All Forum Posts by: Brad S.

Best way to find out is to tour local rehabbed properties in the area, at open houses or look at them on zillow, realtor.com, etc, and/or just go to the local paint store or the one you will be buying the paint from and ask them what people are using. They are providing the paint to a lot more houses then individual investors. They are the hub for current color trends.

But, I have a question for you.

What are you trying to do? 

What are your goals, with career, investing, etc.? 

I would focus on being clear with that first, then you can see which routes fit.

Hey Johanna, Long time appraiser here, and agent/broker, investor, etc. My main "day gig" has been appraising for 26+ years. The industry has definitely changed majorly over that time period and appears to be in a current state of flux also.

My goal was to learn the art of appraising to understand value so I can utilize that knowledge in investing. So, my goal was RE investing 1st, not an appraisal career. Appraising was to be my means to that goal. 

I started at the local Assessor's office, as a Deputy Assessor Trainee for the largest assessor's office in the country, the Los Angeles County Assessor. It was a job, where I got paid training and  great varied experience to learn something that I wanted to know and possibly have as a career. It was a great situation. But, since my goal was focused beyond an appraisal job, I left after a few years, to do fee appraising and investing. I didn't realize at the time the potential that job had. If I had known, I might've thought harder about staying, but I don't regret leaving. As an example, a couple of my colleagues that were in my training class are still with the Assessor and since their pay is public record, I can see what they recently got paid. In a recent year 1 of them got a total  compensation (including benefits) of $245k and another got $197k. That's amazing pay for a govt job and the retirement package is supposed to be very good. They probably can retire soon with 6 figure pensions if they wanted. Now, this is LA within CA and the largest Assessors office, so public money tends to get thrown around meaninglessly here. I don't expect the pay to be similar in other areas.

So, my first piece of advice would be, if you're looking for a career, i'd definitely check out the local Assessor's office. All in all it was a good job an interesting work, for the most part. It definitely helped with my investing knowledge.

As far as independent fee appraising, that has changed over the years. There is always business to get, but it isn't as plentiful as it once was. Most of the lender business is provided through AMC's, appraiser management companies. They typically pay lower fees and can be challenging to deal with. There are some lenders which do engage appraisers directly, but those are fewer these days and with the lower # of people getting mortgages these days, business has definitely slowed for most of us.

There are other avenues for business and work, like CPA's or attorney's for estate work. When a person passes away they need to have their real estate valued at their time of death for their estate, or some portfolios need to be valued every so often for accounting purposes, etc. There's litigation work, for people with disputes for different reasons, etc.

As far as NJ, I have no idea about the business there. My advice would be to go on Facebook and search for appraiser groups, some are only for appraisers, but I think there may be some open to the public. You can pose your question/s there and possibly get some direct answers regarding NJ. Also, it depends on what your goals are. Since you are on BP, I assume you are interested in RE investing. An independent appraiser career does give you the flexibility to do your own investing, but it can also be inconsistent, causing some financial flux. one positive aspect for me is, I do get an inside, behind the scenes look at some current transactions and deals, which does help me really understand what some buyers are looking for and what they are currently valuing, etc.

Anyway, there is a lot more to say, but not enough time. Feel free to ask me anything.

Quote from @Carlos Ptriawan:

This is actually bigger issue. American these days are complaining home price is so expensive blablabla the very reason why home price is expensive is that one guy or one family is occupying too much space, it is no longer making sense for a 10k square foot house has only three or two people living in it. The solution is to have more people per space available. That comes with regulation that's adding more ADU permit, converting SF to MF zone, more apartment and so on and so on.

That needs a sacrifice by another human (that tends to be richer). 

It's O*K*A*Y for your blockview to be distracted so other human being, could live in the same space like you do.

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I'm not sure if ever made sense for only 2-3 people to live in a 10k sf house, but it isn't my right to tell them what to do or not to do. This is why we are a great country - freedom to live how we/they want.

Sorry Carlos, I respectfully disagree with your 1 size fits all solution. Increased density is only 1 possible solution, but, I for one don't wish to be forced into this 1 solution. Again, we are fortunate to live in a place where we have a choice, to live how and where we want. If we want to live away from other people, we can find property further out, if we want to live in a downtown where more action is, then we are free to do that also. But, if everywhere gets forced toward higher density, those choices get limited, and therefore, our rights become limited.

I know we aren't technically "forced" into that type of situation, but we may end up there by default, if everyone around us is increasing their density, limiting our options.

Also, we occupy a very small portion of land, by %, in this country. If people get priced out of an area, they tend to move on the outskirts or other areas where prices are lower. That's how cities and populated areas grow. Cramming people together is not the only solution.

Per a recent statistic I saw, urban areas take up only 2% of land area in the US, that leaves a lot of potentially available development area.

