All Forum Posts by: Peter D'Auteuil

Aaron - I'm in the LA area as well, happy to have a chat and see if what we do can help you.

Hey there and welcome! California metro areas have diverse pockets, with some being better performing than others from a cash flow perspective. It comes down to income and financing. But cash flow is only one element of return, another being appreciation. Consider this - you could be doubling your equity in one year but operating cash flow negative. Say you invest $50k as a 5% FHA down payment, your property appreciates by $50k, but you lost $500/month in cash flow ($6k total). You still made $43k. That can make sense to a lot of people. That said, it's still possible to buy great deals that pencil out and break even in CA metro cities if you know how to find them. Happy to discuss sometime if you're interested, we work with investors in SoCal

Hi Aaron,

The truth is there is opportunity in every market and investors making money in every market. There is still plenty of opportunity in California, and lots of them will cover the mortgage. We target properties B and C class areas that are "in the path of progress" next to highly desirable towns, in dense areas. California will always be a desirable place to live and you can leverage that with the supply shortage to build wealth. BiggerPockets is a good place to start, but I'd also check out your local REIA group. What part of CA are you in?

Peter

@Hannah Paitchel There's opportunity in your backyard! If you get interested in house-hacking in LA or want to learn about how to get started investing in SoCal, feel free to reach out 

Thanks Bruce. Did I mention budget surplus or GDP? CA GDP is huge and sure so it's debt! Gross domestic product is a measure of growth, how much our businesses are producing, not what budget money our state government squanders. The data showed this before and after any Covid funding from the fed. CA is still growing quickly according to the data, and easily dwarfs every other state. Is it the best place to invest? Absolutely not for everyone, it completely depends on your own situation. 

To your "looking at it as a business" point, most growing businesses do not turn a profit... Take tech startup Tesla for example, it took 18 years to turn a profit, for 18 years spending far outweighed revenue. Did that mean it was not worth purchasing or investing in? 

My point is that despite clickbait headlines, there is enormous amounts of business being done here even with ridiculous taxation and a poorly run government. Agriculture for example, even with water challenges it's some of the most fertile land and best climate we have in the states. Our farms and ports are not moving anywhere. From a real estate perspective this is scarce, valuable land and lots of jobs. The fact that you think that GDP data is a worthless fact is hilarious. I hope you don't consider growth as a worthless measure in your investment approach. If so you may want to take an economics class to learn up on this. Personally I want to stick with my valuable land by the beach, with no desire to move to a landlocked furnace. 

And from a real estate perspective, for your exodus data, -1.3M over 10 years is great, I wish it was larger. Our metros are maxed out already and that's just a drop in the bucket for a state with nearly 40 Million. We don't have nearly enough housing for our 39M people, we really could use more of an exodus. I welcome an exodus! Come down to LA on the weekend and tell me everyone's leaving, please. We have a serious supply and demand constraint here in CA Bruce, incredible demand with limited supply. Our cities cant just build out more and more across a barren expanse. That limitation creates value in supply, that's Economics 101 

Hopefully more will leave, we could use a few less cars on the road and crowding in LA :) 

My opinion - I strongly believe the SoCal Coast, where I do business, will always be a desirable place to be and thus property is and will be valuable. You can move to the desert for cheaper cost of living but you can't bring the beach and weather with you. 

California is the #5 economy by GDP growth in the world behind US, China, Japan and Germany. Glad some other states are seeing some growth though

@Jay Hinrichs That makes sense, I would think so too. Thanks

@Jay Hinrichs good or bad, it exists and want to have it assigned over to the buyer

@Nathan Gesner Thank you for the insight. Honestly in this particular case it amounts to less than a drop in the bucket and is pretty inconsequential but I want to be as thorough as possible, on my deals and for my clients in the future. The thing I would want to avoid in this situation is the past owner trying to make a claim to that debt somehow. What you said makes sense. I plan on drafting an addendum for the seller to sign to make sure. 

@Greg M. I view a rental property as a business and so does the city, and my CPA. But you make an interesting point. If I don't have rights to the debt, are you saying you think (without an written agreement) the seller will have rights, or the debt will disappear? This seems like a grey area to me, but I'm inexperienced. I'm the agent representing myself but am fairly new. The answer I have from my broker is the same, to create an addendum to assign rights to the lease to buyer, but the question was if that is even necessary.

I'm pondering a question regarding unpaid rent. In a particular deal, at least one tenant in a property is behind in rent and will be behind when the buyer takes ownership of the property. Who has claim to unpaid rent after the transfer? Once the sale closes, does the new owner have rights to that unpaid rent now or could the previous owner still have a claim to that back owed rent? 

As far as I know, the buyer would need the seller to assign back owed rent to them and release any interest in the original leases. 

Do any other agents or investors have experience with this particular issue? If the assignment is needed, does anyone know of a specific form to use? 

Any insight is appreciated. Cheers

@Tim ORourke - It's key to live close to work in LA, much better quality of life. Commuting can be brutal!

Generally the areas a few miles inland, bordering the beach cities will have more opportunities. Take a look at areas just outside the highly desired and already appreciated areas - pockets in the path of progress. Not knowing your price range, some cities that might work would be Hawthorne, Torrance, parts of Englewood, Westchester potentially, and possibly Culver City although that might be pushing the commute. 

@Nabil Suleiman is totally right, everyone's situation is different and understanding that matters to you is important. If you are not in LA long term, perhaps renting and investing OOS could be a good call. There is a high barrier to entry in coastal California, but if you don't actually need the cash flow to live on right now, you'll be rewarded in more equity gains than the cash flow you'd get out of state in most cases. It doesn't need to be a home run deal, you just need to participate in the market. When looking for a 2-4 unit to house hack, I'd look at my rent amount that you're paying now or the max rent you can reasonably afford, and use that as the target net payment I'd want to carry after collecting rental income from the other units. (Mortgage payment) - Rental income from other units = your rent. Payment will depend on how much you can put down, but that's a decent guideline for affordability. 

@Brian G. I plan on adding the investment to my profile this week, but happy to chat about it or be a resource to you if I can. Shoot me a message.