All Forum Posts by: Radhika M.

@Aaron J. 4% to 5% is what I have seen in the bay area.  If you get it for 4% they may ask you to pay for staging. If you pay on the higher end they will cover staging and few other small expenses. 

It also depends on the price of you house. whether it is 1 mil house or 100 K house matters on how much commission they may be willing to take. 

@Joseph Weisenbloom Catchy title indeed :)

I have to agree with others posters above appreciation is why I personally invest in real estate :) and it is your friend in the long run.  If your taxes are increasing and rents are not keeping up then it is a problem indeed and you may need a new stratergy.

I am in California and for the negatives here in regards to cost of entry and pro tenant laws I still like investing here long term because of appreciation and Prop 13 where your property taxes can not be increased like you are seeing.

@Jeff B. Thanks for getting back with the info. I just wanted to be sure I did not miss a new change in the law :)

I already deal with rent control for certain properties in San Jose where I invest so I try to keep up to date on these issues.

@Jeff B. As far as I have read the california rules unless you have rent control you can increase 10% or more. The only catch is you need to give a  60 day or longer notice. If you have rent control then it is based on those rules.

If you have any written documentation in regards to the 10% please provide.

@Kyle Scholnick You have still need to answer the key questions:

1) What is the amount of negative cash flow you are talking about?

2) What is the current market value of the property and at what discount are you getting it. Are you getting it 5% less or 10% or 20% discount when you compare to value.

3) How long will the negative cash flow last? That is you need to know what are the chances of rent growth? 

4) when you say you will hold for 20 years. How much is the appreciation the area has seen historically? at what price do you expect to sell in 20 years?

5) when you calculate your numbers account for repairs/capex you will have in 20 years.

@Kyle Scholnick I think the posters above ask questions you need to answer before you consider a negative cash flow property. 

@Account Closed pointed out that he is oaky with negative cash flow for 3-6 months and I am in similar thought process though I am okay with negative cash flow for the first 1 year. 

Also something that we personally did was pay higher than normal down payment ( I like to keep my LTV at 60% or below) just makes me sleep better at night but this doe snot provide high Cash on cash but we are okay with that.

 I wish I could find deals where I had a  Equity built in but have not had much success with that so have not bought anything this year though when we started out this our goal was to buy. 

@Account Closed Sorry for the struggle you are having. I know managing a big sum of money is stressful job, especially if you do not enjoy dealing with money like you describe in your email.

$14Mil is a lot of money and is sufficient to live comfortable even if you do not invest and keep the money in a CD or something like that that does not have risk associated with it. After a certain point it can me more important to preserve the money you have than trying to grow it at pace that has risk.

I think $14Mil is big enough amount to have some one manage it for you especially if you are getting stressed about it.

@Dan C No need to apologize. I was just trying to show you how assumptions and estimates should not be used unless you have  experience in similar properties in the same area.  

@Steve Miller I am not an expert in Southern California but in San Jose where we see similar cap rates or lower in some cases where there is potential increase of the the renal income. Based on my experience having 50K or 5% down is going to be very hard unless you are willing to live in one of the units and get a FHA loan or seller financing.

The commercial loan interest here is closer to 5% from what I see here locally. Also for a 4 unit you will not need commercial loan. You need commercial for 5 or more units. So for residential you can get a loan for 4.5% but this is again with higher down.

For doing value add projects like you are planning you need more capital or partners with capital. 

@Dan C. I know you had good intentions when you did your analysis and posted but your costs and analysis is wrong. One easy example is the property tax. The property tax is different in every state and even every city so don't generalize this. The property taxes in california are closer to 1.25% and the insurance cost as 1% of property is totally weird. for high cost areas where land is more expensive than the building. What I have seen here is 50 to 40 per unit per month. So for all 4 units you will have 200 per month.

The Vacancy also is totally dependent on the area in the area and can not be generalized.  

I am not saying this is a good deal or you should do it. But please put real numbers and do the calculations.

@James Park Also wanted to add one point about it being difficult to build wealth when housing costs are high. I agree with you that it can be difficult to do it but can me done.  I have seen many people who have done it. It is harder but if you are smart, work hard and save you can do it.