All Forum Posts by: Ryder Meehan

 Hi Matthew, good questions.  I did get quite a good deal, it was priced below market due to a foundation issue that was less to repair than they thought.  That repair cost was included in my $60K down since the work was down pre-closing.  They were quoted $30K, my guy did it for $10K.

If I sold it I would do a 1031 into a multi-family property or 2 in Florida where I'm currently getting better cashflow than Dallas.

 Yeh, that is definitely another concern - if I factor in around 10% for capex I'm in the red.  This is 1930's fourplex so as with any older property the repairs will be extensive.  If I can get out early I probably dodge any major repair if selling as is or invest to bring it up to move in ready.  The neighhorhood is a mix of fully renovated multi-family properties converted back to single families with owner occupants and multi-family class B's like mine so I'm on the fence there too.

Thanks for the insight @Dan Mackin I appreciate your perspective.  Do you generally find that rental increases trail market appreciation?  I also think I could bump up the rents once current leases expire the end of this year.

Regarding capital gains I was referring to avoiding the short-term gains (25%) but of course I'll still have to pay long-term gains (15%) if/when I sell.

Hello BPers!!!

I pose a conundrum to the forums.  At what point to I sell off my highly appreciated, low cash flowing multi-family that I just bought 6 months ago?  This is on Munger in Dallas, TX (lower greenville area)

Here are the numbers:

Paid: $242,000 (put down: $60,000)

Owed: $180,000

Monthly PITI: $1900

Property Manager: $240 (10%)

Rent Total: $2400

Avg maintenance monthly (lawn care, handy man, etc - I'm out of state): $200

As you can see I'm super tight on cashflow, usually under $100/mo.  My other similar multifamilies are yielding $500+ monthly but I have had them longer.  This neighborhood has appreciated quickly so comps are now in the $290-$310K range as is or if put $40K into getting it all fixed up comps are close to $350-$370K.  I'm not keen on selling and would wait at least 6 months to avoid the cap gains but I'd like to start thinking about my next move.

If I sell I'd probably put it into the Tampa, FL market where I'm doing great cashflow and prices are still low.

I'm interested to hear some thoughts.

To answer your question simply - continue to shoot for a minimum 10%.  The reality in each market will be very different - i.e. you'd never get that in SF out of the gate in cashflow (though you probably could after a couple years of appreciation) and in Dallas, TX that would be a pretty bad cap based on what is normal.

Still, I don't look at anything under 10% anywhere and neither should you =)

This isn't a slam dunk deal but a few considerations that make it look a little better:

1. Tax advantages - don't forget you'll be deducting interest, HOA, property mangement fees and other expense so assume a 25% savings (depends on your tax bracket)

2. Cut out that property manager - unless the place is in a rough area or falling apart it's very easy to self manage with something like RentecDirect.com.  The key is getting quality tenants which should be easy in a hot market like Denver.

3. Vacancy, CapEx and repairs I'd put at 7% each to be more realistic to my experience (unless the place is a mess or in a bad area).

Still, I probably would pass on this deal but I'm not looking in the Denver market so it really might be the best you can do.

 Thanks for the great CNN article share, I'm surprised to see SF at the top of that list with 15% despite rent control!  Must be all the new luxury apartments going up.  It's a great time to own rental property.. but then again, it usually is =)

This is an interesting comparison.  I would argue you might find it hard to get a San Mateo home at $800K though, for what it's worth Zillow has the average at $990K which feels more appropriate to what I've seen them sell for.  It's so hot right now, most will go 20% over list price.

I think it's a little optimistic to bet on a YoY steady 8% appreciation rate, especially for the long term.  God help us in the Bay Area is that does hold up to be true =)

Now on the Houston homes you need to consider the additional expenses of maintaining 4 houses instead of 1 but also, the labor and materials in Houston are so much cheaper it might balance out a little bit.

For me it's an easy choice to opt for Houston in this scenario.  The cashflow is too much higher and depending on how you do taxes also consider the California state tax around 8% while Texas has none.

You may even consider cashing out of those San Mateo properties and re-investing in a garden apartment in Houston while the marketing is ridiculous in the Bay Area though it might get even more insane in the coming years.

I'm not sure how "investors" still play in the SF market, that is unless they bought years ago in which case I applaud you.  Isn't the goal to buy low and sell high?  Buying high and selling a little higher seems pointless.  There are way too many retail buyers to compete with to give any investor any room to work.  

Back of the envelope math, what kind of rent can you collect monthly on that $2.35M duplex + $150K in renovations? My guess is at best around $12,000/mo with each renting at $6,000. PITI is roughly $14,000/mo. Nice investment, net loss of $2K/mo not even including cap ex, management, etc.

SF Bay Area is very solid and a complete blue chip so it's not going to depreciate pending a crisis but buying with appreciation as the goal (and not just gravy) isn't a good bet.

How much better could you do with the $2.5M on a 40 unit apartment building in Florida or Texas?  Someone is still making money in SF but it eludes me, I'm going out of state.

This actually seems like a fairly average deal for the recent North Dallas area where even find a 1% can be challenging.  I'd consider this deal more of a free throw than a slam dunk, it could be a little sweeter if you cut out the property manager.  Push hard for discounts for the roof and foundation before you walk, you don't know if they might give you something like a $10-$15k credit and if not you would have walked anyways.

As others have said, appreciation isn't a strategy to count on but secretly I think this area keeps going up 5% to 7% annually as more business comes to DFW. I have a SFR rental I bought 4 years ago in Richardson for $143K and see comps now for $190K. That said, I wouldn't buy with this expectation but it is a nice consideration.

Good luck!