple consult?

Related - any tips on how to serve notice to the seller? I've got their name, but only the agent's address.

I'm wondering if anyone has guidance on my rights here (I'm determining if it's worth approaching a lawyer or not).

I'm nearing close of escrow on a property. Two issues came up that make me feel the seller has not operated in good faith:

1) Despite already being in contract, and knowing the inspection date - the seller left a number of items that were listed in the MLS un-done until after the inspection (installing a proper dryer vent, installing a new range and vent, replacing the water heater, and installing a new furnace). The house was a flip - and 95% of the work was done for nearly a month before we entered contract. But they left a few key things, and it struck me as odd, if not strategic that they didn't do these until after inspection - despite the MLS listing these items, and agreeing that all were included/to be done home before I even made an offer

2) The Home inspection came up with a few more things. I made repair requests, they got estimates from a contractor, and we negotiated.  They agreed to credit to me for the cost of replacing the roof. However, the roofing estimate they provided looks like a legit estimate - but there is no phone number  on the estimate -just a company name and a PO Box.  I Googled the company, and they don't have a website but I found a random listing for them, but the number is disconnected.  I called a few other roofers to get my own estimates - but they are nearly double what the seller stated it would cost, and what the credit they offered was.

So - I'm nearing CoE next week - everything is signed just waiting on underwriting to finalize and document prep. What are my rights here?  Are the estimates the seller provided legally bound to be honest and accurate? Perhaps I should have gotten my own before I agreed to the credit amounts/repair requests - but if they did indeed just fabricate estimates, do I have room to back out of the transaction at this point? Seems like they at the very least, weren't acting in Good Faith.

Any guidance here?

Sacramento might just be over 2 hours, but there's stuff in that price range there. I've been looking at a bunch of the McCuen 4-plexes (North Highland and Florin area) which have 2/1 units. Not great neighborhoods but not awful. Lots of supply, Many turnkey/leased units selling for $40-80k, with fairly low HOA (under $200). Rents tend to be $750-850 from what I'm seeing.

There's also single family around $100k in North Sac, lots of small 2/1 cottage types, of varying state of repair. 

@Anthony S. - did you end up making a move on these units? I'm looking at similar units and coming to similar conclusions for you - they seem strong on cash flow, and a low barrier to entry for new investors.

I'm looking for advice/info/others regarding some lower-end investments in Sacramento. Specifically - I'm seeing a ton of McCuen-style fourplex condos (in North Highlands / Foothill Farms area, and also south near Florin) that seem to have strong cash flow, even at market-rate sale prices.

Most units are 2/1, listing for ~$45,000-$65,000 (depending on upgrades), and are renting for $750-850+ right now. HOA's are low - most under $200/mo. I'm calculating ROI on these (assuming 20% down, PITI impounded, HOA fees, and 40% of income going to maintenance/vacancy) anywhere from 10% - 25% on various units. 40% also might be high for maintanece - considering HOA is already covered (depending on the unit of course)

I realize these neighborhoods are older and not likely to see significant appreciation. But if cash flow is positive from the start - this seems like a good move to get into investing, with a fairly minimal debt/cash outlay and build some equity and semi-passive income.

I'll admit - this is new to me, but I'm doing my research. I own/live in Oakland, own a 2nd home in Natomas with my mother and a tenant there. I have modest income but strong credit and cash reserves. 

Anyone else have properties in these areas? Care to share any tips, advice, lessons-learned, or pitfalls I should be thinking about specifically with these lower-end units?