All Forum Posts by: Brad S.

Quote from @Jim K.:

Quote from @Brad S.:

Quote from @Jim K.:

@James Dale

Here's my perspective on calculating ARV: @Johann Villalvir  

But you also need to know that the whole "science of appraisal" is becoming more and more guesswork and the profession becoming ever more desperately in need of reform as the years go by. You can't trust that you'll get a good appraisal, not at all, not in the slightest.

Please explain?

OK. In my considered opinion you're all a bunch of flim-flam artists and Zillow.com does 3/4 of your job for you.

Ah, I must've misunderstood, I got the impression you didn't like appraisers. Maybe you should be more clear next time. LOL    But, you're wrong one one point, my estimate is only about 70-80% of appraisers fit into your description, not all.

*********************
... and here is a PSA (Public Service Announcement) for all those that may not know any better. "You may not want to rely much on zillow to do your underwriting for your deals."

Happy Sunday!

Quote from @Jim K.:

@James Dale

Here's my perspective on calculating ARV: @Johann Villalvir  

But you also need to know that the whole "science of appraisal" is becoming more and more guesswork and the profession becoming ever more desperately in need of reform as the years go by. You can't trust that you'll get a good appraisal, not at all, not in the slightest.

Please explain?

Hey @Sean Haran,

Congratulations on doing so well and being in a great position to start your REI journey! If you even do just "average" with your RE investments, you could be in an amazing position in the future!

My 2 cents would be to really "drill down" into what your goals are, where you see yourself in the future, what you want the REI do provide toward that future, etc. Example, if you want to make $10k minimum net monthly cashflow in 10-15yrs, so you have a choice of working or not, then you can reverse engineer your future into what you need to do today to be in that position. You may also want to consider if you want to strictly do sfr investing, multi-family, str, flipping, or a combination of any. That might change over time, as you get more familiar with each option and have more experience.

But, by having a clearer idea of what you want in the future, you'd be able to make moves today, to better put yourself in a position to obtain those goals in the future. That might look like: owning 10 free and clear sfr's which each net $1k/mth cashflow. Then you may choose to purchase 1 rental a year, in a high potential growth (appreciation potential) market, using enough down payment to have a small positive cashflow. Then as you keep on eye on your portfolio, you may decide to exchange the properties into a multi-family throwing off more cashflow, or you could tfr the money to higher cashflow markets, or sell half of them to pay off the other half, etc. Point is there are a ton of options, but well-directed energy is more important. 

I personally have owned out of state (oos) rentals for decades and have no qualms with that strategy. As others have said, having the support of a team is vital for success. And you don't even have to build your own, you can hop on with a group who have already done that and then just vet the team yourself, or find a trustworthy group or person to follow to those areas. 

But, I do differ from one response I read here: I think it can make a huge difference where you invest. In my personal experience, my first 2 houses were oos, my cashflow was ok, my % returns were amazing, but I would've gladly have purchased 1 house in a better potential area, than these. I ended up losing money on them when I sold them about 18 years after I purchased them and they were more of an anchor then a benefit. And even after the big recent uptick in appreciation, they have only gone up nominally, not enough to significantly move the needle.

Quote from @Janet Cho:

I'm definitely interested in investing out of state such as Arizona, Florida, Texas so I'd love to connect with you at some point.  Thank you!

Hey Janet,
Welcome to the RE Investing Community!
I actually have rentals in all the states you mentioned! I think those are good markets to look at, depending on your situation and specific goals. 

Anyway, I would suggest attending some local meetups and/or investment club meetings to immerse yourself into the scene, meet other like-minded people. There are a few in the LA area, depending on where you are located. There is a casual one happening this Friday in Pasadena. You can find it under the events section somewhere or feel free to send me a message and I'll find the specifics for you.

So, based on what you describe, you have a legal quadraplex (4-unit property), which is physically made up of two 2-unit buildings on one legal parcel. 

If you had 2 legal parcels, each with 2 units, then you would have 2 duplexes. If this was the case, you would be able to legally sell either duplex without affecting the other. In your case, the property as a whole (all 4 units) would have to sell as one property, unless you were able to sub-divide the property into 2 legal parcels, each with one 2-unit building.

As far as valuation goes, the best way for 4 units and under properties, is to use the sales-comparison approach, or find relatively similar 4-unit properties which have recently sold. Then adjust for different features and characteristics (gla, bedroom/bathroom, quality, condition, location, etc). I'm not going to go into the details on this.

Using a per sf approach is not typically going to give you an accurate view. It's can be useful for high-view, general market research, but not very good at specific valuation. Example: a 2,000sf, 100yr old duplex on a busy street, backing a freeway will not have the same value as a newly built 2,000sf, modern duplex, with all the bells and whistles, located in the prime location in town. But, they do have the same sf.

The best way to get an idea of value for you would be either to hire an appraiser or talk to a couple of local realtors familiar with 2-4 unit properties in the area.

Quote from @Sean Link:

Got it. Sounds like it was a Benefit/Risk calculation and it paid off. I most likely would've had an addendum written up stating something like, "all monies would be returned to the buyer, if the sale did not close". Just to protect you, the seller. 

But, glad it worked out.  :)

Quote from @Jay Hinrichs:

Quote from @Brad S.:

@Jay Hinrichs

Hey Jay, Do you have credit/FICO requirements for your hard money loans? 

Also, do you do CA, I have a client purchasing a probate that needs some funding.

Thank you

NO I dont run credit..  I am a belly to belly relationship JV partner.. not a lender per se.. but I do a lot of deals and have done many in CA.. I have a CA RE brokers license that allows me to lend in CA legally.

 Thanks @Jay Hinrichs, I sent you a DM

@Jay Hinrichs

Hey Jay, Do you have credit/FICO requirements for your hard money loans? 

Also, do you do CA, I have a client purchasing a probate that needs some funding.

Thank you

My guess is very few,  if any appraisers have come across this situation yet. I haven't (I am an appraiser). If I were to get this type of assignment, I would either turn it down or ask for a high fee, for the extra research and analysis, and potentially additional liability, involved.

There are 2 distinct issues here: 
#1) How the lender will view it and underwrite it.
and
#2) How the appraiser will look at it and approach the valuation problem.
And those viewpoints are not always aligned. In other words, just because a lender tells me how they would like me to view or value a property, doesn't mean I will agree, that I CAN do it that way. A big part of my job is to not create a misleading report.

As an appraiser, we are taught to look at the market, which reflects the value of a property. We look for market evidence to hint at what the value should be. WE don't set the value, the MARKET does. So, the proper question for the appraiser should be: How would the market (typical buyer and seller) view this property?

My guess is they would see it similarly as you, as 5 legally rentable units, or a 5-unit property. If the 5-units on your property are; legally permissible, physically possible, financially feasible, and maximally productive. Then they would most likely reflect the 5-unit use as the property's highest and best use.

It would also seem reasonable to assume that today's buyer/s would look at it as a 5-unit property and be willing to pay for it as such. Therefore, my approach would most likely be to value it as a 5-unit property, against similar 5+ unit properties, utilizing the sales-comparison, the income approach and possibly the cost approach - as a commercial property (5+ units). The Lender can decide to look at it anyway they please, but it won't affect how I approach it.

This group (B4 & AFTER PAGE) - showed up on my feed on an Unnamed social media site I can't stand, but also kinda need. I thought these before and after pics of these houses were interesting and showed what a little imagination and fwd thinking can do to transform a house.