All Forum Posts by: Amit M.

@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.

Minh- he paid $2.4 mil for an eichler in PA, or is that the value of it now? How do you calc the appreciation on it, and in what timeframe?

What, nobody know anything about this? No lawyer types that love analyzing these things?!?

Hello. Does anyone (CA attorneys?) have experience with this topic?

There are two types of CA homestead exemptions. An automatic one that everyone gets just from buying property (and having it as their principal residence) and a "declared" version which you must create and record on your property.

This link gives a great overview (plus a free form to use): http://www.sandiegolistforless.com/file.axd?file=Homestead.pdf

Reading carefully through this, it seems worthwhile to set up the declared version, as it has added benefits. But I have never heard of anyone doing this. Within my contacts, no one seems to know anything about it! A google search only gives the technical definitions; not anecdotal info about pros/cons, is it even worth bothering with, etc?

Are there any CA attorneys, etc. who are familiar with this? Has anyone in CA taken the time to set up the declared version for their primary residence? If so, do tell! Thx.

There is another avenue to consider: with $300k you have enough down payment to buy 2-4 units in the Bay Area and still cash flow. You may not get 12% return, but if you choose well you have a much better shot at appreciation than in many other parts ofthe country. Plus you can manage it yourself and learn firsthand what is involved. Plus with 2-4 units you can get conventional financing and lock in a low 30 year fixed rate. Basically all the other scenarios mentioned involve you relying on other people and companies to manage, and that in itself is a risk.

Every successful investor I know in the Bay Area made money by appreciation. Cash flow is something that must be managed, so you can sustain the investments, even in a down turn. Appreciation is where the big bucks are made. And it looks like we are heading into another up market swing, so now is a good time to get in, IMO.

The other main factor is quality. If you buy in a decent part of the Bay Area (like San Mateo county, decent cities in the East Bay), you will probably be dealing with professionals as your renters. It's a much higher quality tenant pool, and easier to manage (if your property is in good shape.) I'd suggest SF proper itself (the only place I personally invest) but its a bit tricky. SF is extremely competitive to buy in, you need to know how to work/leverage rent control, and understand micro neighborhood dynamics. But its been extremely successful for me.