All Forum Posts by: Amit M.

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.

Michael- certainly by being conservative on your leverage you will have more security. You may gain less in the boom cycle, but your security increases for those down cycles.

Also, I can't emphasize enough to be choosy and smart about your locations. Consider inner city areas experiencing urban renewal. If you can find that it may bring you appreciation in the short term, and you will have built in security as the value and rent increases in the short trem (1-3 years).

Be weary of areas with high investor concentration: they tend to boom/bust, then rents drop, and then owners sell off and it's a downward spiral.

Also keep in mind, our world is changing fast with new technology. And there are clear winners and losers. Seek the areas that are desirable from that perspective as well. Areas with good, progressive jobs give you added security.

Finally, think through how you see the American and global economies play out over the next several years. We had a substantial recession recently. So are we starting to recover or will we go back down? Nobody knows for sure, but you must get comfortable with your won perspective, which will inform your investing strategy.

Hope that helps.

But granite is very practical, it's for a rental not your home. And certainly more durable than laminate.

granite is pretty cheap nowadays and very durable. Installing it costs a bit more, but if your kit counter layout is simple, it's not too bad. Just google discount granite in Oakland- plenty of places sell it. It's also avail in black btw.

Sure avoiding negative cashflows and bad long term loans (variable, balloon, hard money) are important, but an equally important factor in surviving RE crashes is where you buy. The 07-08 crash in the Bay Area played out as predicted, like a ripple effect emanating from the prime center. The very best locations- most of SF and prime towns/neighborhoods in Silicon Valley and San Mateo counties fell 10-20%. Other good areas of Silicon Valley and East Bay fell about 30%. Going outside of the Bay Area we're talking -40% and onwards.

And not surprisingly, the best areas are the first to jump back in values. In my case I invested in a gentrifying SF neighborhood (Mission district) and even I was surprised at the appraisals when I refinanced two condos last month. They actually came back higher then I expected. So now my properties are at least 10% over their 07 peak.

My experience in the Bay Area has shown me that prime areas are the last to fall, fall the least, and rebound the first. And that has a huge cumulative effect on appreciation.

Like many investors, the 07-08 crash was challenging. I got stuck with a gutted triplex and no loan options for renovations in 08. I was able to sell a unit to family for a discounted price, and used the cash from the sale to renovate the entire property. I sold them that unit for $350k, and later this year I will be finalzing condo conversion on that property and their condo unit will be worth $650k, so it turned out a sweet deal, and now my dad plans to give it to my sisters, so they have some security in their lives.

Another saving grace was that rents skyrocketed in SF from 2010-2012. Several of my rentals went up 30%, so having that wind to my back helped during that timeframe when the banks were barely lending (even to qualified people like me.)

With strong positive cash flow I basically treaded water since stabilizing that triplex in 2010, until earlier this year when I was able to refi and separate a former duplex to condos, as well as lock in 3.75% 30 year fixed rates, which is godsend. Now I am in the midst of refing the triplex, I plan to access some of my equity and pull $500k as I would like to buy 2-4 units in SF. With these low fixed rates it's a no brainer if I can even get close to break even. I normally buy properties that need some work and have upside, so I will be busy bringing it to higher and best use. Should be good times ahead!

I like to think in contrarian terms, and to go where others usually ignore. Areas that are 'known' as investor Meccas have some negatives- they tend to boom and bust. One day everyone is there bidding things up, the next they all bail, prices drop and all of a sudden half the homes on the block are either for sale or for rent. I prefer areas that are more prime and more in general demand. Impacted and with no place to build new homes. Of course these areas tend to be expensive and hard to cash flow, but they are a lot more stable. Food for thought.

Pam- SF is super competitive, and I've heard from others that the valley is too. Personally, if I were you (and you plan to stay in the area for a few years) I'd get into my first home before buying anything as investment. An SFH with a granny unit is a great idea, and you can also consider 2-4 units where you live in one. IMO we are on the start of another appreciation cycle in the bay area that will last a few years, so now it's still early to get in. I made all my subsequent purchases from equity appreciation and renovations/property improvements. I'm about to do it again, after a 3 year hiatus when the banks were super tight with lending. It's improved recently.

I suggest you ditch your mortgage broker and work with banks directly. I have had good luck with Wells Fargo recently, as they are actively seeking good candidates to make loans to.

What are the basic numbers on the homes with granny units (cost, rent for unit, etc?). If you can get into one for $200 more than you rent, and the place is as good or better than your rental...then that's a no brainer IMO!