All Forum Posts by: Terry Lao

@Jerry Soer

Jerry

I saw your original post about about getting starter home. There another post by person who lives in silicon valley (bay area), and talks about investing in out of state due to high cost in her area.

https://www.biggerpockets.com/forums/62/topics/434...

Everyone has their opinion as which path is best for them. I like options, the more options the better. Also, I believe the single most important aspect of the whole process is the loan. Unless you are paying all cash, then it is the loan. I have a mortgage background many years ago. I use a reverse analysis approach, meaning I do the numbers and see how much I can qualify for a loan. Then go find the property with the target cashflow or ROI that I am targeting.

I'm okay about connecting, but not sure how. Do you send me your email address? or some setup on the profile that I need to do?

Terry

@Jerry Soer

Look at all your options, rent, buy (SFR, duplex, condo, towhouse), out of state, etc. Run the numbers.

Here's a post by a person in OC, looking at his options.

https://www.biggerpockets.com/forums/55/topics/436840-real-estate-interested-from-orange-county-ca

Terry

@Kyle S.

check out this forecast by realtor.com

http://research.realtor.com/2017-national-housing-...

check out #36

Terrence

@Kyle S.

You are in finance. If you saw these returns on the P&L, what would you think? These are actuals home sales for Las Vegas. Don't believe me, check them out yourself. 

Also, if I had to extrapulate the number for Apr'17, I would estimate at least double digits.

Dec'16 up 3.4% YoY

Jan'17 up 13.9% YoY

Feb'17 up 5.25% YoY

Mar'17 up 11.9% YoY

Terrence

@Kyle S.

Glad you reach that conclusion without me telling you. Also, glad you like cashflow as primary. There is appreciation for multi-units but like SFR, not realized unless you sell. Therefore use OPM, other people's money (rents), with minimal down (25%) to maximize leverage.

I've been doing this method since March 2014, bought (3) fourplexes, sold one for profit of $40k. Still have two that nets monthly cashflow of $600 and $800. Did a condo flip that netted around $14k. Overall, if you take into account tax implications, better to invest in multi-units than flip. It's an opinion.

Read up on the 1% rule here on BP, see the template that Brandon use's here on BP, Brandon likes getting $100 per door/unit net, you need to decide what is your acceptable return on investment (ROI), know difference between ROI and Cash on Cash return.

Terrence

@Kyle S.

Lots of information here on BP. The numbers don't lie, people do. The other day, I was watching seminar put on by people licensed Rich Dad Poor Dad, and were asking for $41k for personal one on one training. Other seminars all the same, do your homework.

The best chance you have is something small in Riverside or San Bernadino, but will still cashflow negative or at best break even.

The first question you have to answer is which do you prefer appreciation or cashflow, and don't say both. It is this answer that will help steer you in the decision you will ultimately make.

Terrence

@Kyle S.

Let's refine the debt to ratio based on you above reply. If 30% is your current debt to income ratio, the you have another 15%, which is about $1500, and if you stretch 20%, you have $2000 max. If you use your equity as your down, then that is a loan to finance another loan. So let's say 15% or $1500 max for PITI and HOA (if any).

I'm afraid that is not much you can buy for $1500 PITI and HOA in Orange or LA County. Maybe a condo for 150-200k? Would that even cash positive? The 1% rule is get one percent monthly rent of sales price, which means get $2000 rent for a condo purchase for $200,000.

Doing the numbers first is the way to go. You should know, you are in finance.

Terrence

Hello Kyle

@Kyle S. Let's look at your situation from an reverse analysis, meaning not find property first, but what you can afford. If you know what you can afford then you can look for specific area. No point in looking at a Mercedes when you can only afford a Yugo. You mentioned you have 300-350 in equity, but banks/lenders will always low ball your home value and maybe you get 100k based upon your loan to value and debt to income ratios. I'm being conservative when I say you will be lucky to get 100k heloc or cash out. Next, you are in finance in OC, and 31 years old now. I would estimate W2 position making about 60-65k annual. Normal is getting loan 3-4 times your annual, which means 180-240k max loan. Let's assume you have a FICO of 740, minimum to get the best rates. Also, you need to be at total debt to income ratio of 45% or below, meaning taking your current home PITI and other debt, and buying new property, you need to be at 45% or below.

