All Forum Posts by: Amit M.

@Brad Rondeau Generally, investing on the West Coast (especially CA) and other more expensive areas like NYC, Boston, etc. is very different from investing in fly over states. Most of the people giving advise above are not familiar with your market. Matter of fact, what normally works for them (cashflow focus) is counterintuitive in places like Orange County.

I think you your investment is a winner, and your perspective spot on! You brought at a good time, you have a good property in a very solid market, and it covers cashflow. You're making good money from loan pay down, and already gained substantial appreciation. It's wise to scale back future appreciation expectations, as you had a big bump the last 3 years.

I strongly disagree with those who state that appreciation means nothing until you sell, or that it can vanish at any moment. 1- an appreciated property will allow you to borrow against it, to pull cash out for another investment. 2- you brought at the bottom of a serious recession, and up already 30%. It's gonna be a cold day in hell if that condo goes back down by 30%.

You also have an investment that is a cinch to manage- fixed up, professional tenants, an expensive location. Try comparing that with 10 houses in a middling hood, with lower incomes, more wear and tear and 10x factor of things that can go wrong!

I could go on. But suffice to say that my market, San Francisco, is even more expensive and crazier than So Cal! We have rent control, nutty pro tenant/anti growth politicians, and even worse cash flow. Have you heard about the protests against the tech, or Google commuter busses here? It made national news- only in SF would (some vocal) people be against tech companies providing free shuttles to their SF based employees. It all leads to an extremely restricted housing supply and hence RE inventory is almost zero. So why are well healed investors tripping all over themselves making multiple offers on seemingly any available property? Because they became very wealthy investing here!

"I'm basically wondering how much thought people investing in dying areas have thought about the future."

Well if the investor him/herself is old, than investing in dying places makes perfect sense. Alternatively, the Goth investor may also be interested in these areas :)

But not me, thank you very much!

thanks for the parking tips!

@Johnson H. you the man for getting an SF meetup going! I'll be there.

For street parking, the meters stop at 6pm, right? Any idea how hard it is to nab a street spot nearby?

Click on my name above to read about my investment strategy. Thx.

@Walt Payne you can dismiss appreciation all you want. I know my market very well, and believe me, appreciation in SF is NOT speculation. Like anything, it takes talent and hard work to capture. It's not like you can buy any SF prop, at any price, and at anytime, but done right you can make bank in desirable and expensive markets. Cash flow is something to be managed, but IMO it's not the best or even likely way to reach financial independence with RE, that's for sure.

@Michael Seeker that is exactly right. You list some good reasons why some props have low cap rates (not to mention that those bldgs usually have strong appreciation to boot :) Usually you need money/previous equity to be able to buy one, so most novice investors are locked out, and hence can't relate/understand why anyone buys them.

@Account Closed Congrats on your purchase. Can you detail us on the existing rents, if you plan to renovate and/or evict tenants, and what the new rents/tenant profiles will be. What's your basic gameplay to take the cap rate up?

@Johnson H. Appreciate your comments but my perspectives are different on three of your points.

1- buy outs of low rent tenants can and do work often (but not always.) It's really a private negotiation between the tenant and bldg. owner.

2- yes it's very hard to buy property in SF (for the reasons you mentioned) but that does not mean the returns are lower. With smart and successful tenant buy outs you can get a very good cash flow, and the appreciation in SF has been phenomenal. BUT, it is a very tricky market to operate in, not to mention that you need significant funds to gain entry.

3- tenants who hoard their unit because they are on rent control are purely milking the property owner! Why should a private property owner subsidize tenants? If SF wants to offer low rent units, tax everyone; one individual should not have to foot the bill. Also, rent control is not means tested. Basically, there are many wealthy tenants who purposely keep their low rent unit forever and use it as a pied-a- terre. They may even own vacation property, homes in other countries, etc, but "claim" their primary residence in SF. This is total BS IMO.

Having said all that, I also agree that attempting to find wholesale deals in SF is next to impossible. Or, you're damn lucky if you find a good one!

@Johnson H. & @J. Martin - I like the idea of a San Francisco meetup! Maybe we could coordinate efforts and alternate monthly meetings, 1 in SF and 1 in Oakland. (I think 1 per month is the right cadence.) I can help secure a place; I can find us something great in the Mission district- BART is right there, and there is free street parking or garages near by too. Plus the Mission has a great atmosphere and lots of cool places to eat and drink at :)

JM is really good at doing all the BP posting promotions, and maybe Johnson can get involved as well. Us three combining forces and efforts should lead to a robust and stable group, benefiting us all. Let me know if you guys are open to it.

sorry, won't make this one (too many good RE things going on right now :)

I'll third what has been said- there should almost be a biggerpockets/Bay Area edition, as not only are our numbers so radically different, they are actually counter intuitive to the rest-of-country investors. Months ago I remember posting about a typical SF deal, only to have people pleading with me; I think it got the worse deal imaginable award or something!

The bottom line is that you need serious money to make money in the Bay Area. It's almost impossible for a starting investor to get in unless you won the lottery, have a trust fund, rocked out an IPO (choose one.)

But for those of us who are already players, accessing existing equity is a great advantage. It's basically trading cash flow for future appreciation. In SF rents have been at an absolute tear. Example: an 800 sq ft unit in the über-tech-hipster mission district rented for $2200 in early 2011. Just re rented it for $3500. Got to admit it was rather fun having people line up/kiss butt/compete. I ended up taking this sweet techie couple who threw in a $200 bonus. Some nice sushi lunches, here I come :) So it's time for me to trade in some cash flow and get another asset under my belt.

I just recently started making offers, and yes I'm shocked that even POS's in lesser neighborhoods are getting snapped up. Lots of Chinese money and established SF families and investors buying all cash. I actually think my best bet is the fool who over prices, then his bldg sits on the market 30-60 days. Sometimes they soften and you can come in with a marginally lower bid and get the deal. The smart sellers put out the teaser price, and watch punters fall all over themselves in the typical bidding war.

So I quickly adjusted my attitude from "find a deal" to "just get something that is ****ing reasonable." I have a very specific building type and neighborhood demographic that I'm targeting. It takes advantage of SF's screwy rent control laws and gentrification. I'm confident if I get what I want that it will be worth $$ hundred of thousands more over the next 2-4 years.

How about all you guys? How bullish are you on appreciation in the Bay Area over the next 2-4 years? The tech bubble/no tech bubble is the sixty thousand $$ question, isn't it!