All Forum Posts by: Phil Hong

@Logan Allec

$3500/mo to finance $540k? Sounds like you are paying the seller about 7% interest. That's about double what banks are asking. I'm assuming you do not have a 20% downpayment to pursure traditional financing.

You need to account for property taxes and insurance. Those will be your top expenses after the mortgage. Then vacancy, maintenance, and management. $1300/mo doesn't leave much room for all those expenses. 

What are the comps in this area for this type of property? Is it possible to improve the property so it appraises higher and allows you to use traditional financing? If so, do the deal, improve the property, and then refi with a bank in 6 months to bring your mortgage payment down to a more reasonable $2500/mo.

It would be a decent deal if you could get traditional financing. Otherwise at 7% interest I would pass.

@Alick Patrick 

First off, I'm not a CPA. I can only tell you what my CPA told me. 

Operating under a LLC didn't change my tax situation. The LLC is a pass through entity meaning no taxes are collected at the business level. The money passes down to me as an individual and I am taxed according to my personal situation. The LLC, in my case, functions as a liability protection mechanism.

You might be able to get some tax benefits from operating as a corporation (S or C). That's a good conversation to have with a CPA.

That being said, there are a lot of tax benefits from real estate that you can use as an individual. Hopefully you're not under the impression that you need to be a corporation just to take advantage of the tax benefits. 

Also I notice you're from Torrance as well. Send me a PM if you want to get together and chat.

@Alick Patrick 

I recommend not getting too bogged down in the tasks needed to setup a business and just start buying your properties. All of these business setup tasks can be done along the way. 

I have been operating as an individual for the past few years and it hasn't affected my success as an investor. For liability protection I make sure I have $1M liability per property and a $2M umbrella. I figure this will cover 99.9% of lawsuits should they happen. 

@Alick Patrick 

Just curious, what types of deals are you looking to do? If you're just doing the standard deals (buy-and-hold,  flipping, etc) then you probably don't need the "big dog" lawyers and accountants to oversee what you are doing. Standard CAR forms and low-cost providers like LegalZoom do a great job taking care of the majority of situations.

Good luck!

@Mario Lara 

Assuming all your costs stay fixed (highly unlikely) then yes you should make some money the next year. This is because you can raise all your rents by some pre-determined amount usually around 2-3%. 

The bigger question is: why would you want to buy an investment property just to break even? Are you betting on appreciation? If so that's dangerous.

If the market you are looking at doesn't allow a return on your investment, I suggest looking at another market or waiting for a better deal.

Phil

@Shane W. We are in the process of ripping out the lawn in our primary home and replacing it with native plants. We attended a waterwise training class similar to the one @Joshua McGinnis mentioned. We are adding lots of interesting features to our landscaping including a dry river bed, sitting area, and pavers. We believe the end result will be superior to a boring patch of green outdoor carpet. It will require less maintenance (lower gardener bills) and consume less water (lower water bills). Win-win-win!

With the current rebate programs available (as high as $3.75 per sq ft) and companies like Turf Terminators, I think now is the perfect time to upgrade your landscaping and save some serious money.

Phil

@Eric Zunkley 

I typically budget $50 per unit per month for water and sewage. This does not include landscaping and laundry. 

@Alan Gordon 

@Hattie Dizmond 

I echo Hattie's suggestion. Post your properties or some numbers in the Marketplace. I will take a look and if interested I'll reach out to you. 

Good luck!

@Tony Coiro Hi Tony

Welcome to BP and real estate investing. I live in Torrance and know the Hawthorne area well. The South Bay is a great place to live but a dangerous place to invest due to everyone wanting to live near the beach. When you're ready to do something post your goals up here and let us know. Good luck!

Phil

@Eric Zunkley 

Are you interested in investing in Los Angeles or still trying to decide a location to start investing? If you have decided to invest in Los Angeles then it sounds like you are getting stuck on analysis-paralysis. Most of the issues you brought up are simply tenant management issues. You are going to have to deal with these issues regardless so don't let not knowing the details get in the way of your goals. You can always learn these details or hire a competent property manager to help you with these issues.

I have heard many people echo comments similar to @Kimberly T. I agree with all her arguments and I still like to invest in Los Angeles because there are A LOT of renters here. Demand for good rental product is high and that makes it fairly easy to get vacancies filled and raise rents periodically. Also I want to see my properties periodically and prefer not traveling long distances to do so

If you are trying to decide where to invest, start with defining your criteria. Start with what is most important to you and that should help you decide on where to invest.