Now, with all the above said, do you think you can afford anything in OC/LA county?

Answer: No, but there is an answer...........LAS VEGAS baby.

How do I know? I live in Anaheim, work in accounting/finance, and own two four plexes in Las Vegas, generating cashflows of 600 and 800 net per month.

Terrence

Hello fellow BP members

I need some unbiased opinions for this argument that involves cash flow 4plex, helping my wife’s brother, and asking her not to tell him. Here are the below facts:

1. Brother in law (lives in UK) and occasionally visits parents in Pasadena, CA, asked me to help him find cashflow properties in Las Vegas, and the first question I asked him was what is your expected return (ROI). He stated double digits. He was going to finance property with 20% with local lender he found with referral from real estate broker.
2. I currently have two fourplexes in Las Vegas that returns 10% (owned 1 year), and 14% (year 1, and 12% year 2) respectively. I manage these properties myself.
3. I’m in the field of accounting and finance, and done mortgages for almost 4 years in past. I’m a regular on Redfin looking at fourplexes, listed, sold, and pending, in Las Vegas. I noticed a recent trend starting in Dec’16 to present, increased sales in a slow period, and low inventory.
4. I found a 4 plex in a HOA community that I currently own, and have cash flow of $800 net per month. I ran the numbers and saw that it can still net around $500 per month, and get 8-10% ROI with an upside of $150-200 per month due to below market rents. Listed $234k, on market for 120 days. First thing I asked from brother in law was do you have a pre-qualify letter and proof of funds. No to pre-qualify letter, and yes to proof of funds. Send to me when you get. I subsequently sent agent my pre-qualify letter and proof of funds, and help negotiate price with intention of getting my name off contract and him solely. After 3 weeks, back and forth, settled on $226k, originally listed at $234k, contingent on viewing inside of units due to no pictures on MLS, with 15 day due diligence. Keep in mind upon agreed upon price, he still did not send agent pre-qualify letter and proof of funds.
5. After I had to call Las Vegas lender to find out what was taking so long, he did not send proof of funds to lender. Also, he was 1099 income, and averaged 21k per year which is about $10 per hour. He did get a pre-approval letter after 3 weeks. I asked if he put live in California, he said yes, but I knew he lived in UK. Fine, you need to handle the loan by yourself. Underwriting will be another issue down the road to prove living in Pasadena, CA, with sister.
6. After all the above, he backs out of contract with seller. I was not upset that he backed out, but more to fact that he should have waited to see the condition of the units before backing out. There was plenty of time with the 15 day due diligence. After all this, it was a complete waste of time, and I had to speak to him during week 2, that you need to decide what you want and not waste my time. I said if you are serious, a yes is a yes, a no is a no, and a maybe is a no. You decide if you are serious. His answer was yes, I am serious.
7. I told my wife not to tell his brother that I was mad and he is a complete waste of time. I was helping him and not paid, nor did I want to be paid. She goes ahead and tells him. I am mad for her telling brother after I exclusively told her not to.

Who would you side with me or wife?

Thanks.

Terrence

My hunch was 1 door = 1 unit of cash flow. I have two fourplexes, which means 8 doors. I guess I'm doing okay, both are in Las Vegas. One netting about $500-600 per month (based on 15 year loan), other netting about $800-900 per month. When watching Brandon's webinars, he suggests netting $100 per door is good.

Also, I've been watching the multi-units activity for Las Vegas for last two years, and more closely past several months. Based upon actual monthly sales recently, see below, I can only imagine a great Apr'17, and onward for spring and summer. Add in the approval of the Raiders moving to Las Vegas, and you have a buying frenzy.

I'm an accountant/finance person by trade and analyze numbers all day. This upward spiral in a quarter that is a seasonal slow period would indicate a trend that will continue.

Thought?

Dec'16 up 3.4% YoY

Jan'17 up 13.9% YoY

Feb'17 up 5.25% YoY

Mar'17 up 11.9% YoY

Thanks all.

Terrence