All Forum Posts by: Nicholas Smith

Most of the Zoning there is R-2 (duplexes). As @Michael Ambrose said, they will require some capital to start off plus a good chunk of ongoing maintenance if you were to hold them. Most of the owners who purchase duplexes here do Summer/Winter lease terms. During the Winter they lease the property out to college kids and during the Summer the rent them out on a weekly basis for a significant chunk. The downside is that there is a lot of wear and tear from the constant move-in/move-out plus the addition of the salty air. Some people are renovating and converting to condos. In my opinion, it is too much hassle. It is more of a place for some owners to park their money and bank on the appreciation of the asset.

With California Landlord Tenant Law, you won't really be able to termite the rental agreement without giving them 60 days notice to vacate (I'm assuming that they are month-to-month and not on a signed lease agreement). With that said, you can still market and transfer (sell) the property with a tenant in it, just might limit your buyer pool. I would give your tenants notice that you are selling the property and can expect showings with reasonable notice. There is a C.A.R. form that your Realtor can utilize for this.

Regarding the "Sale Termination Clause": This is language that would have to be inserted into a lease agreement with the tenant, can't be done after the fact or with someone who is on a month-to-month basis.

To notify the tenant that they need to vacate, you just need to provide them written notice (email will suffice). 

1. Talk to your accountant.

2. It is dependent upon your commission income and how you file your taxes. There is a threshold when it makes sense to form an LLC and not (break in taxes in contrast to money need for annual upkeep and book keeping for LLC).

Hey Alex:

My wife and I were in a similar situation 2 years ago. We were initially looking at some home that would require a 4-5 year exit strategy because they were not where we wanted to be long term.  Given that we have two young sons and had moved twice in the past 8 years, we didn't want to do it again anytime soon. She found home that was outside of what we were looking at, but had everything we wanted. Strangely enough, we dubbed it our "forever" home and made the purchase. We have been extremely happy. And like @Joe Homs said, we are not done with the property. We already have plan on what we want to do with it in the future as our needs change, but that won't require buying and moving to another home.

This is a very broad question in which you are going to get a wide range of input on because their are a ton of variables to consider. First is, what type of person, how do you want to run your business and scale. 

1. Type of person - are you planning on doing a lot of sales yourself? If so, you will need to hire someone to handle all the day to day operations business of running a brokerage. If you don't plan on doing sales, you need to have have some anchor agents to rely on for commission. Regardless, you will need to look at the team of agents you will be recruiting and pro-forma out whether you commission incomes can cover the spread of expenses

2. What type of agents do you want to attract (if any). Are you planning on opening a brokerage just to cover your own book of business and not rely on attracting other agents to your brokerage. If you do want to scale up by attracting talent, what is your differentiating factor and what type of agents will you be looking to recruit (seasoned or rookies).

If you are considering opening your own brokerage, I would first find a very good broker owner in your area and go work for them to see what they have to go through and how they have modeled their business. Also, I would try and form a team under that brokerage so that you can find out whether you like managing other agents, and whether you are a good team leader. Not all agents and brokers are good leaders, and that is OK. Most of the time, the top agents are poor team leaders because they are too busy with their own book of business. Also, speaking from experience and to be quite frank, managing agents is sometimes equivalent to herding cats. The barrier of entry into become an agent is quiet low (almost non-existent) so you get a very wide spectrum of capability. I was a sales manager for a spell at a local large brokerage, it drove me nuts. I now manage a 12 person team that is constantly in the top echelon nationwide. We focus on only hiring seasoned agents. Lets us run lean and focus on the types of problem solving that I like to do.

