All Forum Posts by: Paul Wolfson

Hello. 

In 2019 Los Angeles city council placed new restrictions for AirBnB.

"Only the host’s primary residence can be rented out, defined as the place where a host lives for at least six months per year."

1. With these new restrictions, are you legally allowed to use an ADU as an AirBNB? Since an ADU has a different address than the main house?

2. Since the ADU has a separate address, are you allowed to place a mortgage on it or refinance it? Similar to how if I purchased my house for 500k all cash, I can go to the bank tomorrow and refinance it, effectively placing a mortgage on it and pulling out all that cash.

@Jeffrey Isenberg and @Nathaniel Hovsepian I totally agree that for long term appreciation, it won’t matter if I bought it during a market low or high. However, look at this from a cash flow perspective, not long term appreciation.

If I buy a 1.5 mil fourplex at 3.5%, my mortgage will be 10k/mo.

If the market falls by let’s say 15%, and I buy that same fourplex at 1.35 mil at 3.5%, my mortgage will be 9k.

That’s a $1000/mo difference in terms of cashflow. Isn’t that a big deal?

According to Rich Dad Poor Dad, I received a mixed message. While he says NOT to time the market, he also says to get into position. This is contradictory a little bit.

"As we used to say as surfers: 'There is always another wave.' People who hurry and catch a wave late usually are the ones who wipe out. Smart investors don't time the markets. If they miss a wave, they search for the next one and get themselves in position. This is hard for most investors because buying what is not popular is frightening. Timid investors are like sheep going along with the crowd. Or their greed gets them in when wise investors have already taken their profits and moved on. Wise investors buy an investment when it's not popular. They know their profits are made when they buy, not when they sell. They wait patiently. As I said, they do not time the market. Just like a surfer, they get in position for the next big swell."

The 2001 recession in the dot-com bust, home values continued to rise. This is because the recession wasn't driven by the housing market like the 2008 recession. In fact, it's the strong housing market that got us out of the 2001 recession rather quickly. Having said that, while I don't think prices will dip much nationwide, in California, they may drop up to 15% due to our local housing bubble. That can be $1000/mo in mortgage savings on certain properties. That's a lot.

The real estate agents I talk to say to buy buy buy now. But perhaps they have an agenda? Some of the podcast hosts suggest to NOT buy right now in markets that are ripe for appreciation such as SF and LA. These podcast hosts are instead buying for cash flow in other markets that are opposite of ours. They are not worried about appreciation at this time, at least not until prices dip.

So I'm trying to get an opinion of local investors. I feel that real estate agents may give a biased answer. I don't want to buy out of state at this time.

Are you guys timing the market or are you actively buying now?

Hello everyone.

I live in a very expensive market and am looking to buy my first rental property. While I would love to make my first purchase in my local market it’s not practical as the price to rent ratio is so high. Having said that, I’m looking for advice/recommendations for cities where the numbers can make sense in today’s market.

PS: since this would be my first investment, I would like to avoid fixer-uppers.

I guess my question is, where can the average investor get these metrics?

Hello everyone.

Can you please share the sources where you get your market trends from. Things like the today's median home sales/prices compared to last month/year. 

It would be great if there was a daily/weekly newsletter that gets email that would aggregate and summarize these analytics.

I'm particularly interested in the Los Angeles market, as I know it is its own beast.

@Jerry W. the dilemma here is not whether it’s better to pay rent to yourself versus paying someone else’s mortgage. The dilemma is about the missed opportunities. You could’ve used the down payment you put on your house to instead invest in assets. 

Thank you @Parker Eberhard. This advice is invaluable. 

@Parker Eberhardbut couldn’t have you just rented that same or similar house in that same school district for about the same monthly payment? And used the down payment for buying an asset?

@Bill B. thank you for your insight.

For me, 5 years ago, I bought a 2bd condo for 380k with about 40k down. So my loan was 340k. Today, 5 years later, it's about 315k remaining. So while I could've spent about 150k paying rent, instead I paid 150k in total PITI over the past 5 years. But only about 25k was truly saved as it went to pay down my loan.

In summary:

5 yr rental expense: 150k

5 yr mortgage expense: 125k

However, thanks to high appreciation, if I sold today, it’s valued at about 500k, so if I sold, I would get abut 175k before closing costs and selling fees. 175k that I would not otherwise have. 

I would conclude that in high appreciation markets, in the long term, it would make sense to buy a house (liability), even though you are locking up capital you could've invested in an asset. But only because in the long term you are making good ROI. My ROI seems to be:

175 (total equity) - 40 (8% selling costs of 500k) = 135. 
135/40 (initial investment down payment) = 337%