All Forum Posts by: Amit M.

@Darren Sager

I'm actually surprised to hear that. Most big time developers focus on churning money in high end markets like NYC and SF, especially in a rising market. Especially given the high building costs, most towers don't pencil out as rentals. There are a few exceptions I see in my market, SF, but most were sold off during the last run up. The buy and hold folks usually have portfolios of existing bldgs.

But this may be changing of recent. Rents have jumped big time in SF over the last three years, and interest rates are low. So maybe some towers do pencil out. I know today a few are being built as rentals (but condo mapped; almost an automatic thing here in CA). The question is if the units will be sold off or not. I also know the rentals are usually smaller spaces- they love 1br and studios as they get higher $ PSF. Optimal condos for sale are usually larger units with nicer amenities. So there is a bit of a clash WRT optimization.

I have the same optimization issue in my much smaller properties in SF. I like to buy run down apartments, but be able to renovate them with enough amenities so in the future they can easily be sold as condos or TIC's (our equivalent of coops.) more in renovation costs on the front end (like putting in-unit washer/dryers) and nice decks, but at least I get the best tenant pool that way as well.

In the past have there always been new towers built in nyc intended only as rentals? Or were most resale condos?

For the record, I don't advocate buying expensive homes with big negs just to sit on them for appreciation. But the Venice home, it looks like there is built in value on the buy side, and you add value by adding the 1/1, and you can get close to break even on it renteise, and you can expect 15-20% appreciation in the next 2-3 years, investing ~$500k cash and doubling it in 2-3 years is a solid deal IMO.

Assuming the above, and that you live in SoCal, why won't you want to do that deal?

@Account Closed

I appreciate the great loans you've uncovered, but it's not all apples to apples. The schwab loans are probably based on having that amount in stocks/liquid as security, so that's different than getting it secured by RE equity. And your loc is nice, but the super cheap money is 12 month promo. Your brothers loc is more in line with my experiences, as I can get an loc with Wells Fargo private equity group for similar, incl on my investment properties.

BUT, the low doc option you mentioned is something new to me. If they also do that on investment props than that is golden! Could you forward me the bank and broker contact info for that? Good find! Thx.

if you sell, at least 1031 exchange. Makes little sense to sell RE, pay commissions and taxes, then buy all over again! Think 1031.

@Darren Sager I've also heard about the 18,000+ rentals in Brooklyn. That's almost all high rises. Aren't the developers mapping those out as condos anyways?

That's how It's done in SF at least. When the market was bad the plan was to build/map as condos but rent the units out. Then when the market turns around (like now) they don't renew leases and sell units off.

Can you shed any light on how this plays out in NYC? Thx.

^ appreciate your POV, but to challenge your notions a bit.

1- I think you're over empasizing the dominance of wall st. jobs; NYC is quite diverse economically; tech, medical, new media, many unique private businesses, etc.

2- speaking at least for manhattan and parts of Brooklyn, they are major destinations and are in demand event in slow economy (yes growth is affected, but at least you don't see -40% drops in appreciation like you do in FL, AZ, etc.) also loads of foreign money buys NYC RE.

3- given the recent downturn winding down, I highly expect RE growth in the next 2-3 years. This is a great time to get into a decent deal in a good hood IMO.

4- be careful about comparing stock concepts (growth vs income, etc.) RE is an inefficient market with lots of distortions (especially highly desirable ones like manhattan and San Fran.) I succeeded by learning the myriad of less obvious, and often counter intuitive nuances that impact my specific markets.

* btw how the hell do you get that "@riley f" thing on the top of reply posts?!?

^ for buy/hold, not flip. In it for 1.2 (incl addition), worth now 1.5, so you have 300k equity. Prices are on the upswing, especially in good areas, so expect average 5-7% appreciation in next. 2-3 years. That adds $225-300k in equity. Now you can pull some serious cash out. This also assumes home is pretty nice, not a dump, and can rent for $5000. Of course, you need $450-500k to begin with for this deal, but it takes money to make money. You put in 500, and basically double it in 3 years. And, you have a nice property and can pull cash out. And basically manage 1 high end tenant.

