All Forum Posts by: Steve O'Keefe

@Drew Slater

Everyone has different goals, but these are just my two cents. Having a commute that long is more expensive and painful than working on your personal finance and increasing your savings rate. You waste money on gas, vehicle wear and tear, and most importantly time. Time you could spend learning about REI, learning a new skill/trade (maybe for that better paying job you hinted at?), and just relaxing downtime with friends and family.

California is without a doubt an expensive place to live and get started in.  If you're looking to buy a primary residence in CA to live in long-term, then I recommend saving up and buying when you can afford it.  Get a place close to work with roommates, ditch the car for a bike, dine out less, etc. to ramp up your savings even more.  It sucks, but that's the reality if you're going to save up for a down payment on a $600k house.  If you're looking to just invest in real estate and grow a portfolio, then consider looking OOS and maybe years down the road you can bring some of the cash earned back to CA.

@Andrew Meng I would like to hear more about your property and some of the research / steps you employed.  I'm a fellow San Diego resident who is also interested in multi-units OOS.

In response to your question, from the research I've been doing (and outside of the residential vs commercial aspect that @Sherwin Gonzales brought up), a big part will be your comfort level and financial goals.  Many will suggest you leverage as much as possible if you are still in a positive cash flow situation and you have the reserve funds necessary to cover any issues.  Others will say to pay it off as quickly as possible and use the cash flow to start saving for your next property that way it's really hard for things to go south on you.

If your multi-unit is residential I would recommend trying to secure a bank loan since you can get them at a low interest rate for 30 years and then enjoy the cash flow and start looking at other investments.  Good luck!

Hi @Andrew Herrig, thank you for the very thorough and clear response! Since we just bought a new house, I am definitely trying to be a little more conservative until we can analyze all of our new expenses and make sure it aligns with our planned budget. My wife and I are very fiscally conservative by nature so our nest egg is more than strong enough to cover an extended shortfall, but I agree that balancing the risk via our leverage is a good strategy. That's ultimately why I decided to start with the ~$185k and keep the equity from our other rental banked until we are fully ready. If we can make some profitable deals with that money then it will go a long way towards motivating us to pursue more REI.

@Tiffany Hoffman Thank you!  We have decided at the moment to keep our Kearny Mesa condo, so we're likely priced out of San Diego fourplexes with our ~$185k but I'll keep my eye on the market and if we start to see a dip in the future hopefully I'll be poised to take some action locally.

Absolutely, we love that area.  My sister lives in San Carlos and so that was another area we were looking at.  I'm definitely happy to keep in touch, there is much to learn!

Hi @Seda Dogan!  I actually cross-posted to another forum and have been getting a lot of responses over there.  I suggest you check that out and ask your questions in there: https://www.biggerpockets.com/forums/88/topics/572646-sell-or-rent-advice-for-our-properties-in-san-diego-ca?page=1

We currently live in the Santee townhome but are moving this Sunday (eek!) to the new house we bought in Del Cerro.  We plan on raising kids and retiring in that house so the natural question became what do we do with our older properties that were bought (and financed) as primary residences and not investment properties?

One of the strategies that you'll see discussed in the other thread that I linked is a cash out refinance which may be an option for you if you've built up significant equity in the home and want to use it to invest.  I'm sure the smarter and more experienced folks who have been responding in that thread can provide you better advice than I can so hop over there.

You are all so awesome!  Thank you for all of the great discussion and ideas.  I took the overriding advice to heart and my wife and I discussed both our short and long-term goals.  We have decided to sell our Santee townhome now and utilize that ~$185k equity right away.  I still have a lot to learn (obviously), so I will probably start with something more passive until I feel comfortable moving on a multifamily property.  We are going to hold on to the Kearny Mesa condo with the idea of eventually doing a cash-out refi if the right opportunity comes along and/or based on how well the initial $185k investment is doing.

We have been very diligent about saving for retirement and will continue to save aggressively for that.  We are hoping that generating cash flow now will allow us to reach financial independence and ultimately retirement sooner.  With the BP community, I am confident that we can reach that goal :)

This post is not meant to be an end to the thread, please keep posting ideas, strategies, and more!  If not for me, I'm sure someone else will eventually arrive on this thread via google (which is how I landed here) and will find this as helpful as I have.

@Dan H. That's good to know, thanks! My realtor also owns a STR in Alabama right on the ocean. He told me today that he's cashflowing very well on it. He expects the next few months to be his best of the year so he's excited.

While I self-manage my current rental and plan to self-manage our Santee property (if we do end up renting it, that is), I would anticipate using a PM for anything larger and certainly OOS.  I agree it would just be a cost of doing business but hopefully their experience in finding and maintaining good tenants while smartly increasing rents over time would pay for itself.

@Dave Toelkes Thanks for the reply!  To be honest, it's because it is not clear even to myself what our long-term goals are.  Since I hope to retire from my day job in 12 years, I know that generating cash flow by that point is a priority.  We have index funds that can supplement any RE income, but certainly the more cash flow the better as it just keeps more of our index funds growing.  As I mentioned in my OP, I'm trying to come up with a plan that utilizes the equity I've built in an efficient way.  It it's not painfully obvious by now, I don't know the best way to do that and came to BP to learn.  Normally I would like to be better informed before I create a post like this, but we need to make a decision on whether we will sell or rent our Santee property soon or risk it sitting vacant which is about the only definite thing I can tell you I don't want haha.

OOS properties seem like my best bet for cash flow, but also from my utter lack of experience, seems the least likely for me to be able to implement without lots more learning.  I'm willing to put in the effort, but wanted to make sure it was worth it before selling off our Santee condo.

@Thomas S. I'm not going to disagree with you, this is what caused me to question holding the properties to begin with!  My dad kept telling me how much equity I was building - but if the plan is to hold forever, I'll never realize those gains anyways (or pay big taxes when I do).  So the question is whether or not the rental appreciation is significant enough to warrant toughing it out.  Additionally, though I know from a previous post that you think the kids of faith investors will just sell it off and enjoy their parents' sacrifice, I do like the idea of having a local condo that I can gift my kids when I'm gone.  I love living in San Diego and never want them to feel they can't continue to make San Diego their home if that's what they want.  If they decide to sell it and blow the money on expensive cars then I will have failed in my efforts to teach them fiscal responsibility!

@Travis Rasmussen That was our original plan (keep KM, sell Santee).  We changed our mind about a dozen times since that point which eventually brought me to BP!  I think we are most interested in OOS multifamily units.  I would not be against partnering for our first few deals given my inexperience, but we never considered or spoke about that before so obviously the wife would have to feel comfortable with it as well.  Short Term Rentals do not appeal to me, nor does flipping or anything that is more "active" investing.  I am willing to do upfront research and number crunching, but would prefer a more structured and steady work rate after closing.  Nothing is truly passive, but I'd rather work upfront to put a system in place and address the glitches as they pop up than be constantly hopping from deal to deal.