All Forum Posts by: Peter Aziz

Can we get another one of these on the books?

Another Santa Clarita resident and investor here. Live up Copperhill in one of the Tesoro communities and have been actively buying SFRs in the SCV for the past 8 years or so. Thought is to now diversify into higher cap rate areas. Would be good to connect with like minded people and would definitely be interested in attending a Meetup.

@Denny Robert, super helpful! What's going on in STL these days? Any recent county-wide initiatives? Employers coming to town? Developers? Last time I was in STL was in Q4 2015 and at the time it looked like Tower Grove South was completely getting redone...

@Ruben Banuelos, my partner and I have considered doing this for quite some time. We're actually in the middle of rolling out a product that will give buyers the opportunity to pick out the home they want to rent-to-own.

Hey there, BP! So, I'm not sure that I'm exactly a 'New Member'... but I haven't been very active in the forums. I'm hoping to change that as my investment strategy changes going forward and I'm looking forward to interact with all of you!

A little about me: My name is Peter and I live in Los Angeles County (Santa Clarita/Valencia if you're familiar with the region). I've been a commercial lender for close to 15 years now - we finance the working capital needs of investment grade publicly traded companies - so I guess you could say I'm kind of a numbers guy :)

My wife and I got started investing in real estate in 2011 where we bought our very first SFR. Little did we know, that SFR would go from being our primary residence to becoming our very first rental property 2 years later. We quickly realized how strong the rental market in our area was and put together a plan - buy new primary residence, obtain favorable owner-occupant financing, save up more money, buy another primary, turn departing residence into a rental...

Over the next few years, we saved as quickly as we could and acquired as many properties as we could. Over the 8 year time frame that we've been doing this, we were able to put together a portfolio of 5 SFR's in the Santa Clarita area that generate on average an 8% Cash on Cash return. The real returns though have come through equity, as our homes have appreciated significantly over the past few years. To give you a feel for what we're talking about, we've been able to turn apx. $475K of our capital into > $1M of equity.

In light of the significant appreciation that Los Angeles and So Cal in general have experienced, we are now considering buying out of state properties. The change in direction comes in light of the fact that we can no longer turn a cash profit in our area without putting more than a 20% downpayment (will take longer to acquire subsequent properties and will generate smaller returns given the price appreciation). We're looking to invest in areas where the Cash on Cash dynamics are favorable relative to Los Angeles and understand that we'll probably not enjoy the appreciation that we've experienced in So Cal and we're okay with that so long that we can generate consistent monthly income. The idea is to generate enough cash flow where we both can retire and we plan to do that through value add acquisitions (BRRR!).   

So, that's a little about me! I hope to get to know you all on a more intimate level and look forward to providing value to the BP community.

Cheers,

Peter A.

Thank you all for the helpful information and for confirming that I wasn't losing my mind. 

Follow-up question: How are you modeling your maintenance expenses when looking at a potential acquisition? Are you taking the cost to replace major items (roof, HVAC, counters, floors, etc) and dividing by the useful life of said items? Seems like the maintenance reserve can be very arbitrary. 

Posted this elsewhere in the forums, but thought I'd add here as well. 

Hello, BP! I hope everybody's doing well around here.

In thinking through the 50% Rule, and modeling it out in my spreadsheets, I am finding myself very uncomfortable using it. Here is the hurdle that I'm mentally up against:

• While certain expenses are in actuality directly tied to your gross rental income (vacancy and property management) some expenses are not (maintenance and CapEx). I'm currently looking at purchasing a multi-unit in St. Louis. In St. Louis, like most other cities, there are premium neighborhoods (A's & B's) and non-premium neighborhoods (C's and below). The premium neighborhoods obviously demand higher rental rates - however, the cost to replace a roof or snake a sink in an A neighborhood is not going to be different than the cost in a non-premium neighborhood. So, with that said let's assume that a building in an A neighborhood will fetch $2,700/mo in rent, while a building in a C neighborhood will only bring in $2,000. Most investors I've spoken to have advised to accrue 10% of gross rents for maintenance expense (and 5% for CapEx). Why on earth would I accrue $270/mo for maintenance in an A neighborhood and only $200 in a C neighborhood that could be as little as 4 or 5 blocks away?

Hello, BP! I hope everybody's doing well around here. 

In thinking through the 50% Rule, and modeling it out in my spreadsheets, I am finding myself very uncomfortable using it. Here is the hurdle that I'm mentally up against: 

• While certain expenses are in actuality directly tied to your gross rental income (vacancy and property management) some expenses are not (maintenance and CapEx). I'm currently looking at purchasing a multi-unit in St. Louis. In St. Louis, like most other cities, there are premium neighborhoods (A's & B's) and non-premium neighborhoods (C's and below). The premium neighborhoods obviously demand higher rental rates - however, the cost to replace a roof or snake a sink in an A neighborhood is not going to be different than the cost in a non-premium neighborhood. So, with that said let's assume that a building in an A neighborhood will fetch $2,700/mo in rent, while a building in a C neighborhood will only bring in $2,000. Most investors I've spoken to have advised to accrue 10% of gross rents for maintenance expense (and 5% for CapEx). Why on earth would I accrue $270/mo for maintenance in an A neighborhood and only $200 in a C neighborhood that could be as little as 4 or 5 blocks away?