30% exp only if inc. prop taxes and ins. Self manage it. Venice is very hot and desirable area = good tenants ( google engineers, doctors, etc. who want the beach life)= less turn over and less crap to deal with. These peeps care about their credit score, and that $5000-7000 deposit too, so chances are they'll take good care of it.

Venice is a highly rentable area, so 40% for expenses is too much, even incl. prop taxes and ins.

@Minh: 2% loans for HNW? I doubt that, where did you hear that? The best LOC's are 4%+.

What's the real rent for that bldg? Is it a SFH? If it is, and rents for anywhere near $5k, it may break even with 30% down. Plus if you can add the 1/1 for under $100k and not go crazy with city planning dept. Hang on to it; a nice equity play IMO if these assumptions are accurate.

why focus on cash flow and not on appreciation? If you're in NYC you have a wonderful opportunity to get into a gentrifying neighborhood. Imagine being in williamsburg several years ago. Cha-Ching!

Being your first place, you also have the opportunity to buy 3-4 units and owner occupy. One of the best ways to start IMO. Done right- promising upcoming hood, bldg that needs some TLC, and you take a smaller unit, you can live pretty cheaply. Then by adding renovations, increasing rents, and marke upside, you may be able to refi 1-2 years from now and buy another prop. Plus you lock in a low 30 year fixed rate. Keep this place as a long term rental, even if you move out. Equity-eventual cash flow-low fixed rate is a winning recipe, as long as you get into upward mobile hoods.

That's what I did in San Francisco for 19 years. Made all my money on incredible appreciation, whereby I was able to pull equity out and buy again. Cash flow for me was always something to be managed, not the main goal.

Look at all the rich people in NYC that buy flats all cash, just to park their money. Not the most efficient way to create wealth, but why do they do it? Because the right neighborhoods in NYC are golden as long term appreciation buy/holds. Same here in SF.

Don't know where you live, but I'd seriously look at parts of Brooklyn that have upside. Follow the hipsters. W-burg is done- yuppies moving in there now and it's expensive. Really study neighborhoods carefully. Read local blogs. Walk around and identify the hoods you think will pop in the next 2-3 years; then focus on finding the right 2-4 unit bldg. It's a lot of fun, and rewarding. That's all I do nowadays :)

Maurice- Most people on this forum just focus on cashflow, in areas that get little appreciation. In decent parts of CA (especially the Bay Area) you need nowhere near 50% of rents to cover expenses. For one, vacancies are lower here. Also, higher rents per unit drastically effect expenses. Example. Tenant leaves and say you need to invest $2000 in paint and minor updates. That could be 4 months of rent in Texas, 1 month in CA. And in TX you would need 4x more units to equal 1 in CA, so your repair exposure is x4. So yes, there you want 50% ratio, but certainly not in the Bay Area.

And as for prices, if you think Oakland is bad, SF is worse! People on DP want 2% of prop cost to equal 1 months rent. In SF it's more like 1/2%! Terrible deal right? Then why are there so many investors clawing their way to buy here? (I'm also looking to get into another multi unit in SF.) Cause they quietly know that future appreciation in SF is substantial. Oakland (although I don't specialize in it) is similar in potential, certainly compared to cashflow friendly areas with little appreciation.

I'll quote you: "One person told me he covered the rent in the unit he lived in as a owner occupier until he could refi out his loan and take money out to buy another property...risky! But they all do that or try to do that."

That is exactly how many do it in CA. Your friend was able to buy another property from appreciation. That's huge!

Ultimately you have to run your own numbers. But if you can get into a decent part of Oakland for little down, secure a low rate 30 year fixed loan, and manage the cashflow mid term, you have a decent chance of setting yourself up nicely 3-5 years from now. Rents will inevitably go up in next 2 years, and $1000 in added rent (over 4 units is not a lot) will increase your property's value by (using 12-14 GRM) $120,000-140,000. As long as your buying in a decent part of Oakland, I think you strategy is solid.