All Forum Posts by: Steven C.

 San Francisco was never really a tech hub until the mid 2000s.  It ceased being a tech hub after the pandemic and the rise of remote/hybrid work.  It's astronomical rise in cost of living is relatively recent, the past 15-20 years.  I don't think we will see a tech resurgence in San Francisco.   It will recover and be a better city than it is today in maybe 5-10 years, but without a very significant tech presence.   There is enough office space in Silicon Valley to absorb all the growth since many companies don't need as much office space anymore

It's quite simple. Just look at your total return upon exit after X months. You can look at whatever X value you want. Create a spreadsheet with your mortgage amortization tables based on home price, loan amount, interest rate. Each row is a month. Add entries for taxes, insurance, maintenance, vacancy, HOA, PM, rent etc.  Each row should show remaining mortgage balance and cumulative cash flow. Scale each row by inflation. Pick the row you want to exit at, say 60 months, calculation your appreciated home price, subtract sales comission and mortgage balance, and voila, you have your total ROI from your initial entry point. Now you can play with your down payment amount to see how your ROI changes. Each factor will play a role. Appreciation, X months held, down payment, interest rate. There is no one rule that says, oh, put the least down payment. It depends on the interest rate and the other factors. If you do this, you'll see exactly the sweet spot for the current conditions and your exit time frame

From interest tracing rules, you can deduct any debt use to purchase a rental property against rental income. One disadvantage of cash out refi is that the interest rate on your primary will be higher than what you can get with a regular primary mortgage. Say you can get a 1M primary loan @ 2.5% but a cash out refi with a 1.5M loan might be @ 3.0%. So you're going to pay a 0.5% premium on your primary in order to get the $500K at 3.0%. You should check whether this is better or HELOC/HEL or getting a straight investment property loan of $500K. I find that HELOCs and cash out refi top out at around $500K, so if you need more, an investment property loan might be a better choice. 

If you want to invest in CA, appreciation has to be in your ROI calculation, not just cash flow. Appreciation will be higher in CA compared to other parts of the country due to stricter regulation and therefore more limited new construction/land, not to mention higher costs.  You can make money with cash flow or more limited or cash flow/appreciation or even negative cash flow and appreciation.  It depends on your goal/time horizon/capital.  If you don't consider appreciation in CA, it's like looking at a growth stock and wondering why the dividend yield sucks.

What is your investment time horizon?  What % is this investment in your overall portfolio?  Without this info, it's hard to say what the best course of action would be.  You should calculate your overall return at your expected time horizon based on assumed appreciation/deprecation, rental income projection, etc.  

I was trying to see how other folks model those expenses. I agree with your ROI strategy. In CA, I look at the total return after selling @5, 10, 20, and 30 years and decide whether to make the investment. What is your appreciation assumption? For Sacramento, I assume 3% annual appreciation. Then I calculate my total return at those points in the future.

I'm curious, do folks normally only consider PITI + PM - rent as cash flow? What about maintenance, reserves, vacancy? For this type of property, in my model, I add $100, $200, $250 per month for those items respectively. Any thoughts? This might be conservative, but everything is relative and I use this to compare investments and worst case return.

Thanks for the info.  John, Akshay - can you please provide some details about your purchase price and rent that you can cash flow $700?  what vacancy, maint, insurance, do you factor into $700?

Hello,

I'm from San Jose, CA and am interested in finding long term buy and hold SFH rental properties. I'm new to all this, so maybe this isn't the right strategy, but I'm not looking for multi-family or a lot of cash flow. I'm looking for long term appreciation and having the rental payments pay the note over over time. Hence I'm looking for a SFH in a good school district that would attract good tenants and appreciate over 10, 20, or even 30 years. Let me know if this makes sense. I'd love to hear thoughts on this.

What communities should I be looking at in the Phoenix metra area?  I'm looking for a 3/2 1500 sq feet.  I'm been looking at closed sales and rental prices in Zillow to get an idea.  Here's my rough ball park numbers:

Location:  Chandler, AZ (Hamilton HS)

Price:  $375K

Down + closing: 25%  $100K

Tax+ HOA + Insurance + Vacancy + Maint per year: $2400 + $600 + $1000 + $1000 + $2000 = $7K

PITI @ 4% = $1343

Cost per month = $1343 - $7000/12 = $1926

Estimated rent:  $2000