The only way to preserve a view is to purchase a view easement from pertinent surrounding property owners. Views are not typically a protected right. I understand view easements are sometimes purchased from neighboring properties in New York city, limiting the heights of some of the surrounding buildings and preserving views for other high rise apartment units. Pretty costly though.

Sometimes there are tree ordinances which limit heights of trees on a property, but unfortunately, in this case, it doesn't look like much can be done, except for cooperating with the neighbor and working out a beneficial solution for all.

Quote from @Carlos Ptriawan:

Quote from @Brad S.:

Quote from @Bradley Shuhart:

I have an opportunity to assume a loan at 2.5% in a HCOL SoCal community. Even at that rate I will still be losing about $800-$1000 per month with a renter due to HOA & Mello Roos. I'm ok with a negative cash flow for a couple of years because its in an area that should continue to appreciate. My question is how much is too much negative cash flow? Is there a general rule of thumb or is it based on personal tolerance. Thank you!

A lot of advice and good insight already, but i'll add my $.02

1) First, as always ....it depends. What are your general and specific goals, what is your time frame for those goals, what is your individual financial position (job, income, expenses, expectations with those, etc). 

2) Then, where is the "deal" with this property, is it a "deal" or just an attractive interest rate, what are the potential future outcomes with the property and area (i.e. what are the stats saying, increased population/income trends, new business moving in, etc).

3) And what are you expectations with this potential property/deal, how will it get you closer to your goals (see #1).

I am sure there is more stuff to be added above, that but I'll leave those there for now. On to some other insights.

* Most of us have probably heard this saying before, "Don't wait to be real estate, buy real estate and wait." I agree with that, but what is left out is HOW LONG DO YOU HAVE TO WAIT!  In other words - most all real estate will appreciate over time, but how much time are YOU able to wait for that appreciation, if you happened to buy a relatively high price property at the top of the market, in a time with high demand and low inventory, in an area of a shrinking population you may be waiting a while (many years) for it to get back to even ...hopefully. FYI - I am not specifically speaking of any one area, this is just an extreme general example.

So, how do you think I know this! Yep, I have owned properties for many years and over a decade, which I was finally able to get rid of ...at a loss. A couple of them I had for about 18 years before I gladly dumped them at a loss. And, they cash flowed from day 1, but never made me any significant amount of money - cash flow or otherwise. They felt more of an anchor holding me back from some opportunities. My lesson there was I should of done more research on those local market trends. This was pre BP days and a lot less easily available data.

From reading many posts on BP, my guess is that many on here have only been through 1 market cycle, and most recently that was an unusually fast appreciation cycle. The downturn was about 14-15 years ago and things have mostly been up since then! And my guess is many on here, didn't experience the quick rise of the early 2,000's, only to see it implode later. 

And even less so may be aware of the 1,990's where it took most of that decade to come back to normal. I personally participated in a losing transaction there also - bought at the height (1990) and sold at a loss just before things started to soar again (1997). So, if you think the market can only go up ...you're WRONG!

So, if you are buying a property at a monthly loss "hoping" it goes up at some point in the future, you may want to contemplate how other potential outcomes fit into your current, medium, and long term goals and plans.

Oh, and I have also owned rentals where the rents actually went down! So, I don't believe anyone that tells me that can't happen either. It's not normal, but is possible. But, guess what I have rarely seen gone down .....my home insurance, property taxes, maintenance, capex, etc.

By the way, all properties cash flow....if you put enough money down. It's the returns that are affected. 

With all that said, I have had negative cash flow properties, but there were good fundamentals toward upward momentum in prices. In general, I would try and stay away from negative cash flow, in aggregate (the whole rental portfolio), unless there were some very strong indications of possibilities.

And in general, CA is at a historically low affordability rate. The challenge is predicting which factors which make up affordability are going to move where and when. Those factors are: prices, supply, demand, interest rates, incomes, and all the things that make up those (and some are specific to location). In the past when affordability went low, some upward movement in supply would lead to some softening in prices, assuming stable or lowering incomes. Now, we have many homeowners with the lowest interest rates in history, who are more reluctant to sell or move, as they would otherwise be, this in turn helps keep inventory low, possibly keeping a lower floor on prices or at least, making it more difficult to guestimate market reaction.

 If national and regional index price moving up but your home is losing value after 18 years it just mean you purchase at the wrong market,

I know place like flint Michigan is losing money but nationwide speaking,real estate value follows the money supply distribution model which is always expanding

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Well, yes, I agree I bought those in the wrong market, but I sold them years ago and I'm not sure what the national or regional price index was doing at the time I sold them. My main point is it can be detrimental to just purchase for the sake of owning any RE, as some people seem to promote. There are specific factors which should be considered, and a main one is the time portion of an individual's goals. A 60yr old should have a different time horizon then a 40yr old, and someone wanting to leave their W2 job in 5 yrs should have different time considerations, etc. If the person wanting to leave their job in 5 yrs, would've purchased a home in 2006-07, they would've been severely disappointed in their readjusting time horizon.

