All Forum Posts by: Simon C.

@Robert Herrera PITI (including HOA) looks to be: $2282. Using a cash flow calculator with a 2% vacancy rate and 10% maintenance expense I'm right at about break even so looks like cash flow is zero... ouch. The HOA raise has been pretty killer.

@Account Closed 's response) a MF unit is the really the next logical step and I do want to eventually want to get serious and build a real portfolio (not just picking up properties here and there). I have a lot more homework to do.

@Saj S - ok I see now where I made that statement so sorry for the confusion on my part. All your points are valid and was only trying to make a point in that I did not have a strong income back then and though condos in SF were selling for $350k (and townhomes in the south bay which I was looking at) I still wasn't able to compete due to all cash offers and/or not having a strong enough income to approve for a higher loan amount. But you're right in that there were options here locally but unfortunately for me I wasn't able to secure any of them. I didn't have the foresight to buy in up and coming areas as well and only wanted prime locations. Seems like everything is prime now!

I've tried to look for MF units and everything I've seen is overvalued or rents do not meet the expenses for positive cash flow. Though I'm likely not looking in the right places or have the right connections to find the right properties as I'm sure they exist as you mentioned.

 Hey Saj - I think there was a misunderstanding of my words and did not intend to convey that "nothing in California is worth it." I looked back at my statement and I don't believe I said that but what I did say was that the Bay Area specifically doesn't make sense to buy from a cash flow perspective (current market). Rental rates simply don't cover the mortgage/expenses at this time from my calculations and you are only banking on appreciation which doesn't work for me.

And I certainly did not overlook the Bay Area in 2013 but it's just that I wasn't able to close on anything and was outbid every time. I sorely wanted to get something but just wasn't able to land anything. I'm a non engineer (also single income) and graduated in 2007 right as the GFC was hitting so did not have that much capital in 2013 to really compete (I don't have access to outside capital or mom and dad funds like most people I know around here). I only dream of if I was able to get ANYTHING that I put a bid on back then which as you mentioned would be 2-3x by now but unfortunately that ship has sailed. I certainly tried.

The current Bay Area housing market is simply unaffordable for me at this point and even if I wanted to get something I wouldn't be able to due to 1. competition 2. not enough funds 3. rents don't cover mortgage/expenses

That would certainly make things interesting.

The numbers certainly aren't as strong. HOA on this property has been a letdown and has been poorly ran. Initially when I purchased the unit it was $261/mo and then the residents voted for mandatory internet/cable (discount provided for the building) which jumped it up to $350/mo. Then recently starting in 2018 there was an HOA hike to the current $421/mo. Rent seems to have stabilized with all the new rental units that have come on board recently in Denver (maybe someone can correct me here if I'm wrong).

A 1031 into something else seems to be the best option but unsure of how to really time this with the current tenants (although they are currently month to month and trying to decide if they want to renew so may be an opportunity soon). Also, identifying a property to exchange into seems to be pretty daunting for me (although I'm willing to do the research and put in the time). Nothing in California will be worth it so I'm likely looking out of state again presumably. I do have a good friend that works in commercial real estate that lives in the Boulder/Eerie area and have been talking about partnering on something on that front (maybe multifamily or apt complex and not necessarily CE).

Hi All,

Back in 2013 I purchased a rental property in Denver, Colorado due to not being able to close on anything locally in the San Francisco Bay Area (where I currently reside and still continue to rent). My goal was originally to find a home to use as a primary residence but competition in the Bay Area was just insane and after losing out on a bunch of properties I decided to look out of state for an investment property so that I could at least lock something down and finally diversify into real estate. Now I’m at a juncture where I’m reevaluating what to do with this property and am looking for advice on what the best options are from people who’ve had much more experience than I have.

Details on the property:

2bd/2ba condo (includes 2 garage parking spots) in prime downtown Denver location

Purchase price: $380k

Current value: $550k (approx)

Loan: 30 year @ 3.625%

Remaining loan: $256k (put down 20% originally)

Current rental rate: $2500/mo

HOA: $421/mo

Renovations: $25k spent to date

Property management fee: $0 (currently manage it myself from out of state) - if I do decide to pick up a PM company in the future it'll likely be a 7-8% fee)

Vacancy rate: Not really sure how to calculate this accurately or if there is a general number to use (but I've had about 1.5 months where the unit wasn't rented in the last 5 years)

My original idea was for me to keep this forever and use basically have it cash flow nicely after the mortgage is paid off. To me the cash flow right now isn’t great (could someone reconfirm this for me?) but not terrible I suppose. 

These are what I think my options are:

1. Hold and continue to rent
2. Sell outright (get killed in taxes/commissions/etc) - while I’ll make some money this doesn’t seem like what most RE investors do. Paying taxes sucks and profit will be drastically reduced. However, this may be a good time to make a profit and reinvest/diversify into lower risk investments (T-bills, etc) to protect against a potential down turn.
3. 1031 exchange (but into what? And where?) - timing this will be difficult.
4. Cash out refi/HELOC - does this even make sense with the current higher rates? Doesn't seem like it to me but sounds nice to lock in some equity?
5. Other options?

As mentioned earlier, I currently rent since prices in the Bay Area are stratospheric and buying just doesn’t make sense to me right now. My goal is buy a primary residence but am unable to afford anything at this point and I don’t see any value around here in the Bay Area. So the next goal is to see how to best maximize this investment. I don't have much RE experience and have pretty much just grinded it out for the last 5 years and learned on my own. 

Looking forward to everybody’s opinions and thanks in advance!

If the cash flow is good then you might as well keep it if the properties are in a good rental location.