All Forum Posts by: Timothy Howdeshell

@Gurvinder Singh You're certainly going to generate some interest with this post! Everyone loves a free lead :-) Best of luck! I own several properties in independence. Let me know if you have any specific questions. (I'm not a local agent, just an investor)

@Kyle Zdrojewski Hey Kyle. Looks like you've been pretty active on these forums lately! Great to see. I'm just curious, what are you looking for on your first deal and what do you think is the limiting factor currently?  

@Michelle Cohen it sounds like the time for a new property manager has come. The issues you have listed are not impossible to fix but at this point the trust has been broken and so it will be an uphill battle. 

Given their poor track record, it's probably best to cut ties and find a better company. Don't get discouraged or down on real estate though. Just use this as a learning lesson and an opportunity to get better in dealing with property managers. I've had to go through several myself and also learn how to work with them better in general.

If you truly cannot find any other companies then consider your strategy. It usually means that you are investing in very bad areas with low rents. Most property managers charge a percentage of the rent and so if that is low they aren't making much money. Think about how much work you would do for $100 a month. 

It would be a deal if that wasn't a factor and a company should do what they promised regardless as they agreed to the pay, but that is just the reality of the situation. At this point, the best thing to do is to read your contract, figure out how to get out of it, interview several new property managers for the area, and then start the transition plan ASAP. 

You can also consider trying to rent out the vacant unit yourself. You'll need to read the contract with your property manager to find out the implications. But if the house isn't good condition, it should be rentable. Price is probably the issues you already noted.

I'm sorry this sounds like a stressful situation. But there is a way out in a light at the end of the tunnel. Best of luck!

@Lei Li I'm no expert, but I'll throw my 2 cents in regardless :-)

I invest out of state in Kansas City and live in Fresno, CA so I have a bit of perspective for what you're looking to do. as @Ryan Muska noted, tenant/landlord laws can have a big impact on the success and headaches of rentals. I haven't focused on California property for this reason in part. Evictions take much longer and there are more defined squatter's rights in CA than in Missouri where I invest. 

Price to rent ratios are another thing to consider. Given that you can buy in cash in most cities in the US with $500k, cash flow is easier to find than when considering financing. It is important to consider your return on equity however as well as downside risk. 

What this means is that if you rent a 500k property for $2,500/mo then you'll make 30k/yr on 500k investment. This is a 6% cash on cash return (not really as there are other costs, but keeping things simple). If instead you buy a $200k property that rents for $1,600/mo you have a 9.6% return on your equity. 

Given that high yield savings accounts are paying upwards of 5% FDIC insured, not sure if low yield real estate makes sense. You'll be basically speculating on appreciation.

Down side risk, I'm referring to vacancy. If you buy 1 $500k property, and it goes vacant, you have 100% vacancy and no revenue in your business. If you buy 2 200k properties and 1 goes vacant, you only have 50% vacancy and are still making money. Plus you have $100k left over for reserves. 

My vote is obviously to search for somewhere that has better yield on your equity than CA. Good luck!

Hey @Nicholas Wright 

I'm an investor in KC. I do a bit of flipping, BRRRR, long term rentals, and wholesale. Nice to meet you! What are you looking to do yourself?

@Bradley Shuhart as strictly an investment, I wouldn't do -$1k/month. The only savior seems to be appreciation (aka gambling).

What if we get recording inflation, FED raises rates 4 more times, and the housing market tanks? Does this invalidate your whole investment?

Is there more to the story? As in you have a ridiculously high income and desire to own this specific building? If so then, sure, I guess go nuts.

If not don't let FOMO talk you into losing at least $12k/yr. Aka, subsidizing your renters lifestyle.

When you get a loan that is recorded as a mortgage, a lender will want that money to "season". 

Basically you can't (or rather the lenders won't) do a cash-out refinance before the seasoning period (6 months typically; I've heard some are pushing 12 months now). These guidelines are set by Fanny/Freddy. Most mortgage originators sell their mortgages to Fanny/Freddy and so follow their guidelines. 

The reason for this is to prevent people from getting a good deal, immediately refinancing, pulling all of their cash out, and having no "skin in the game". Also I think there is some financial penalty for the mortgage originator if their loan is refinanced before 6 months, but am not certain about that. 

In a BRRRR you need to refinance to pull out your cash outlay and repeat the process.

Must have: 

1. understanding of deal structure (financial and operational)

2. understanding of rehab costs generally

3. Good communication and a positive attitude

Nice to have:

1. willingness to check on property periodically during rehab (if listing agent)

2. knowledge of contractors and other vendors

3. Working knowledge of modern communication (video chat, file sharing, docusign)

Really nice to have:

1. List of investor buyers and relationships with them

2. Ability to negotiate and structure creative finance deals that you can sell to investors

3. Return all phone calls immediately

It is truly a chicken or the egg thing. That being said, I think deal flow should be top priority if going off-market. I have always found it easier to find buyers than deals, even today. 

I'm primarily concerned about interest rates these days. Most things I'm seeing don't cash-flow well at an 8% loan. I'm okay gambling that the FED will reduce rates in the next 2-3 years and then get cashflow post-refi, but want to at least break even until then. 

@Scott Trench couldn't have said it better!

I had coffee with a prominent local investor and realtor last week. He believes that values will decline about 10% during the winter season here in central CA.

It is a great time to get owner finance deals where you can negotiate your debt structure more favorably.

Where there's a will there's a way!