"Right" markets don't fix "wrong" timing decisions quickly. Meaning, your underwriting and purchase strategy and decisions would be best altered to try and fit the current market environment. Sure, there is some educated guessing involved, but like you do Carlos, people would benefit from following the data.

Quote from @Bruce Woodruff:

Quote from @Brad S.:

Had to laugh at this....how true...!

Great post by the way....

Thanks Bruce@ 
I always appreciate your posts!

Quote from @Bradley Shuhart:

I have an opportunity to assume a loan at 2.5% in a HCOL SoCal community. Even at that rate I will still be losing about $800-$1000 per month with a renter due to HOA & Mello Roos. I'm ok with a negative cash flow for a couple of years because its in an area that should continue to appreciate. My question is how much is too much negative cash flow? Is there a general rule of thumb or is it based on personal tolerance. Thank you!

A lot of advice and good insight already, but i'll add my $.02

1) First, as always ....it depends. What are your general and specific goals, what is your time frame for those goals, what is your individual financial position (job, income, expenses, expectations with those, etc). 

2) Then, where is the "deal" with this property, is it a "deal" or just an attractive interest rate, what are the potential future outcomes with the property and area (i.e. what are the stats saying, increased population/income trends, new business moving in, etc).

3) And what are you expectations with this potential property/deal, how will it get you closer to your goals (see #1).

I am sure there is more stuff to be added above, that but I'll leave those there for now. On to some other insights.

* Most of us have probably heard this saying before, "Don't wait to be real estate, buy real estate and wait." I agree with that, but what is left out is HOW LONG DO YOU HAVE TO WAIT!  In other words - most all real estate will appreciate over time, but how much time are YOU able to wait for that appreciation, if you happened to buy a relatively high price property at the top of the market, in a time with high demand and low inventory, in an area of a shrinking population you may be waiting a while (many years) for it to get back to even ...hopefully. FYI - I am not specifically speaking of any one area, this is just an extreme general example.

So, how do you think I know this! Yep, I have owned properties for many years and over a decade, which I was finally able to get rid of ...at a loss. A couple of them I had for about 18 years before I gladly dumped them at a loss. And, they cash flowed from day 1, but never made me any significant amount of money - cash flow or otherwise. They felt more of an anchor holding me back from some opportunities. My lesson there was I should of done more research on those local market trends. This was pre BP days and a lot less easily available data.

From reading many posts on BP, my guess is that many on here have only been through 1 market cycle, and most recently that was an unusually fast appreciation cycle. The downturn was about 14-15 years ago and things have mostly been up since then! And my guess is many on here, didn't experience the quick rise of the early 2,000's, only to see it implode later. 

And even less so may be aware of the 1,990's where it took most of that decade to come back to normal. I personally participated in a losing transaction there also - bought at the height (1990) and sold at a loss just before things started to soar again (1997). So, if you think the market can only go up ...you're WRONG!

So, if you are buying a property at a monthly loss "hoping" it goes up at some point in the future, you may want to contemplate how other potential outcomes fit into your current, medium, and long term goals and plans.

Oh, and I have also owned rentals where the rents actually went down! So, I don't believe anyone that tells me that can't happen either. It's not normal, but is possible. But, guess what I have rarely seen gone down .....my home insurance, property taxes, maintenance, capex, etc.

By the way, all properties cash flow....if you put enough money down. It's the returns that are affected. 

With all that said, I have had negative cash flow properties, but there were good fundamentals toward upward momentum in prices. In general, I would try and stay away from negative cash flow, in aggregate (the whole rental portfolio), unless there were some very strong indications of possibilities.

And in general, CA is at a historically low affordability rate. The challenge is predicting which factors which make up affordability are going to move where and when. Those factors are: prices, supply, demand, interest rates, incomes, and all the things that make up those (and some are specific to location). In the past when affordability went low, some upward movement in supply would lead to some softening in prices, assuming stable or lowering incomes. Now, we have many homeowners with the lowest interest rates in history, who are more reluctant to sell or move, as they would otherwise be, this in turn helps keep inventory low, possibly keeping a lower floor on prices or at least, making it more difficult to guestimate market reaction.

@Sebastian Marroquin

Hay Sebastian, I'm sorry I wasn't able to go to this meetup. Are you planning any more?

Quote from @Jim K.:

@Brad S.

Yes, I think I did overstretch there. That 70-80% of appraisers instead of 100% of them couldn't put a reasonable value on a pack of gum, let alone a house, yes, that sounds like a more reasonable estimate. Thanks for setting me straight, Brad.

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Well, I've read some of your previous posts, so I know you're smarter than that and that your passion was just oozing out a little ...so, I just wanted to help nudge you a little.  ... no thanks needed, that's just how I roll.  :)

...But, I definitely don't disagree with your general overview. I have had some terrible appraisals on my own deals and have reviewed many others.