Further, to answer your initial questions:

Curious to know if any realtors have become a broker and started your own firm? - I am a non-competing broker for a team. Right now we have decided to leverage and work under another brokerage (a ton of factors in this). We still contemplate going at it ourselves as a backup plan (always have contingencies). Even though we work under a brokerage, we are completely autonomous and insulated for the most part from them (we don't rely on any of the tech and such). We just leverage their wonderful staff which allows us to cut our overhead cost

How was the transition? - N/A

What do you do as a broker on a day to day basis, and what do you delegate to others? - As a non-compete broker, I manage all the operations for our team which include, but is not limited to, risk-management, planning strategy, escrow coordination, client interaction, analysis, and all around problem solving. I have a counterpart that handles all the marketing aspects of the business and we work hand in hand to make sure that our marketing has a reasonable ROI.

Was it worth it? - How we operate, very much so

What do you wish you knew then that you know now? - Be slow to hire and quick to fire. Vet out your potential agents and make sure they know our expectations. Culture is huge for us, so if someone isn't who they were on the first and second date, get rid of them.

How was it building your team? - interesting. You have to manage personalities and make sure that additions to the team fit withing the team culture. I consider our team family and friends, they are all quirky in their own way and that is what I find attractive.

What are the titles/responsibilities of your team members? Me - operations. Counterpart - Marketing. Principals (team leaders (2)) - making sales and hopping in to drag transactions across the finish line as needed.

Hope that helps, I tend to get long winded and opinionated on this topic. That is because I have a passion for it. Feel free to DM me if you have any other questions.

Priya:

1st, if you are being represented in this transaction, you should consult with your real estate agent. I assume that you are being represented as those questions posed come from the straight from C.A.R. SPQ.

 With that said, here is how we advise our clients: "when in doubt, disclose, disclose and disclose". For item #1, I would highly advise my client to disclose that. For #2: Fill out as much that you know about. Your duty is to disclose all material facts, which can be interpreted different between buyer and seller. Because of this, you would want to try and disclose everything to the best of  your knowledge.

If you have access, I would look into SchoolsFirst Federal Credit Union. We have banked with them for over a decade and absolutely love them. You have to be affiliated with a school district to access them though (through yourself, spouse are close family member). 

Because your tenants have a signed lease agreement with a termination date (which I'm assuming from your original post) than they must vacate the property by the end of the term. This has no consequence with executive order issued by the Governor (that is to halt evictions). So by you notifying your tenant that they need to vacate is enough. Unfortunately they could choose to not vacate, at which time you will have to start eviction process. Also, if you want them out by the end of the lease agreement, do not accept any rent for the month after the scheduled termination date. If you do so, that changes their tenancy to a month to month, which affords them some rights outside of the lease agreement. 

Also, as a disclosure (because we are in CA): I am not an attorney and you should seek the advice of one...

If you go the condo route, I would focus primarily on condos that are south of 7th st. (ocean side). With that being said, I don't like condos for a few reasons:

1) You are relying on the other owners to be responsible in up keeping their units so that it positively effects yours. Yes, this is still the case with SFR, but more accentuated in condos.

2) HOA board - I have severe disdain for HOA's. Having owned, lived and been on the HOA board for a period of my life, that is one thing I will not want to relive. Trying to heard other unit owners around to do what is in their best interest is mind numbing. Also, if you get a poorly managed board it can be nothing but headaches.

Though, plenty of people I know do well in the condo space. I just personally don't like them. Also, take my input with a grain of salt as I'm a very independent and opinionated person. Don't do well with people telling me what to do (board members) or with telling people what to do and not having them meet the task. 

There is some great smaller condo complexes that might fit your needs well. These will always rent out. I would just try and talk to some of the residence to get a feel of the HOA and Management.

I'm a little biased, but I would vote for Long Beach. Our city is going through some great up-scaling and revitalization that will contribute to appreciation growth. Plus, it's just awesome to live here! My business is in OC (Newport Beach). Some areas a good in that price range. Just would not recommend it as much as the LBC. If you ant to try for a little more cashflow, you might consider San Pedro. It's a working town that serves the port and surrounding business, but it is also going through it's own revitalization. There is a cute little area near the ocean that has some small homes for good opportunity.